Make Sure You Read Your Renewal Cargo Insurance Policy, You May Not Have the Same Coverages Year to Year

For my clients in the shipping industry, be sure to read your renewal policy to ensure that your shipments are covered; don’t assume that your agent or broker will notify you of policy changes, and be especially aware that they (the broker or agent) may not even have a duty to alert you to the changes, based on the law of the state you do business in.

These issues are pending before the Sixth Circuit Court of Appeals in an appeal out of the Western District of Kentucky, Atic Enterprises Inc. v. Cottingham & Butler Insurance Services.¹ Atic Enterprises is a trucking company that had a policy of insurance with Westchester Fire Insurance Company from 2012 to 2013 which provided coverage for loss of copper shipments. The renewal policy for the 2013 to 2014 time-period contained a copper exclusion. When Atic was robbed of two loads of copper in November 2013, the claim was denied based on the copper exclusion.

Atic sued the broker, Cottingham & Butler, for negligence in failing to provide sufficient notice of the newly added copper exclusion. The trial court granted Defendant’s motion for summary judgment, holding that the broker/agent owed no special duty of care to notify the policyholder of the exclusion because the exclusionary language was clearly and unambiguously stated in the policy. The trial court went on to say that under Kentucky law, a broker/agent has no separate duty to alert a policyholder of changes to the policy from one year to the next if the insurance policy itself unambiguously explains its terms and conditions of coverages.

An argument in Atic’s appeal that I find appealing (see what I did there?) is because Atic relied on the broker’s advice, the broker undertook an ongoing duty to advise the company of any changes to the policy. The broker argues the reverse, that Kentucky law has found that a broker has no ongoing duty to advise beyond providing the written policy. The appeal has the potential to effect Kentucky law regarding broker and agent negligence if the Court of Appeals decides the matter on the above stated arguments of the parties.
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¹ Atic Enterprises Inc. v. Cottingham & Butler Insurance Services Inc., No. 16-6549, filed Oct. 17, 2016 (6th Cir. 2016).