CPR&S. Glen R. Pritchard Insurance Agent Liability. www.GlenPritchard.com. Click on “Glen’s Library” to view and download this slide show and related material. The Basics.
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“An insurance sales agency owes its customer a duty to exercise good faith and reasonable diligence in undertaking to acquire the needed insurance coverage.”
“An insurance customer is generally charged with the knowledge of the contents of his or her own insurance policy.”
An insurer does not have a duty to the applicant to enumerate and outline, beyond the language of the policy, all risks which it may ultimately decline to insure.
Plaintiff testified that he requested “full coverage” from State Farm agent. A policy was issued for $100,000 of liability and uninsured motorist coverage, but no underinsured motorist coverage. State Farm denied UM coverage for accident caused by tortfeasor with $25,000 of insurance.
“The relationship between an insurance salesman and his customer may take on fiduciary dimensions when reliance is reasonably reposed in the salesman by the customer. It is reasonable to conclude that in the situation before us, a duty of disclosure arose in favor of the plaintiff.”
Plaintiff purchased a beer and wine drive-through and sought “full coverage” insurance from Defendant insurance agent. The policy issued did not include coverage for liquor liability, and plaintiff incurred a personal judgment in a dram shop action. At trial against the plaintiff’s agent for failing to provide the coverage, the jury apportioned fault 40% to the plaintiff and 60% to the insurance agent.
Affirming, the appellate court noted “an insurance agent must not only obtain the insurance requested, but also, advise a customer who is relying on his expertise.”
The plaintiff purchased a business general liability policy to cover his trucks and specifically confirmed with his agent that the policy would cover out-of-state accidents. If fact, the policy excluded coverage for out-of-state accidents, and plaintiff sued the agent for negligent misrepresentation.
The appellate court reversed the trial court’s grant of directed verdict for the agent, finding the allegation of misrepresentation sufficient to state a negligence claim.
Note: A showing of a fiduciary duty is apparently not required to state a claim for negligent misrepresentation.
Plaintiff’s business was destroyed by fire. The loss was only partially covered by insurance due to a coinsurance provision. Plaintiff sued his insurance agent for failing to provide an “agreed value endorsement”.
Held: As issue of fact exists as to whether the agent owed a fiduciary duty to Plaintiff based on the agent’s own testimony. The agent testified that he did not give his clients advice, but also testified that he had convinced the plaintiff to maintain his level of coverage.
Plaintiff’s business lost electricity, and the plaintiff suffered a loss of refrigerated goods. This loss was excluded under the plaintiff’s business “all-risk” policy. Plaintiff sued the agent for failing to advise the plaintiff of a new endorsement which became available after the policy went into effect which would have covered some of the loss. The court of appeals held that, absent a special relationship, an insurance agent has not on-going duty to review and advise insured’s of new coverages that become available after the policy is issued.