Insurance Coverage: Do Agents Have a Duty to Advise Customers on What They Should Buy?

Generally speaking, an insurance agent has no obligation to, on its own, evaluate a customer’s particular insurance needs or give the customer advice regarding the coverage the customer should purchase. That said, insurance agents do have a duty to take the appropriate steps to protect their policyholders from potential risks and liabilities. If you think you have a claim for insurance agent or broker malpractice, a Miami insurance coverage lawyer can assist you. Importantly, if you can show that a “special relationship” existed with your insurance agent, his or her duty may be expanded to include advice on the insurance necessary to fulfill your needs. 

Basic Duties of Insurance Agents and Brokers

Insurance brokers are required to exercise good faith and reasonable skill, care and diligence in procuring insurance requested in accordance with the client’s instructions.  They are also obligated to obtain:

• Coverage that is not materially deficient
• Coverage undertaken to be supplied at the requested limits
• Requested coverage within a reasonable time (or inform client of inability to do so).

No General Duty to Advise Regarding Coverage Deficiencies or Needs

If the agent has contracted to provide “standard” brokerage services, then the agent has not agreed to evaluate the customer’s needs or to give the customer advice regarding the coverage the customer should have. This is because insurance agents and brokers are not seen by the law as personal financial counselors or risk manages.  A general request for “full coverage” or the “best policy” does not broaden the broker’s obligations to the insured or give rise to a duty to advise.

Duty Expanded Where Special Relationship Exists

Under certain circumstances, courts are expanding the traditionally ministerial role of insurance agents and holding that they also have a duty to offer the customer advice regarding the types of coverage that are available and necessary to meet that customer’s particular needs. If the policyholder can show “special circumstances” or a “special relationship,” the court may conclude that the broker had a fiduciary duty to offer the customer advice regarding the insurance necessary to fulfill the customer’s needs. Existence of a special relationship may be found when:

• The agent misrepresents the nature of the coverage being provided
• The agent voluntarily assumes the role of selecting the appropriate coverage
• The agent offers the customer advice related to the type of coverage available and the exclusions to that coverage
• The agent holds him or herself out as a specialist or makes representations about expertise
• The agent and the customer have a longstanding relationship; or
• The customer paid the agent for the agent’s advice

Potential Claims by Policyholders for Broker Liability

The most common claims by policyholders against insurance brokers are based on “failure to procure.” The broker is alleged to have failed to procure appropriate insurance coverage for the policyholder’s situation or did not complete the tasks necessary to keep the policy current. Such claims will hinge on whether the coverage was requested and available, and, if so, whether the insured would have purchased it and the coverage would have applied. If found liable, insurance agents may be responsible for paying a customer’s loss even if properly denied by the insurer the agent obtained.

Let a Miami Insurance Coverage Lawyer Help You

If you are considering a claim for insurance agent or broker malpractice, we welcome you to contact Ver Ploeg & Marino at (305) 577-3996. 

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