Reliance on An Insurance Agent's Representations of Coverage
In Clement v. Smith, supra, 16 Cal. App. 4th 39, the insured obtained contract liability insurance and twice received assurances from the agent that the policy would cover litigation by a specific person.
When that person sued the insured for breach of contract, the insurer denied coverage because the policy in fact covered only personal injury and property damage.
The court held: "Absent some notice or warning, an insured should be able to rely on an agent's representations of coverage without independently verifying the accuracy of those representations by examining the relevant policy provisions.
This is particularly true in view of the understandable reluctance of an insured to commence a study of the policy terms where even the courts have recognized that few if any terms of an insurance policy can be clearly and completely understood by persons untrained in insurance law." ( Id. at p. 45.)