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No reliance means no UDTP claim against insurer


A plaintiff must present evidence of actual and reasonable reliance on a misrepresentation in order to make a successful claim for unfair and deceptive trade practices against an insurance agent, the North Carolina Court of Appeals has unanimously ruled.

DC Custom Freight, a freight shipping and trucking company, engaged Tammy A. Ross & Associates, an insurance agent and broker, to procure commercial automobile insurance coverage. DC Custom provided the insurance agent with a list of its equipment and a copy of its former insurance policy to guide the process.

DC Custom—which used rented vehicles in its business, including trucks rented from Rush Enterprises—purchased a policy under which trucks leased on a long-term basis were covered for physical damage, but trucks rented on a short-term basis weren’t. 

Rush’s insurer asked Ross to send a Certificate of Insurance that showed DC Custom’s liability insurance limits and physical damage deductibles for leased or rented vehicles. The COIs, none of which were sent to DC Custom, showed liability insurance limits and a deductible for collision.

In June 2018, DC Custom rented a truck from Rush on a short-term basis. The rental agreement required DC Custom to provide collision insurance for the truck. In July, the rented truck was damaged in a collision, but when DC Custom submitted a claim to its insurance company, it was denied because short-term rentals weren’t covered by the policy.

DC Custom sued Ross, asserting claims for negligence, breach of contract, and unfair and deceptive trade practices (UDTP). The North Carolina Business Court granted Ross’s motion for summary judgment on all of DC Custom’s claims, which DC Custom appealed.

In an opinion authored by Judge Lucy Inman, the Court of Appeals affirmed, relying on a 2013 case from the state’s Supreme Court, Bumpers v. Community Bank of Northern Virginia, which held that UDTP claims based on misrepresentation require a showing of both actual and reasonable reliance to prove that the misrepresentation caused damages, she wrote.

“We hold that this requirement extends to claims made within the insurance industry context, in which certain practices are defined as unfair or deceptive under N.C. Gen. Stat. §58-63-15,” Inman wrote. “We also hold that plaintiff has failed to produce evidence sufficient to support a claim for negligence or breach of contract. The trial court’s grant of summary judgment was therefore proper as to each of plaintiff’s claims.”

Reliance required but not shown

DC Custom’s UDTP claim rested on the intersection of two statutes, Inman explained: N.C. Gen. Stat. § 75-1.1, which creates a private cause of action for UDTP, and N.C. Gen. Stat. § 58-63-15(1), which “our courts have held recognizes certain acts within the insurance context as per se unfair or deceptive practices.” UDTP claims based on a misrepresentation by the defendant generally require a showing that the plaintiff relied on the misrepresentation, leading to its injury.

Although the court had addressed the issue of reliance in the insurance context in a 2003 case (Cullen v. Valley Forge Life Insurance) and held that reliance is not a requirement to show causation in a UDTP claim stemming from Section § 58-63-15(1), the subsequent Bumpers decision called Cullen into question, Inman wrote, even though it concerned a UDTP claim outside of the insurance industry.

“Plaintiff has not submitted, nor can we identify, any authority or analysis concluding that the element of proximate cause in the insurance context should be treated differently than causation outside of it,” Inman wrote. “In order to succeed on a UDTP claim arising under Section § 58-63-15(1),a plaintiff must show reliance on the misrepresentation.”

DC Custom failed to demonstrate that reliance, Inman said.

“The only document plaintiff received from defendant provided no representation regarding the insurance coverage in dispute,” Inman wrote. “Plaintiff argues that its rental of trucks from Rush shows reliance on the alleged misrepresentations, because Rush agreed to the short-term rentals on the condition that plaintiff have collision coverage for those vehicles. This attenuated connection is insufficient to establish a factual dispute regarding plaintiff’s reliance.”

Further, the reliance of a third party cannot show reliance for a UDTP claim, Inman said. Bumpers was “unequivocal” that a plaintiff “must prove that he or she detrimentally relied on the defendant’s misrepresentation.”

Other claims fail

The court also affirmed dismissal of the negligence and breach of contract claims, finding that DC Custom had failed to present evidence raising a genuine issue of material fact as to whether it had requested that Ross obtain coverage for the short-term rental trucks.

“When seeking insurance coverage, plaintiff provided defendant a copy of its previous insurance policy, which did not cover short-term rentals,” Inman wrote. “Plaintiff argues that its representative told defendant that plaintiff engaged in short-term rentals, and that this constituted a request for coverage. Considering the testimony in the light most favorable to plaintiff, it does not show a request for coverage of short-term truck rentals, and it does not show that defendant promised to obtain such coverage. Defendant had no duty to procure coverage beyond what plaintiff actually requested.”

The court reached a similar conclusion with regard to DC Custom’s breach of contract claim, noting that it lacked evidence showing that the contract between the parties extended Ross’s duties beyond the standard requirement that an insurance agent procure the coverage actually requested by the insured.

Inman rejected DC Custom’s argument that the COIs implied collision and comprehensive coverage for all vehicles, triggering an additional contractual duty on Ross’s part.

“Our legislature has prohibited the issuance of COIs that ‘contain[] any false or misleading information concerning the policy of insurance to which the certificate of insurance makes reference,’” Inman wrote. “We simply hold that a COI, sent to a third party and never communicated to the insured, without any additional consideration, does not create additional contractual duties owed to the insured.”

Jason Benton and Jessica Dixon of Parker Poe in Charlotte represented Ross. Benton said in an emailed statement that the decision “confirmed what we’ve long known in North Carolina.”

“A plaintiff that decides to pursue a claim of unfair or deceptive trade practices must establish all elements of such a claim, including in particular proximate cause, or else face dismissal,” Benton said.

Christopher Duggan of The Duggan Law Firm in Monroe, who represented DC Custom, said his client intends to appeal the decision.

“The court instituted a new requirement for plaintiffs [in UDTP cases],”Duggan said. “Although the insurance statutes state that misleading information in the COI is a per se unfair or deceptive trade practice, the court said you still need to have reliance on that issuance.”

The 25-page decision is DC Custom Freight, LLC v. Tammy A. Ross & Associates, Inc. (Lawyers Weekly No. 011-224-20). The full text of the opinion is available online at

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