Examples of insurance broker negligence . We discovered the broker’s mistake by reviewing the original documents from ten years earlier and each of the annual renewals. In contrast to an insurance agent, an insurance broker typically works with several carriers and typically is considered to be acting for the insured. For instance, the New Jersey Supreme Court in Brill v. Guardian Life Ins. Can I sue my insurance broker for negligence? (See, e.g., Jones v. Grewe (1987) 189 Cal.App.3d 950, 954.) Agents are “persons” engaged in the business of insurance for purposes of the Insurance Code, Section 541.002(2). Finding adequate insurance cover can often be tricky and time-consuming. The challenge in these cases is proving the existence of a duty because in … Brokers sometimes will assume additional duties that can result in them being held accountable for professional negligence. In any jurisdiction that recognizes a fiduciary relationship, this cause of action should be included with negligence as it might increase the available damages. The Motion to Remand was granted. Find and retain an expert as soon as you can, even before you agree to take the case. Emma Slade, a solicitor who specialises in Professional Negligence law, considers negligence claims against Letting Agents. Michael L. Cohen is a principal at Cohen McKeon LLP. This includes the obligation to use reasonable care, diligence, and judgment in procuring the insurance requested by an insured.” (Ibid.) Scenario 2: The client asked the broker to buy specific insurance, such as earthquake insurance. The types of damages you can seek in a lawsuit for negligence are generally more limited than those for intentional actions like insurance fraud, and limitations vary by state. The firm submitted a claim, but the carrier paid only a fraction of the total loss. (See Lake County Grading Co. v. Great Lakes Agency, Inc. (Ill. 2d. In our experience, there are not many working insurance brokers who are willing to testify against another insurance broker. In this case, it would be what a fellow real estate agent would have done. A good example of the case described in scenario three is Williams v. Hilb, Rogal & Hobbs Insurance Services of California, Inc. (2009) 177 Cal.App.4th 624. Sometimes, the law will impose additional duties on a broker. Negligence is a legal theory that must be proved before you can hold a person or company legally responsible for the harm you suffered. The Agent will take responsibility for sorting out the tenancy agreement, the deposit, rent collection and will be the first port of call when the Tenant has any problems. These documents might reveal mistakes the broker made long before the loss but that become apparent only after the loss. Determine whether the coverage was available in the marketplace at a price the insured would have paid. In an action against an insurance broker for professional negligence the measure of damages is “the loss of coverage which [the insured] would have received under the [ ] policy (or a like policy issued by another company), except for the negligence and fraud of [the broker].” Greenfield v. Ins. (See, e.g., Fitzpatrick v. Hayes (1997) 57 Cal.App.4th 916, 927.) Subscribe. Scenario 1: The client claims that she forwarded money to her broker to pay the policy’s premium, but the broker failed to pay the premium. Insurance brokers have only limited duties to their clients, An insurance broker has a duty to exercise reasonable care in procuring the insured’s requested coverage. The services of a Letting Agent seem an ideal option for busy landlords. This case is a relatively straightforward finding of professional negligence by a real estate agent. All estate agents should have indemnity insurance in place to cover against the possibility of liability for claims of professional negligence. Associates, Inc. (2004) 115 Cal.App.4th 1145.). Consequently, it is important to find and retain an expert as soon as you can. For example, a bar can ask for insurance to cover bar fights, but coverage for such claims is increasingly rare and difficult to find, let alone at an affordable rate. Claims can be made against this insurance for a range of matters, including incorrect or harmful advice, the loss of vital documents or the breach of … The biggest headache can be finding the … Anytime you ask for an insurance agent’s recommendation, put that in writing so if later on, you find he or she sold inadequate coverage, you have the basis for pursuing a negligence cause of action against the insurance agent. Be the first to know! For reprint permission, contact the publisher: www.plaintiffmagazine.com, California Jury VerdictsVerdict searchReport your recent verdict, Copyright © 2020 by Neubauer & Associates, Inc., All Rights Reserved, Pursuing insurance agents and brokers for professional negligence. Jones v. Grewe (1987) 189 Cal.App.3d 950, 954, Greenfield v. Ins. A client may claim that their real estate agent knew or should have known something, but failed to take any action … In these jurisdictions, scenario four might be a broker-negligence case worth pursuing. He devotes a substantial part of his practice to representing policyholders in cases involving insurance coverage. Therefore, as you are reviewing a potential case, it is important to get as much information as possible to find out if the agent or broker made misrepresentations regarding a policy, held themselves out as an expert in a specific field, or mishandled funds. The broker said he would but then failed to do so. 641. Estate Agent Negligence. When insurance agents fail to get you the protection you thought you paid for, you may have the right to sue the insurance agent and the insurance company for negligence. Estate Agents do not have to be professionally qualified to practice as such but many of them are professionally qualified and, as a consequence of membership of a professional regulator or association, will maintain professional indemnity insurance. In that case one of the disputed issues was whether the broker had taken certain necessary actions. Existence of a Special Relationship. Of course, if proper insurance were obtained, then there would be no claim against the broker. Insurance agents and brokers are for the most part insulated by the law from negligence claims. The first two scenarios are straightforward examples of broker negligence. Insurance agent negligence occurs in many contexts. (Emerson Electric Co. v. Marsh & McLennan Companies (Mo. Except in rare circumstances, a broker’s actions will not bind the carrier and will not be imputed to the carrier. Although insurance agents occasionally can be held accountable for negligence in the performance of their duties as agents, since their professional actions can be imputed to the carrier, it is more common for brokers to be named as defendants in cases of alleged professional negligence. We provide authority from several jurisdictions, which will provide the reader with an informed starting point for further analysis and research. The bottom line is to remain ethical, do the right thing, and be honest with yourself and with your clients. Another real-world example: When the opposing party in one broker negligence case disclosed its testifying expert, we researched that expert’s background online. She is considered to be acting for the carrier, and her actions can bind the carrier. INTRODUCTION . The clients had chosen an insurance agency that advertised an expertise in providing complete insurance packages for business. The plaintiffs sued the real estate agent and the accountant for negligent misstatement. at p. Four typical scenarios for broker negligence. 2016 by the author. The fourth scenario presents a case that is probably not worth pursuing: in most jurisdictions – not all, but most – courts will hold the policyholder responsible for choosing the amount of coverage. An insurance agent may be liable to an insurance company for negligence or a breach of contract that causes loss or damage to the company. 1) An insurance agent is a direct link between an insurance company and the client. Inc. (1971) 19 Cal.App.3d 803, 812. At McWherter Scott & Bobbitt, our Tennessee-based agent negligence attorneys work to get insurance companies to honor valid contracts and fight to hold insurance agents responsible when the agent fails to do his/her job. The firm renewed the policy year after year for ten years. This article is an introduction to the key issues that an attorney should consider when evaluating or prosecuting a negligence case against an insurance agent or an insurance broker. These documents might also help you establish whether there was a special relationship between the broker and your client sufficient to persuade a court that the broker should be treated as more than just an order-taker. In Illinois, insurance agent malpractice claims are typically premised under a negligence legal theory. The broker procured the coverage. The relationship between insurance agents and brokers with insurers is based upon the contract between the insurer and the agent or broker. Heather M. McKeon is a principal at Cohen McKeon LLP. A few jurisdictions impose greater duties on insurance brokers. Indeed, we urge attorneys who are even considering such a case to consult with a broker before you take the case. In Jones, the California court held that, “[o]rdinarily, an insurance agent assumes only those duties normally found in any agency relationship. Obtaining insurance which does not cover the appropriate amount. Go back to the beginning of the relationship. • If the broker and the insured have a special relationship, which can be created by having a long-term relationship. Dist. Accordingly, New Jersey courts have held that insurance intermediaries owe a fiduciary duty to the client. It turns out, instead of setting an aggregate limit for the firm and all its operations regardless of the building in which that particular operation was housed, the broker had requested separate limits for each building based on the firm’s operations in each building at the time the broker first placed the policy a decade earlier. This is true even where the insurance company has wrongly denied the claim. The plaintiffs bought a house for $180,000 which proved to be uninhabitable. An insurance agent is an agent of the insurance company she represents. The courts will sometimes treat the broker as more than just a glorified order-taker and impose a greater duty under the following circumstances: • If the broker misrepresents the nature, extent, or scope of the coverage being offered; • If the broker assumes additional duties, either by express agreement or by holding himself out as having expertise regarding insurance for a particular business or industry; or. It is remarkable mainly for the large dollar value of the damages awarded. Insurance agents and insurance brokers can be held accountable for performing their professional duties negligently, but only in limited circumstances. You should also make sure the lawyer has good references. The appellate court upheld a finding of both a duty and breach of that duty by the insurance broker based on the following facts: • Williams and Simon “reasonably assumed agent Thaw’s expertise and relied on her in the belief they were offered an insurance ‘package’ tailored for Rhino dealerships.” (Id. When the agent or broker breaches the contract with an insurer by defrauding an insured the insurer, unless it directs or ratifies the fraud, has no liability to the insured. The case settled the following week. Depending on the level of negligence, the type of damage, and your insurance contract, your insurance company might still pay a claim even if it occurs because of your negligence. Insurance agent negligence is something that every agent should be aware of and know how it can affect them and their clients. Mary’z allegations, if proven true, would create a reasonable possibility that Mary’z could prevail on its negligence and Insurance Code claims against Texas General and Khan. The West Virginia Record reported that a woman is suing a real estate agent for negligence, because the floor of the property allegedly collapsed when she was viewing the property. In Williams, the clients sued their insurance broker for failing to procure worker’s compensation insurance for their business. Being an insurance agent comes with its own set of risks, and errors and omissions claims can arise even from a simple mistake. The firm disclosed all of this to its broker, who obtained a comprehensive general liability (“CGL”) policy. Information posted as a resource only and is in no way intended to constitute legal advice in any manner or form. 2) Suing an insurance agent usually will prevent an insurance company from having an insurance lawsuit being moved to Federal Court. Hydro-Mill Co., Inc. v. Hayward, Tilton and Rolapp Ins. The professional conduct of insurance agents and brokers is governed by the laws of each state, and we have not exhaustively researched each state’s laws for each of the concepts that we discuss in this article. Insurance Agent Duties and Actions That May Constitute Negligence The primary duty of insurance agents is to use reasonable care, diligence, and judgment in selling insurance policies that are appropriate for their customers based on each one’s requests and requirements. That is, under-insuring the client. Three of these four scenarios present potentially worthwhile broker-negligence cases. The trial judge found the real estate agent liable and the accountant not liable. 3) Insurance agents are simply easy targets. Due care is essentially what a reasonable or prudent person would do under the same circumstances. in 1992 from Harvard Law School, and was a member of the Harvard Law Review. This stuff can get very complicated and it will be extremely difficult for you to win at trial if you are representing yourself. 2981) 508 F.Supp. (Id.at p. 542 (“if a broker does not inform the prospective insured of the availability of a temporary binder option, the broker has committed professional negligence”).) The client tells the broker to get full … Many states, including California, have existing law that provides a duty on the part of a broker to, “use reasonable care, diligence, and judgment in procuring the insurance requested by an insured.” This is important: 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. In some jurisdictions an insurance broker can be liable for breach of fiduciary duty, In most jurisdictions, including California, neither insurance agents nor insurance brokers owe their clients fiduciary duties unless they are holding the client’s money, which could make them fiduciaries for reasons other than the procurement of insurance. The Insurance Journal (www.insurancejournal.com) offers on-line courses for brokers, but the courses are available to anyone who pays. Scenario 4: The client asked for homeowner’s insurance for his house. She devotes a substantial part of her practice to representing policyholders in cases involving insurance coverage. The expert’s face was red when he confirmed that the voice was his. Negligence in Real Estate Case Studies. The house burns down, and the client learns that she does not have sufficient coverage to rebuild her home to its pre-loss condition. We discovered that he taught continuing education courses for insurance brokers and that his courses were available on-line and on-demand. Proving negligence is required in most claims from accidents or injuries, such as car accidents or "slip and fall" cases.Negligence claims must prove four things in court: duty, breach, causation, and damages/harm. 2012) 362 S.W.3d 7.) This is a question that often gets asked when a party suffers a catastrophic loss and doesn’t have sufficient insurance coverage to pay for all claims. Furthermore, most of the broker experts who are willing and competent to testify prefer to work for defendants or for the defendants’ errors-and-omission carriers. If you are prosecuting a claim for negligence against an insurance broker, you should obtain documents reflecting the entire relationship between the broker and your client, from the beginning to the time of the loss. The fire damaged several buildings, and it gutted the building that housed the firm’s most important and expensive machines. He repeatedly told his students, “If it’s not in the file, it didn’t happen.” At our deposition of this expert, I played this excerpt from the lecture. In Search of Deep Pockets: Suing the Broker: Broker’s Negligence from a Plaintiff’s Perspective. The insurance industry is pushing to impose drastic limitations on people’s ability to sue … As the firm’s needs would change, the firm would move its operations from one building to another. The list below is not intended to be exhaustive, so if you think you have a claim against your insurance broker, and you cannot see an example, please contact us for a no obligation initial telephone assessment. Cohen received his J.D. Discovery involves exchanging documents and conducting “depositions”. One night the firm suffered a large fire. These cases turn on whether the attorney can develop the evidence necessary to establish that the broker had a duty to procure insurance that the insured had not specifically requested. The courts have held that “a special duty may be created by express agreement or by the agent holding himself out to be more than an ‘ordinary agent.’” (Paper Savers, Inc. v. Nasca (1996) 51 Cal.App.4th 1091, 1096 (internal citations omitted); see also Kurtz, Richards, Wilson & Co., Inc. v. Insurance Communicators Marketing Corporation (1993) 12 Cal.App.4th 1249, 1257 (holding that special duty was created when brokerage held itself out as an expert on the specific type of insurance requested by Kurtz). Insurance Agent Negligence. The court further found it “taxes credibility, and plain common sense expectation of business practice under the circumstances, that no written record of even minimum formality exists by agent Thaw documenting considerations, discussions, advisement, or Plaintiffs’ alleged declinations relating to workers’ compensation insurance for Plaintiffs’ Rhino SFS dealership.” (Ibid.). Consequently, a broker’s failure to obtain coverage for such claims probably would not constitute negligence. 798, aff’d 722 F.2d 988, What is “Excess Coverage” – Tracy Morgan v. Wal-Mart Example, Illegal Bad Faith Insurance Tactics Hurt Injured Victims Twice, Seniors are Often Victims to Predatory Insurance Practices, “First Party” vs. “Third Party” Insurance Coverage, Duty of Insurance Companies to Settle Legitimate Claims. ABKCO Music, Inc. v. Harrisongs Musics, Ltd. (S.D.N.Y. For this reason, and for simplicity’s sake, we focus in this article not on insurance agents but on insurance brokers. (Hydro-Mill Co., Inc. v. Hayward, Tilton and Rolapp Ins. Brokers in Illinois might have fiduciary obligations to inform a proposed insured of all material facts and to procure requested insurance. Another reason to retain and consult with an expert as soon as possible is to determine whether the coverage the potential client needed or wanted was even available in the marketplace. She acts on Allstate’s behalf, and her actions can bind Allstate. 10 Ways Agents Typically Get Slapped With Lawsuits - Inman The client asked her to get the appropriate insurance for that particular business, and the broker failed to procure the necessary and available insurance for that business. However, if you were denied coverage or suffered other damages because of insurance agent negligence, you could be entitled to a large sum. The firm’s operations were housed in separate buildings in the same industrial neighborhood. That defendant’s expert, in his on-line lecture, emphasized the importance of keeping documents in the file. Importantly, insurance agents have no general duty to advise their clients as to their insurance coverage needs. Being able to sue an insurance agent is important for three reasons. The challenge in these cases is proving the existence of a duty because in most jurisdictions insurance agents and brokers have only limited duties to their clients. If the agent fails to obtain specific coverage that the insured requested and that the agent said would be provided by a particular policy, a court – applying the common-law doctrine of equitable reformation – may in effect re-write the insurance contract to include the requested coverage. Your lawyer and the lawyer for the insurance company will investigate facts and the history of the dispute through a process called “discovery”. 1992) 589 N.E.2d 1128.) 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