COURT CONSIDERS WHETHER A "SPECIAL RELATIONSHIP" EXISTS BETWEEN AGENT AND INSURED

Peter B. Worden

In Maynard v Scott Murray and Transamerica Life Insurance Company, an unpublished decision issued on December 21, 2021, the Court of Appeals considered whether an exclusive insurance agent assumed a duty to advise an insured regarding the impending lapse of a life insurance policy due to the existence of a “special relationship.” In a 2-to-1 decision, the Court determined that there was sufficient evidence that a special relationship existed and vacated the lower court’s granting of summary disposition to Transamerica.

Dervin Maynard had purchased a life insurance policy with Western & Southern Life in 2016 through defendant Scott Murray when Murray was an independent insurance agent. There was testimony that Maynard had owned a small business and had various insurance needs, and that he had long relied on Murray for insurance advice. Shortly after selling Maynard the Western & Southern policy, Murray took a job as an exclusive insurance agent with Transamerica. On Murray’s advice, Maynard then applied for a new life insurance policy with Transamerica. However while the Transamerica application was being considered, the Western & Southern policy lapsed for nonpayment of a premium due on June 15, 2017.

In June of 2017, both before and after the Western & Southern policy lapsed, there was a series of text exchanges between Maynard and Murray regarding Maynard’s concerns that the previous policy was lapsing before the new Transamerica policy was in place. At no point did Murray advise Maynard to pay the Western & Southern policy premium and prevent that policy from lapsing.

Transamerica ultimately denied Maynard’s application for life insurance in July of 2017, citing his COPD and history of smoking. The Western & Southern policy was by then irretrievably lapsed. Maynard died in November of 2017.

The trial court held that Murray had no duty to advise Maynard on his insurance coverages, and granted summary disposition to Transamerica. The plaintiffs appealed that ruling. (For reasons that aren’t clear, there was no ruling on summary disposition as to the claims against Murray himself; a footnote in the dissent indicates the plaintiffs’ suit against Murray was dismissed without prejudice because neither side showed up for the scheduled trial).

In the Court of Appeals, both the majority and dissenting opinions recognize that generally an exclusive insurance agent owes no duty to advise an insured regarding the adequacy of coverage. However, a duty of care can arise when an event occurs that creates a “special relationship” between the agent and the insured. In Harts v Farmers Ins Exchange, 461 Mich 1, 10-11 (1999), the Michigan Supreme Court had held that a “special relationship” would arise where:

(1) the agent misrepresents the nature and extent of the coverage offered or provided, (2) an ambiguous request is made that requires a clarification, (3) an inquiry is made that may require advice and the agent, though he need not, gives advice that is inaccurate, or (4) the agent assumes an additional duty by either express agreement with or promise to the insured.

Note that none of these factors directs us to look to the general nature, length, or depth of the relationship in deciding if a “special relationship” exists; an insured might have a close, even friendly relationship with an agent for decades, but in and of itself that does not make the relationship “special.” Rather, it is what occurs during the relationship that defines the relationship. In fact, the majority mentions evidence that Maynard had long relied on Murray for insurance advice, but it did not find that a “special relationship” existed on that basis.

The majority and the dissent had sharply different interpretations of the text messages between Maynard and Murray, leading to different conclusions as to whether a “special relationship” and thus a duty existed. The majority read the text messages as essentially Murray assuring Maynard that the Transamerica policy would be issued. At certain points Murray had texted that they were just waiting on a couple of signatures, or information from a doctor. He specifically advised Maynard that “It looks like it will be final in a day or two” and the two then discussed Murray picking up the annual premium from Maynard. The majority read these messages to mean that Murray, in response to Maynard’s concerns that his other policy was lapsing, was assuring Maynard not to worry and that his new coverage was “a done deal.” For the majority, this was enough to potentially create a “special relationship” under items (3) or (4) of the Harts standards, precluding the granting of summary disposition.

The dissent, on the other hand, read the text messages more literally. It points out that at no point did Murray ever text Maynard to say that the new coverage was assured; instead, all of his texts could be read as expressions that the application process was moving forward. At no point did Maynard specifically inquire with Murray whether Maynard should allow the Western & Southern policy to lapse; and at no point did Murray offer any advice as to whether to allow the prior policy to lapse.

The dissent also points out that when Maynard applied for the Transamerica policy, he signed a form acknowledging his understanding that his coverage was not guaranteed and would not be complete until the application process was finished (a fact not even mentioned by the majority). Maynard was also well aware that his previous policy was lapsing before any new coverage was in place; this was, in fact, the basis of the concerns Maynard had voiced in his texts to Murray.

Thus, the dissent concludes that Murray was never asked for advice, and never gave any that was inaccurate; failing to meet the 3^rd Harts standard. Rather, Murray’s lack of comment on whether the prior policy should be allowed to lapse was entirely consistent with Murray’s lack of duty or obligation to offer such advice. Nor was there any express agreement or promise by Murray to Maynard to offer such advice, further failing to meet the 4^th Harts standard.

The majority, responding to the dissent’s points, relies primarily on two legal principles: first, in considering whether summary disposition is appropriate, all evidence must be considered in the light most favorable to the nonmoving party, citing Opdyke Investment Co v Norris Grain, 413 Mich 354, 360 (1982). Second, the evidence considered should include all reasonable inferences and circumstantial evidence, citing Yoost v Caspari, 295 Mich App 209, 228 (2012) and Bergen v Baker, 264 Mich App 376, 387 (2004).

Applying these principals, the majority held that it could be inferred that in his texts Maynard was asking Murray for help, which logically meant he was looking for an assurance the Transamerica policy was about to be issued or at least a request for advice as to what to do if it was not issued. The majority stated that in response to this request, Murray suggested or implied that coverage would be forthcoming from Transamerica. He even discussed with Maynard the latter’s payment of the premium a year in advance. In the majority’s view it could be inferred that Murray had been asked to give advice, or that he had agreed to provide advice, but his advice was inaccurate.

Although much of the majority’s opinion reads as though it is holding that a “special relationship” in fact existed, a careful reading of the opinion suggests its holding was more limited. The majority held that the lower court’s granting of summary disposition was inappropriate, not that a special relationship existed. The majority sent the case back to the lower court for further proceedings consistent with its ruling, which logically should include a determination by the trier of fact (probably a jury) as to whether a “special relationship” in fact existed.

Although whether a legal duty exists is a question of law for a court to decide, Harts, supra at 6, that principle should not be read as leaving it to the courts to decide if a “special relationship” exists in all cases as an issue of law. Rather, the legal question of duty begins and ends with the courts’ determination that a legal duty exists if a “special relationship” exists. Whether a “special relationship” exists is a question for the trier of fact, if there is a legitimate question of fact. See, e.g., Palmer v Pacific Indemnity Co, 74 Mich App 259, 267 (1977). In Maynard, the majority’s point to the dissent was that in the majority’s view, there were legitimate questions of fact.