Orlando Harmon
Insurance agents are generally insulated by law from negligence claims, but they can be sued for losses incurred due to their negligence. For example, if an insurance agent failed to secure fire damage insurance for your home, and you had to spend additional money on a hotel while the matter was addressed, you could sue the agent for negligence. However, insurance agents are not obligated to advise their clients on their insurance coverage needs or to predict future needs. Instead, their duties include exercising reasonable care in securing insurance coverage that the client has specifically requested and notifying the client of any issues regarding its availability.
| Characteristics | Values |
|---|---|
| Grounds for suing an insurance agent | Negligence, misrepresentation, failure to adhere to duties, or breach of contract |
| Agent's duties | Exercise reasonable care in securing insurance coverage, notify the client of any issues, properly consider the client's needs |
| Misrepresentation | Misrepresenting the scope of coverage, failing to notify of insurer issues, misrepresenting what's in the policy |
| Recoverable damages | Loss suffered due to negligence, consequential damages, inconvenience and emotional costs of denied coverage |
| Limitations | Varies by state, no absolute right of action, determination of claim depends on specific circumstances |
| Special relationship | Agent's marketing efforts, level of engagement, provision of additional advisory services |
| Exceptions | Policyholder requests specific coverage, agent holds themselves out as an expert, superior knowledge |
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What You'll Learn
Suing for negligence
While it is challenging to hold insurance agents and brokers accountable for professional negligence, it is not impossible. Insurance agents and brokers are generally insulated by the law from negligence claims. However, they can be held liable for negligence if they make promises or guarantees, misrepresent themselves or a policy, or mishandle funds.
In the United States, insurance agents are generally required to exercise reasonable care, diligence, and judgment in procuring the insurance requested by the insured. This means that they must act or refrain from acting in a certain way, and failure to do so may result in a breach of duty, which could lead to a negligence claim. For example, if an insurance agent fails to notify you of insurer issues, such as financial insolvency, or misrepresents what is in your policy, leading you to believe you are covered for something that is not included, you may have a negligence claim.
In the case of Jones in California, the court held that insurance agents assume the duties normally found in any agency relationship, which includes the obligation to use reasonable care in procuring insurance. However, most jurisdictions interpret this duty narrowly, making it challenging to hold brokers accountable for professional negligence. For instance, in most jurisdictions, brokers are not obliged to advise an insured to procure additional or different insurance coverage. On the other hand, a few jurisdictions impose greater duties on brokers, requiring them to advise on additional coverages without the need to prove a special relationship with the client.
When considering suing an insurance agent for negligence, it is essential to consult a lawyer well-versed in insurance law. They will review your case, determine your chances of success, and guide you through the process. The lawyer can also advise on the potential damages you may be able to recover if your claim is successful. These damages may include an amount equal to the benefits or payments you would have received if not for the agent's negligence, as well as compensation for any inconvenience and emotional costs incurred due to the denial of expected coverage.
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Misrepresentation of policy
If a policyholder suspects that their insurance agent has misrepresented the policy, they may have a claim for insurance bad faith. This means that the policyholder believes the insurance company or agent has acted in a dishonest or unfair manner. In these cases, it is important to consult with an experienced insurance attorney who can advise on the specific laws and limitations in each state. For example, California law requires that insurance companies do not deny coverage based on an agent's negligent or intentional misrepresentation of a policy's coverage provisions.
To prove a negligent misrepresentation claim, the policyholder must generally show that the insurance agent had a duty to act or refrain from acting in a certain way, that they breached this duty, and that this breach caused foreseeable harm to the policyholder. The policyholder must also prove that they suffered actual damages, such as property damage, lost wages, or medical expenses.
In some cases, insurance agents may be held liable for negligence if they fail to adhere to their duties, such as failing to secure the necessary coverage for their clients. However, it is important to note that insurance agents are generally insulated by law from negligence claims, and the law does not grant an absolute right of action against them. Nonetheless, if an agent's negligence results in a denied insurance claim, the agent may be required to pay damages equivalent to the full losses suffered by the policyholder.
To avoid misrepresentation of policy, policyholders should carefully review the terms and conditions of their insurance policies and seek clarification from the insurance agent or company if there are any unclear or opaque provisions. Policyholders should also be aware of their rights and options in the event that they suspect misrepresentation or negligence on the part of their insurance agent.
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Failure to secure coverage
Insurance agents and brokers are generally protected by law from negligence claims. However, they may be sued for negligence if they fail to secure coverage that they were supposed to obtain for their clients. This is dependent on certain factors.
Firstly, the insurance must have been available in the marketplace, and at a price the insured would have paid, before a broker can be held accountable for failing to obtain coverage. For example, a bar may request insurance to cover bar fights, but coverage for such claims is rare and difficult to find at an affordable rate. Thus, a broker’s failure to obtain coverage for such claims would not constitute negligence.
Secondly, insurance agents and brokers are generally not obliged to advise their clients on the type and amount of insurance coverage they need. However, this duty to advise may be activated under certain circumstances, such as when the agent has established a "'special relationship'" with the client. Factors that may indicate a "special relationship" include the agent's marketing efforts, their level of engagement with the insured, and whether they are being paid to provide additional advisory services.
Thirdly, the more an agent or broker promises, the more likely they can be held liable for negligence. This includes making misrepresentations regarding a policy, holding themselves out as an expert in a specific field, or mishandling funds.
Finally, insurance agents and brokers have a duty to act with reasonable skill and diligence in selling insurance policies. This includes assessing the client's needs and requests before selling them the appropriate amount and type of coverage. If an agent fails to sign up a client for requested coverage that is available in the marketplace, they may be sued for negligence.
In summary, while insurance agents and brokers are generally protected from negligence claims, they may be sued for failure to secure coverage if they fail to obtain coverage that was reasonably available, establish a "special relationship" with the client, make promises or misrepresentations, or fail to sell the client the appropriate coverage.
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Mismanagement of funds
Many business disputes arise from the mismanagement of funds. Examples include combining funds with personal accounts, theft, bribery, fraud, and publishing trade secrets obtained illegally. In the United States, the False Claims Act is a powerful tool for combating healthcare fraud, including unlawful kickbacks and discrimination against disabled Americans.
Insurance agents and brokers are generally protected by law from negligence claims. However, they can be held liable if they make promises or hold themselves out as experts in a specific field. In the state of California, an insurance agent assumes the duties normally found in any agency relationship, including the obligation to use reasonable care, diligence, and judgment in procuring the requested insurance. Similarities exist across state insurance laws, and agents owe a fiduciary duty to their clients during the underwriting and selling process.
In the case of Tobby Jablonski and Rand Sre, the Michigan Department of Insurance and Financial Services suspended their licenses after an investigation found they had allegedly mismanaged customers' escrow funds. Customers deposited funds into escrow accounts and later received notices that taxes, utilities, and liens had not been paid. This example demonstrates the legal consequences of financial mismanagement, which can include monetary damages, rewriting financial agreements, or replacing the person in charge of the funds.
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Failure to notify of insurer issues
While there is no exact data on how many insurance agents are sued, insurance agents can be held accountable for negligence in the performance of their duties. In Florida, the law gives you the right to sue an insurance agent for negligence. If your insurance agent fails to adhere to their duties, you may be entitled to sue them for negligence and recover damages for the losses over which your insurer has refused to extend coverage. However, the law does not grant an absolute right of action against your insurance agent.
Insurance agents have a duty to notify their clients of any issues regarding the availability of insurance coverage. If an insurer faces financial problems, such as insolvency, the agent must inform the client. Agents who hold themselves out as experts or specialists in a given area owe an even higher duty of care. Failure to notify clients of these issues can result in a negligence claim against the agent.
For example, if an insurance agent fails to secure the necessary insurance coverage for a client, and the client suffers a loss that should have been covered, the agent may be liable for the full amount of the loss, as well as any consequential damages. In this case, consequential damages could include additional living expenses incurred by the client while the matter is addressed.
It is important to note that insurance agents do not have a general duty to advise their clients on their insurance coverage needs. However, if an agent misrepresents the details of a policy or makes material misrepresentations about the coverage provided, this could lead to a negligence claim. Proving negligence can be complex and may require the expertise of a lawyer well-versed in insurance law.
To determine whether you have a valid claim against an insurance agent for failure to notify of insurer issues, it is advisable to consult with a lawyer who can review your case and determine your chances of success.
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Frequently asked questions
No, insurance agents are not expected to predict future needs. However, if you communicate your needs to your insurance agent, they may be held liable for failing to meet those needs.
Yes, if your insurance agent fails in their duties under state or federal laws and you are denied coverage as a result, you may be able to sue them for negligence.
Negligence is a type of legal action that requires proof of duty, breach, causation, and harm. For example, if an insurance agent failed to secure insurance coverage for fire damage to your home, causing you to spend additional money on a hotel, you may be able to sue for negligence.
If you are considering suing your insurance agent, it is recommended that you consult a lawyer well-versed in insurance law to guide you through the process and determine your chances of success.
