Licensed Insurance Agents: Ensuring Proper Auto Coverage

Insurance agents are licensed professionals who help individuals and businesses obtain insurance coverage for various needs. They are responsible for selling insurance policies, negotiating coverage, and ensuring their clients are adequately protected. While the specific duties of an insurance agent may vary by state and the type of insurance they specialize in, they generally have a fiduciary duty to their clients and must exercise reasonable care, diligence, and judgment in their work. This includes selling the appropriate coverage, informing clients of any changes to their policy, and disclosing any issues with the insurer, such as financial insolvency.

Misrepresenting what's in your policy

Misrepresentation in insurance refers to the provision of false or inaccurate information, which can influence an insurance company's decision-making process. This can be done either deliberately or inadvertently. Providing false information can lead to severe consequences such as denied claims, policy cancellations, and even criminal charges for insurance fraud.

There are two types of misrepresentation: negligent misrepresentation and fraudulent or intentional misrepresentation. Negligent misrepresentation occurs when incorrect information is provided to the insurance provider without malicious intent. For example, a policyholder might mistakenly report the age of their home's roof, resulting in a higher premium.

On the other hand, fraudulent misrepresentation involves knowingly providing false information or concealing relevant information to deceive an insurance provider. For instance, if a policyholder falsely denies prior insurance claims on their application. Fraudulent misrepresentation is a severe form of misrepresentation and can lead to harsh legal repercussions.

In the context of auto insurance, misrepresentation can occur when an insurance agent misrepresents the details of the policy, such as the extent of coverage provided. This can lead to the insured individual unknowingly purchasing a policy that does not adequately cover their needs. In such cases, individuals may have a claim for insurance bad faith against the agent or the insurance company.

To avoid misrepresentation, it is essential to provide accurate information on insurance applications and maintain open and transparent communication with insurers. Verifying details before submitting an application or claim and regularly communicating with the insurer can help prevent misrepresentation and its potential repercussions.

Failing to notify you of insurer issues

An insurance agent is responsible for notifying the insured of any issues with their insurer. If an agent fails to do so, they can be held liable for negligence.

An insurance agent owes their client a duty of care, which includes keeping them informed about their insurance coverage. If an agent fails to notify their client of any issues with their insurer, such as changes to their policy or inability to procure insurance, they can be held legally responsible for any damages or injuries that occur as a result.

For example, if an agent fails to inform their client about a change in their renewal policy, they can be held liable for any losses the client incurs as a result. Similarly, if an agent undertakes to procure insurance for a client but fails to do so, they are responsible for any damages that occur due to a lack of insurance coverage.

It is important to note that the standard of care required of an insurance agent is that of a "reasonably prudent agent", which can evolve over time as the "state of the art" of insurance agency procedures and operations changes. As such, agents are expected to stay up-to-date with industry standards and best practices to ensure they are providing their clients with the appropriate level of care.

In addition to their legal responsibilities to the insured, insurance agents also have duties to the insurer. Agents may be liable to the insurer for negligence or breach of contract that causes loss or damage. This includes a duty of loyalty, fairness, and honesty, as well as acting in good faith and keeping the insurer informed of material matters.

Overall, insurance agents play a crucial role in ensuring their clients have appropriate insurance coverage and are notified of any issues with their insurer. Failing to do so can result in legal consequences and financial liability.

Failing to notify you of policy cancellation

Duty of the Insurance Agent: Insurance agents have a fiduciary duty to their clients, which includes keeping them informed about their policy status. This means that they are legally and ethically obligated to notify their clients if their insurance policy is going to be cancelled. This falls under the common law duties of an agent to its insured, ensuring they use the necessary degree of care to protect the interests of the insured.

Consequences of Non-Notification: If an insurance agent fails to notify their client about an upcoming policy cancellation, the client may face financial and legal risks. They may be left without the necessary coverage, leading to out-of-pocket expenses in the event of an accident or incident. Additionally, a lapse in coverage can result in higher premiums when the client seeks a new policy, as insurers may consider them a higher risk.

Client's Rights and Options: If a client experiences a failure of notification from their insurance agent, they may have legal recourse. The client can explore a negligence claim against the insurance agent and seek compensation for any damages incurred due to the lapse in coverage. It is important to note that the specific laws and requirements may vary across different states, so seeking legal advice is essential.

Prevention and Mitigation: To prevent such issues, insurance agents should maintain regular communication with their clients and keep them informed about any changes to their policy, including potential cancellations. Clients can also be proactive by regularly checking in with their insurance agent to ensure their policies are up to date and meeting their needs.

Overall, failing to notify clients about policy cancellations can have significant negative consequences for all parties involved. It is crucial for insurance agents to uphold their duty of care and provide timely notifications to their clients to avoid these issues. Clients should also stay informed and be aware of their rights and options in case of any lapses in communication.

Failing to pass on notification of your claim

Failing to notify your insurance company of a claim can have serious consequences. In the US, state laws impose specific responsibilities on insurance agents, and if they fail in their duties, you might have a negligence claim. One of these duties is to inform the insurer of a claim.

The requirements for notification vary based on your policy. For example, claims-made policies, such as professional liability policies, require notification to be made within the effective period of the policy. Occurrence-based policies, which cover things like automobile accidents, do not necessarily require timely notification, but if the insurance company can show that the delay prejudiced them, the claim may not be paid.

It is important to adhere to the specified procedures and timelines outlined in your policy when notifying your insurance company of a claim. These typically include details such as the nature of the claim, the parties involved, and the timeframe within which the notification must be given. Keeping a record of your notification, including the time, the person you spoke to, and their title, is also crucial in case the insurance company denies receiving the notification.

Failing to notify your insurance company of a claim can result in denial of coverage or delayed payment. For example, in the case of Maccaferri v Zurich Insurance Plc [2016], the court held that Zurich was obliged to indemnify Maccaferri Limited under the policy despite late notification. However, this may not always be the case, and it is best to avoid taking such a chance.

Failing to sign you up for requested coverage

Failing to sign a client up for the coverage they requested is a breach of an insurance agent's duty of care. This is a common cause of errors and omissions claims against insurance agents.

Insurance agents have a duty to use reasonable care, diligence, and judgment when selling insurance policies. This includes assessing a client's needs and requests and selling them the appropriate amount and type of insurance.

To avoid a claim, insurance agents should fully vet every client to determine their insurance needs so that their recommendations are correct. Agents should also ensure that clients are immediately notified if requested coverage cannot be purchased and provide them with alternative options.

It is also important for insurance agents to document all interactions and save correspondences. If a client refuses a policy, the agent should get this in writing and send a follow-up email to confirm what was agreed to or declined, so there is no confusion. These records should be kept even after the client relationship has ended.

By taking these steps, insurance agents can help protect themselves and their business from costly errors and omissions claims.

Frequently asked questions