Insurance Agent E & O Claims: Where is the Duty?
Insurance Agents and Brokers: Is there a duty to advise or recommend coverage in Florida?
“My home was destroyed in a fire, and I did not receive enough money from my property insurer to rebuild it as I wanted. My agent should have suggested I obtain more coverage.”
“My flood insurance was not sufficient to fully rebuild my house after a devastating flood. My agent should have recommended additional flood insurance.”
“I had minimal UM coverage on my vehicle, which was inadequate for the injuries I suffered in an automobile accident. My agent should have told me to get higher UM limits on my policy.”
Similar assertions are made throughout Florida, and often times result in a lawsuit against an insurance agent for failing to recommend what is alleged to be “sufficient” coverage. So what is an Agent's duty in this regard, and how can an Agent best fulfil that duty and protect himself/herself to prevent such a claim being made?
Generally speaking, an insurance agent has no duty to advise the insured as to the insured's insurance coverage needs. Tiara Condominium Association v. Marsh USA, Inc., 991 F.Supp.2d. 1271, 1281 (S.D.Fla. 2014). An insurance agent is required to use reasonable skill and diligence, and liability may result from a negligent failure to obtain coverage which is specifically requested or clearly warranted by the insured's expressed needs. Warehouse Foods, Inc. v. Corporate Risk Management Services, Inc., 530 So.2d. 422, 423 (Fla. 1st DCA 1988). Additionally, an insurance broker is under no duty to detail every term of every policy he offers to his customer, particularly where the policy plainly covers all of the risk for which the customer specifically requested coverage. The primary duty of the insurance broker is to provide insurance as agreed. Gust K. Newberg Construction Co. v. E.H. Crump & Co., 818 F.2d 1363 (7th 1987).
The agent's primary duty is to provide the coverage requested (or advise that such coverage could not be obtained) and to correctly and fully provide information specifically requested by the insured or clearly warranted by the insured's expressed needs.
The duty to advise or recommend additional or other coverage may be created, however, where certain special circumstances or a special relationship with the insured exists. This exception is factually specific and looks at the nature of the relationship between the agent (broker) and insured. Some of the factors the courts will look at to determine if a special relationship exists included:
The existence of relationships described above between the insured and agent create an argument, and ultimately a jury question, as to whether a special circumstance existed such that the agent was under a duty to advise or recommend additional or other coverages. In order to avoid such an argument, or to protect one's self against the inevitable, follow some basic guidelines:
These recommendations should help to minimize any exposure you may create for failing to recommend additional limits or other coverages. However, when an insured is without sufficient coverage to pay a loss sustained, it is more likely they will seek to hold the agent responsible unless the failure to obtain the additional coverage was their fault. Meaning they rejected a suggestion or opportunity to request more coverage, failed to provide more facts to give the agent a better understanding of the insurance picture, or rejected a quote for higher limits.