August 17, 2022 – It’s 2020 – a young couple with a child are working from their apartment during the pandemic and want to buy a house. They hire a realtor who finds them a small house with a nice yard. The couple takes out a loan and closes escrow.

Two years later, they have twins. And, no longer working from home, both parents take new jobs, miles away from the house their realtor helped them buy. They need a bigger house, in another city.

Although real estate agents and brokers are sued, it is usually not because they failed to anticipate their clients’ future housing needs. Few people would seriously consider suing a real estate agent just because the realtor failed to anticipate how subsequent developments would affect their clients’ future housing needs.

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In contrast, insurance agents and brokers who help individuals and businesses purchase insurance are sued; and all too often it’s about failing to anticipate the future – failing to predict what types and amounts of insurance their insurance customers might need down the road.

•”My agent messed up: my auto insurance liability limit was only $250,000 per person. When I hit the young surgeon and she fell off her bike, she broke her surgery hand.”

•”My agent messed up: when I wrote the letter saying my neighbor was selling drugs, I had no idea it was just Amway. Why didn’t my insurance agent tell me I’d need a policy that covered defamation?”

Accurately predicting the future is difficult. As Hall of Fame catcher Yogi Berra supposedly said, “The future ain’t what it used to be.”

Are lawsuits against insurance agents and brokers merited? Typically, they are not. For example, the Texas Supreme Court in its 1992 decision, May v. United Servs. Ass’n, cited in the 1987 California appellate decision Jones v. Grewe, stating that “neither a requirement of “adequate” coverage nor the agent’s assurance of adequacy of liability coverage can support such an agreement more broadly; permitting such a conclusion ‘would in effect make the agent a general insurer for his principal.'”

A recent New York court decision in 2018, Fox Paine & Co., LLC v. Houston Cas. Co., also cited California’s Jones v. Grewe and held that “Absent extraordinary and special circumstances based on brokers’ conduct or by express or implied contract, a broker’s duty is limited to obtaining coverage required and there is no fiduciary relationship between an insurance broker and the customer…”

Emphasizing the typically limited nature of an insurance agent’s duty, the California Court of Appeal in Murray v. UPS Capital Ins. Agency, Inc. in 2020 explained that “an insurance agent undertakes only those duties found in any agency relationship such as reasonable care, diligence and judgment in procuring insurance required by an insured”.

What this means is that a person or business buying insurance cannot count on their agent to accurately predict their future (or even current) insurance needs. Instead, in most situations, the agent should be as good as they want the party seeking coverage to be.

An insurance buyer who tells their insurance agent about the particular risks they may encounter or the need to protect significant assets is more likely to get the broader coverage or higher policy limits they need. But if you simply tell your insurance broker that you want auto insurance because you can’t drive without it; homeowners insurance because your mortgage company insists on it; or business liability insurance, because some clients won’t let you work for them without it, you may not end up with the scope or extent of insurance coverage you expected.

Like almost any rule, the limited duty rule has its exceptions. The main exceptions to the insurance agent and broker liability rule are that the agent or broker may be liable to the insured if:

(1) the agent misrepresents the scope of coverage being purchased to the policyholder; or

(2) the policyholder requests or inquires about a specific type of insurance coverage; or

(3) the agent believes that he has special expertise in a particular field of insurance required by the insured.

Unless a misrepresentation, a specific claim to coverage, or claims of special expertise are made in writing, these exclusions can be difficult to prove.

As explained in the 2021 California appellate decision, Vulk v. State Farm General Ins. Co., merely requiring the “best policy” or “full coverage” is not sufficient to meet the requirement for a specific type of coverage criteria.

Similarly, an insurance agent will probably not be considered to have a particular area of ​​expertise based on the length of their relationship with the insured, or the agent’s generally superior knowledge of insurance in general. Again, however, a more involved and communicative insurance buyer—especially one who communicates by text, email, or letter—is more likely to prove that the agent’s duties were expanded due to misrepresentations about the scope of coverage the agent provides. , requirements for specific coverages, or assumed expertise.

For example, policyholders who are specifically looking for the particular type of coverage they want can expand the agent’s duties.

The specific expertise exception was addressed in the 2020 California appellate decision, Murray v. UPS Capital Ins. Agency, Inc., where a police officer wanted to ship $40,000 worth of computer equipment from California to Texas with UPS. The equipment was damaged during shipping. The claim was denied because the policy only covered catastrophic loss, not malpractice damage.

The court reversed a summary judgment motion for the insurance agent, allowing the case to go to trial because, among other things, a UPS agent had recommended UPS Capital and suggested that UPS Capital was the industry’s recognized inland shipping broker. needs.

A case from Wisconsin, on the other hand, shows how the agent’s duties are narrowed when the insured shows little interest in his insurance. In the 1994 decision, Lisa’s Style Shop v. Hagen Ins. Agency, the Wisconsin Supreme Court noted that the policyholder ignored his insurance needs until he suffered a loss.

The court then explained its refusal to expand the agent’s duties:

imposing such a duty on agents “could provide insureds with the opportunity to insure themselves after a loss simply by asserting that they would have purchased additional coverage [or, in this case, increased their liability limits] if it had been offered.” [Lisa’s president] admitted that she never reviewed Lisa’s policies. Other than that, she didn’t ask for advice or help. Now that Lisa has suffered a loss, [Lisa’s president] cannot claim that she would have bought more insurance if [the agent] he had only advised him to do so.

When it’s time to buy insurance, consider some advice from the Wisconsin Supreme Court – discuss your insurance needs with your agent or broker. Don’t wait for a loss or claim to start thinking about the insurance you wish you had.

Erin Mindoro Ezra is a regular contributing columnist on insurance coverage for Reuters Legal News and Westlaw Today.

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The opinions expressed are those of the author. They do not reflect the views of Reuters News, which, according to the Trust Principles, is committed to integrity, independence and freedom from bias. Westlaw Today is owned by Thomson Reuters and operates independently of Reuters News.

Erin Mindoro Ezra

Erin Mindoro Ezra manages Berger Kahn’s South Orange County office in Lake Forest, California, focusing on Insurance and Labor & Employment Coverage. She represents and counsels clients in insurance coverage matters, particularly liability insurance, and counsels clients in connection with wage and hour disputes, investigations, discrimination, retaliation and other employment matters. She can be reached at [email protected].

David B. Ezra

David B. Ezra leads the firm’s insurance coverage group in its South Orange County office. He also serves as a mediator and as an expert witness in connection with insurance claims handling matters. He can be reached at [email protected].

Heather C. Whitmore

Heather C. Whitmore is a partner in the South Orange County office, focusing on insurance coverage and litigation. She represents clients in insurance-related litigation, including coverage, bad faith, equitable contribution/substitution, and reimbursement. She can be reached at [email protected].

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