Agents Duty to Advise or Recommend
Insurance Agents and Brokers: Is there a duty to advise or recommend coverage in Florida?
“My home was destroyed in a fire, and I did not receive enough money from my property insurer to rebuild it as I wanted. My agent should have suggested I obtain more coverage.”
“My flood insurance was not sufficient to fully rebuild my house after a devastating flood. My agent should have recommended additional flood insurance.”
“I had minimal UM coverage on my vehicle, which was inadequate for the injuries I suffered in an automobile accident. My agent should have told me to get higher UM limits on my policy.”
Similar assertions are made throughout Florida, and often times result in a lawsuit against an insurance agent for failing to recommend what is alleged to be “sufficient” coverage. So what is an Agent’s duty in this regard, and how can an Agent best fulfil that duty and protect himself/herself to prevent such a claim being made?
Generally speaking, an insurance agent has no duty to advise the insured as to the insured’s insurance coverage needs. Tiara Condominium Association v. Marsh USA, Inc., 991 F.Supp.2d. 1271, 1281 (S.D.Fla. 2014). An insurance agent is required to use reasonable skill and diligence, and liability may result from a negligent failure to obtain coverage which is specifically requested or clearly warranted by the insured’s expressed needs. Warehouse Foods, Inc. v. Corporate Risk Management Services, Inc., 530 So.2d. 422, 423 (Fla. 1st DCA 1988). Additionally, an insurance broker is under no duty to detail every term of every policy he offers to his customer, particularly where the policy plainly covers all of the risk for which the customer specifically requested coverage. The primary duty of the insurance broker is to provide insurance as agreed. Gust K. Newberg Construction Co. v. E.H. Crump & Co., 818 F.2d 1363 (7th 1987).
The agent’s primary duty is to provide the coverage requested (or advise that such coverage could not be obtained) and to correctly and fully provide information specifically requested by the insured or clearly warranted by the insured’s expressed needs.
The duty to advise or recommend additional or other coverage may be created, however, where certain special circumstances or a special relationship with the insured exists. This exception is factually specific and looks at the nature of the relationship between the agent (broker) and insured. Some of the factors the courts will look at to determine if a special relationship exists included:
- Did the agent represent that he/she was an expert, and did the insured rely on that expertise?
- Did the agent volunteer advice to the insured?
- Was there a long-term relationship between the agent and the insured which would cause a reasonable person to believe the insured was relying upon the agent for guidance?
- Did the agent receive a fee in addition to the commission for providing advice to the insured?
- Was the agent actually involved in making the insurance decisions for the insured?
The existence of relationships described above between the insured and agent create an argument, and ultimately a jury question, as to whether a special circumstance existed such that the agent was under a duty to advise or recommend additional or other coverages. In order to avoid such an argument, or to protect one’s self against the inevitable, follow some basic guidelines:
- Understand what the insured is requesting;
- Obligate the insured to review and ratify the coverage provided as to its sufficiency for their requested needs – send a letter;
- Always provide a quote for the next additional coverage limit or additional coverage option, and retain a copy of it with the file;
- Ask the insured to verify the sufficiency of the insurance package upon renewal;
- Advise the insured you are available to answer any questions regarding exclusions, limitations, or restrictions in coverage;
- Avoid marketing terms such as “expert;”
- Don’t ask an insured to sign a blank or incomplete application for coverage.
These recommendations should help to minimize any exposure you may create for failing to recommend additional limits or other coverages. However, when an insured is without sufficient coverage to pay a loss sustained, it is more likely they will seek to hold the agent responsible unless the failure to obtain the additional coverage was their fault. Meaning they rejected a suggestion or opportunity to request more coverage, failed to provide more facts to give the agent a better understanding of the insurance picture, or rejected a quote for higher limits.