Insurance Agent Liability

When Is An Insurance Agent Responsible?

Insurance Agents Owe a Duty of Reasonable Care to Their Customers.
The law governing this case is set forth in Damon's Missouri, Inc. v. Davis (1992), 63 Ohio St.3d 605, 590 N.E.2d 254:

An insurance sales agency owes its customer a duty to exercise good faith and reasonable diligence in undertaking to acquire the needed insurance coverage.

First Catholic Slovak Union v. Buckeye Union, 27 Ohio App. 3d 169, 499 N.E. 2d 1303 (1986) held:

An insurance sales agency has a duty to exercise good faith and reasonable diligence in obtaining insurance requested by its customer, and in advising a customer who is relying on the agency's expertise.

When the agency knows that the customer is relying upon its expertise, the agency may have a further duty to exercise reasonable care in advising the customer.

Stuart v. National Ind. Co. (1982), 7 Ohio App.3d 63, 454 N.E.2d 158 similarly held:

An insurance agency that undertakes to acquire coverage for a customer and fails to do so by fault or neglect is liable to the customer for any resulting damage.

Further, such an agency has a duty to exercise reasonable care in advising its customer about the terms of requested coverage.

Ohio law follows the majority rule in this area. 72 ALR 3d 747, Liability of Insurance Agent or Broker on Ground of Inadequacy of Property Insurance Coverage Procured:

It appears to be a well-settled rule that an insurance agent or broker who, with a view to compensation for his services, undertakes to procure insurance for another, and unjustifiably and through his fault or neglect, fails to do so, will be held liable for any damage resulting therefrom.

In Schaefer v. C. Garfield Mitchell Agency, Inc., 82 Ohio App. 3d 322, 612 N.E. 442 (1992), the court upheld a jury verdict against an agency that had failed to recommend that its customer purchase a stop-gap endorsement to its general liability policy which would have covered an employee's work-related intentional tort claim. The court noted that the negligence of the agency was properly submitted to the jury since there was expert testimony that the standard of care within the insurance industry had been breached by the agency's failure to recommend stop-gap coverage to its client.

In Minor v. Allstate Ins. Co., Inc. (1996), 111 Ohio App.3d 16, an insurance agent was sued for not procuring the appropriate insurance coverage for an insured. In that case, the named insured was a mother whose daughter was living with her in the home. The daughter was not listed as an insured in the policy. The mother did not list her daughter by name to the insurance agent. A burglary occurred at the home where the daughter's personal property was stolen. Because she was not specifically named as an insured on the policy and her personal property was not identified within the policy, the insurance company denied her claim. The daughter sued the agent for not procuring the appropriate insurance for her personal property. The Court stated:

With respect to Robinson's claim against Rogers, that he negligently failed to procure insurance that would cover her loss, Robinson relies on Alberta Minor's testimony that "I'm sure that I told him that I lived there and that my daughter lived there." Robinson herself testified concerning a conversation when her mother asked Rogers to procure insurance coverage for any loss to the property and its contents:

"The three of us were standing there talking about insurance on the property and at a point my mother turned to me and asked me, `Do you think it is enough coverage, it is primarily your things here,' And I said, `Yes.' And because there would have been no reason to camouflage, to hide, to lie [about] my being there, my living there."

Based on this meager evidence, the Court ruled in favor of the daughter and against the agent. Specifically, the Court found:

The foregoing evidence, viewed most strongly in favor of Robinson, as Civ.R. 56 requires, demonstrates that Steve Rogers was on notice that Alberta Minor's purpose in purchasing insurance for 6900 Derby Road, or at least one of her purposes, was to provide insurance coverage for the personal property that her daughter kept there. The issue is whether Rogers was under any duty to Robinson which he breached by failing to procure such coverage.

An insurance agent who, with a view to compensation, undertakes to procure insurance for another is obligated to do so. The agent is liable if, as a result of his or her negligent failure to perform that obligation, the other party to the contract suffers a loss because of a want of the insurance coverage contemplated by the agent's undertaking. See Couch On Insurance 3d (1995), Section 46:46. Such a failure has been found where the type of coverage or the amount procured was less than that desired by the insured. Conestoga Chem. Corp. v. F.H. Simonton, Inc. (Del.1970), 269 A.2d 237. In that event, the extent of the agent's liability is the amount the insured would have received from the insurer had the coverage been placed. Id.

The evidence reasonably supports an inference that Steve Rogers knew that Alberta Minor wished to benefit Robinson with insurance coverage for her personal property when she asked Rogers to procure insurance to protect the residence premises. Rogers's undertaking to procure insurance implies a promise that the coverage he obtained would provide that benefit. As a third-party beneficiary of Rogers's implied promise, Robinson may maintain a claim against Rogers for any loss she suffered as a proximate result of his breach and/or negligent failure to perform that promise.

Whether an agent has negligently failed to procure insurance is ordinarily a question of fact. Couch, supra. Reasonable minds might conclude that it was foreseeable to Rogers that the coverage he procured would not provide the protection that Alberta Minor desired if she moved from the insured premises. Whether Rogers breached his duty by failing to tell her that or by failing to procure different coverage is a question for the jury. Likewise, the jury must decide whether any duty that Rogers owed Robinson as a third-party beneficiary of the implied promise that he made to her mother was cut off by Alberta Minor's failure to inform Allstate and Rogers that she no longer occupied the residence premises, as the policy may have required her to do.

In McAlvain v. General Insurance Company, 554 P.2d 955 (Idaho 1976) the court correctly noted that:

An insurance agent performs a personal service for his client, in advising him about the kinds and extent of desired coverage and in choosing the appropriate insurance contract for the insured. Ordinarily, an insured will look to his insurance agent, relying, not unreasonably, on his expertise in placing his insurance problems in the agent's hands * * * When an insurance agent performs his services negligently, to the insured's injury, he should be held liable for that negligence just as would an attorney, architect, engineer, physician or any other professional who negligently performs personal services.

The seminal case in the 5th District Court of Appeals on insurance agent liability is Wanner Metal Worx, Inc. v. Hylant-Maclean, Inc., 2003-Ohio-1814, Par. 30, Case No. 02CAE10046, 5th District Court of Appeals of Ohio, Delaware County (attached hereto as Exhibit 5). The trial court dismissed Plaintiff's claims on the basis that Plaintiff failed to read the insurance policy. The Fifth District reversed the trial court for several reasons. To begin with, the 5th District specifically held that an insurance agent owes a duty, not only to obtain the insurance requested by the insured, but also advise the insured above and beyond the requests based upon the agent's expertise.

{¶35} "When the agency knows that the customer is relying upon its expertise, the agency may have a further duty to exercise reasonable care in advising the customer." First Catholic Slovak v. Buckeye Union Ins. Co. (1986), 27 Ohio App.3d 169. Id. Thus, an insurance agent must not only obtain the insurance requested, but also, advise a customer who is relying on his expertise. Id.; Bedillion v. Tri-County Ins. Agency (Feb. 3, 1993), Summit App. No. 15722, unreported.

Do You Have The Right Insurance Coverage?

Does anyone explain the endorsements that you receive in the middle of a policy year?

Do you ever wonder, "What in the world am I buying?"

The Pousoulides Law Offices have helped homeowners and business owners discover the following deficiencies in their insurance policies:

1. Insurance Agent sold homeowner an endorsement for "Back-Up of Sewer and Drain" that under any circumstance the insurance company would provide no coverage for a back-up of a drain line given the construction of the client's particular home. The Agent did not inspect the home to determine whether the endorsement would cover for such a back-up. Client's home flooded. Insurance Company denied claim. Despite the position of the insurance company, the Pousoulides Law Office took the case to Court and was able to receive monetary compensation for its client.
2. Insurance Agent sold homeowner a policy with insufficient coverage for homeowner's barn. Even though Barn was in plain sight and its value (in excess of $100,000) was readily available on the County Auditor website, insurance agent only secured $17,500 in insurance on barn. Evidently, insurance agency did not bother to inspect the home to determine the value of the Barn and placed a 10% value on the Barn based on the value of the residential home. Despite the position of the insurance company and agency, the Pousoulides Law Office was able to receive monetary compensation for its client.
3. Insurance Agent sold business owner an insurance policy which only provided for Business Income Loss coverage of $60,000. However, even given a modest loss, the business would sustain a loss well in excess of the policy limits. The Pousoulides Law Offices alerted the client of this deficiency.
4. Insurance Agent advised business owner that his Machinery & Equipment (in excess of $1,000,000) would be covered under the "Real Property" section of the insurance policy. Insurance Agent did not bother to read the Insurance Policy or even ask the Insurance Company whether it categorized Machinery & Equipment as "Real Property."

Guess what?

Insurance Company categorized Machinery & Equipment as "Business Personal Property." Business Owner was NOT covered for his Machinery & Equipment under "Real Property," and thus was greatly underinsured. Through litigation, the Pousoulides Law Office was able to receive monetary compensation for its client.
5. If you have questions or concerns about your insurance coverage, please contact the Pousoulides Law Offices to schedule an appointment to review your declaration page and insurance policy. Clients usually contact the Pousoulides Law Offices after an Insurance Company wrongfully denies a claim or an insurance agency negligently secures insurance.


What Is Blanket Insurance?

If you own more than one property, you should consider Blanket Insurance. Blanket Insurance can be purchased with a single limit over more than one type of property at multiple locations, or one type of property at multiple locations. An insured can also insure more than one type of property, i.e. real property and personal property at one location under a blanket policy.

One reason you may need to blanket your real property and personal property is because the value of the different property fluctuate over time. If you purchase insurance on a particular coverage, your real property may be valued too low and your personal property too high.

If you purchase blanket insurance with a single limit, you have greater latitude in classifying your property loss into a specific coverage that has exhausted the policy limits.

Top 10 Qualities In An Insurance Agency.
  1. They call you back the same day, no exceptions!
  2. They are not "salesmen." They are there to "protect" you.
  3. They know insurance policies and are able to make competent insurance coverage decisions for you.
  4. They ask many questions to find out your insurance needs, not to "sell you insurance" to meet their own needs.
  5. Their premiums are competitive.
  6. If you file a claim, they do not run away from you as if you never met. They process your claim quickly and work for you during the entire claims process.
  7. They keep in contact with you on a regular basis, not just when they sell you their policy (never to be heard from again).
  8. They welcome your telephone calls with enthusiasm as an opportunity to solve your problems.
  9. They are professional in appearance and in the way they conduct business.
  10. They are "on your side."

The information contained in this website is not legal advice. You are free to consult with your attorney to obtain advice and you are encouraged to do so. We may investigate the facts of your case to determine if you have a case. However, until you and the Pousoulides Law Offices enter into a written contract signed by both parties, the Pousoulides Law Offices does not represent you in any way or manner.