Property insurance agents who offer customers advice on the replacement value of their homes have a duty of care to their customers, a Crawford County Common Pleas Court judge has ruled, but that duty only lasts for the length of the insurance policy’s initial contract.

Writing that an end of such a contract triggers a waiver of liability unless agents again involve themselves in the renewal process, President Judge Anthony J. Vardaro ruled such a duty cannot be considered "ongoing."

Instead, Vardaro continued, the responsibility for determining how much a home is worth falls to the homeowner.

"We agree that the insured is in a better position to know when her property value has increased and that the burden to adjust replacement cost policy values lies with her," the judge wrote in Colvin v. The Travelers Indemnity Co. "The insurer or its agent has no duty to provide ongoing advice ad infinitum regarding changing property values absent some evidence of an inquiry by the insured or a separate undertaking by the insurer to update policy limits."

Neither the plaintiff’s attorney in the case, William T. Jorden of Jorden & White in Meadville, Pa., nor the defense attorney in the case, W. Darren Powell of Thomas Thomas & Hafer in Harrisburg, could be reached for comment.

According to Vardaro, plaintiff Tammy Colvin filed a claim with her homeowner’s insurance company, The Travelers Indemnity Co., after her home was damaged during a fire in February 2005.

Colvin’s policy limit was $117,000 and Travelers paid that amount, plus an adjustment for inflation, Vardaro wrote. Colvin, though, argued her home was worth more than the amount Travelers paid and that she should be paid the difference in value.

Specifically, Colvin argued her home was worth $218,411 and that Travelers was negligent in providing her with a replacement value of $117,000.

Travelers filed a motion for summary judgment after Colvin brought suit, arguing that Colvin bought her insurance through an independent broker, Titusville Insurance Agency, and that it had no duty to provide ongoing insurance advice.

To support its argument, Travelers noted a Titusville manager had testified that his company works with 30 different property and casualty carriers and that it obtains three quotes from those carriers for a customer. Further, Travelers noted, the manager testified that the term "independent broker" related to Titusville’s relationship to its customers, not its relations to Travelers.

Since that was the case, Travelers argued, Titusville was not an agent of the insurer. Instead, the company argued Titusville was the agent of the insured, which, if correct, would leave Colvin without a claim against Travelers.

Vardaro, in his analysis on that issue, wrote that a 2009 Superior Court case, Regis Insurance Co v. All American Rathskeller Inc., allowed for brokers to be considered agents of an insurer, but that "some evidence of an authorization, or some fact from which a fair inference of an authorization by the company might be deduced to make an insurance broker the agent of the company."

And though there was no operating agreement between Travelers and Titusville, Vardaro wrote, there was an insurance binder that described a Titusville employee as an "authorized representative" of Travelers. Further, wrote Vardaro, the Titusville manager also testified that Titusville was an agent for Travelers.

"Here, evidence in favor of plaintiff shows that defendant Titusville had authority to issue insurance binders on defendant Travelers’ behalf, and that Travelers relied on Titusville to ensure insurance to value on their behalf, because Defendant Travelers wasn’t going to come see plaintiff’s property to set the value," Vardaro wrote. "This is sufficient to establish a material issue of fact as to defendant Titusville’s status as defendant Travelers’ agent."

That being the case, however, Vardaro wrote that Travelers’ liability only extended to that contract.

Travelers, in arguing that it did not owe Colvin an ongoing duty, cited two Superior Court panel decisions, a Supreme Court opinion and a 2007 federal court decision from the U.S. District Court for the Western District of Pennsylvania.

Vardaro wrote that only the federal court case — Stern Family Real Estate Partnership v. Pharmacists Mutual Insurance Co. — was on point.

And though that decision was unreported, Vardaro wrote that he saw the case as instructive because the factual background was "quite similar to the one before us now" and no Pennsylvania case law existed on the matter.

In Stern, wrote Vardaro, a federal court judge ruled that an agent had a duty of care under Section 323 of the Restatement (Second) of Torts. because he had inspected the property, took measurements, calculated an amount of coverage needed and recommended that amount. The plaintiff in the case had alleged reliance on that recommendation, Vardaro wrote.

According to Vardaro, §323 of the Restatement (Second) of Torts holds that "[o]ne who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of the other’s person or things, is subject to liability to the other for physical harm resulting from his failure to exercise reasonable care to perform his undertaking, if (a) his failure to exercise such care increases the risk of such harm or (b) the harm is suffered because of the other’s reliance upon the undertaking."

In the current case, then, the evidence presented by Colvin was enough to establish that Travelers used its own expertise, through an agent, to determine the replacement value of Colvin’s home when she first sought her insurance policy, Vardaro wrote.

That duty only lasted until the end of the first contract, though, Vardaro ruled.

To support that decision, he cited Ohio case law and wrote that "other states permitting reliance on Restatement §323 to create a duty, find that such a duty is not an ongoing one."

Still, summary judgment was not available to Travelers, Vardaro wrote, because Colvin’s negligence claim asserted the insurance company was negligent for failing to provide a proper replacement value during its initial evaluation of the property.

(Copies of the 23-page opinion in Colvin v. The Travelers Indemnity Co., PICS No. 10-1901, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m. Tuesday.) •