Charles S. Faber v. Francine A. McVay
155 A.3d 153
R.I.2017Background
- From 1998–2005 McVay served as Dr. Faber’s insurance agent; she altered his auto coverage effective December 11, 2002 to reduce premiums by $4,951. The change placed $250,000 UM with Progressive and an umbrella/excess liability policy ($5,000,000) with Vigilant that did not include UM.
- Dr. Faber received multiple coverage-update/declarations summaries but conceded he did not read them and relied on his agents’ expertise.
- McVay retired in 2005; M&S and agent Albright handled renewals thereafter and sent similar coverage notices (including a February 22, 2006 renewal showing excess-only coverage).
- Dr. Faber was injured in an automobile accident on April 24, 2007, recovered $250,000 from Progressive (UM) but was denied excess/UM coverage by Vigilant.
- Plaintiffs sued defendants for insurance malpractice on August 6, 2009. The Superior Court granted summary judgment for defendants as time-barred under G.L. 1956 § 9-1-14.1 (three-year limitations with a discovery rule). The Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When did the § 9-1-14.1 limitations period begin to run for insurance malpractice? | Tolling under the discovery rule until the insured was injured and denied coverage in 2007; earlier coverage notices were not reasonably read. | The period began when plaintiffs received clear coverage summaries (Dec. 11, 2002 and Feb. 22, 2006); reasonable diligence required reviewing those notices. | Held: The clock began no later than Dec. 11, 2002 (and Feb. 22, 2006 for later claims); the 2009 complaint was untimely. |
| Does the § 9-1-14.1 discovery rule require actual knowledge of damages or knowledge of the wrongful act? | Limitations tolled until damages were discoverable (i.e., when coverage was denied). | Discovery refers to the wrongful act; recipient must discover or reasonably should have discovered the negligent conduct from coverage notices. | Held: Discovery refers to the wrongful act; plaintiffs should have discovered the defective coverage earlier. |
| Can an insured as a matter of law be excused from reading coverage updates as reasonable diligence? | Yes — a reasonable insured typically does not read detailed insurance notices, so failure to read should not start the limitations period. | No — an insured must at least peruse the declarations/coverage summary; personalized summaries command attention. | Held: No. A reasonable insured must review declaration/summary pages; failure to do so defeated plaintiffs’ tolling claim. |
| Effect of substantial premium reduction on notice/readiness to investigate? | Irrelevant to tolling; still relied on agent. | Large premium reduction should prompt inspection or inquiry; reinforces constructive notice. | Held: The significant premium savings supported finding plaintiffs had reason to review and thus were on notice. |
Key Cases Cited
- Bustamante v. Oshiro, 64 A.3d 1200 (R.I. 2013) (discovery date is when plaintiff knew or should have known the wrongful act)
- Burns v. Connecticut Mutual Life Insurance Co., 743 A.2d 566 (R.I. 2000) (recipient of a policy is obligated to examine documents; claim time-barred where notice was provided)
- Dionne v. Baute, 589 A.2d 833 (R.I. 1991) (recipients must examine relevant documents)
- Mallane v. Holyoke Mutual Insurance Co. in Salem, 658 A.2d 18 (R.I. 1995) (declarations sheet is of paramount importance because detailed provisions are seldom read)
- Sentry Insurance Co. v. Grenga, 556 A.2d 998 (R.I. 1989) (insureds rely on personalized documents to disclose significant limitations)
- Sutherland v. NN Investors Life Insurance Co., 897 F.2d 593 (1st Cir. 1990) (insured’s failure to read policy cannot be used to revive claims against insurer)
- Manchester v. Pereira, 926 A.2d 1005 (R.I. 2007) (a party who signs or receives an instrument manifests assent and cannot later claim ignorance)