No Harm, No Foul? Insurance Agents, Negligence, and Damages

In Abdelmaguid, the panel addressed – in a published decision – whether damages exist when an insured has assigned away its negligence claim against an agent in exchange for not having to pay an underlying judgment.

Finding this to be a question of first impression in Michigan, a divided panel looked to caselaw from other states and adopted the “majority” approach, holding “that an insured, who has entered into a covenant not to sue or execute on an excess judgment” has a right “against an allegedly negligent insurance agent, which could be assigned to others.” Id. at ___; slip op at 17-18.

A suit against the agent can be maintained “so long as the assignment contains only a covenant not to sue or to execute on the excess judgment, instead of a full release of rights.” Id.