Consumer Reliance on Statements About Pre-Existing Condition Coverage Creates Potential Liability for Insurance Company

The Hosfords consequently sued State Termite and the Inspector alleging negligence and several other theories of recovery. In the Circuit Court of Lowndes County, Mississippi, State Termite did not deny that a pest control operator is held to a duty of reasonable care similar to that imposed upon anyone providing expert or specialized services to the public. Rather, State Termite claimed there was no contract between State Termite and the Hosfords, and therefore, the Hosfords had no basis for their suit. The circuit court agreed. State Termite had contracted with McCrary and therefore the Hosfords lacked priv-ity of contract. Further, the court ruled that State Termite could not have foreseen that the Hosfords would rely on the inspection report. The circuit court granted summary judgment for State Termite and the Inspector and dismissed the complaint. The Hos-fords appealed to the Supreme Court of Mississippi. The Supreme Court of Missis-sippi rejected State Termite's lack of privity of contract argument. The court looked to a state statute in which the Mississippi Legislature had declared that privity of contract would not be a prerequisite to any suit for personal injury, property damage, or economic loss brought under negligence, strict liability, or breach of warranty. Because the Hosford's action against State Termite alleged negligence , there was no legal consequence to the fact that the Hos-fords did not have a contract with State Termite. Thus, State Termite could not assert lack of privity of contract as a defense. Foreseeability The Mississippi Supreme Court also rejected State Termite's defense of lack of foreseeability. The court looked to the Restatement (Second) of Torts 552 (1977) which states that one who, in the course of business, supplies false information due to a failure to exercise reasonable care or competence in obtaining or communicating the information is liable to those who justifiably rely upon the information in their business transactions. However, under the Restatement, the supplier of false information is only liable to those whom he knows will use the information. The court also cited an analogous case that extended liability to those whom the supplier knows or reasonably should know will use the information. Therefore, the fact that McCrary, and not the Hos-ANNOUNCEMENT The Loyola Consumer Law Reporter is currently accepting lead articles and feature columns for publication in upcoming issues. The Reporter publishes articles by practitioners , scholars and consumer experts that explore in depth legal …