These quick notes are part of our new CE series on the top 100 Insurance Agent Blunders. Knowing the legal and ethical mistakes made by others is a practical way to avoid the same blunders in your own business.

 

Do you have “superior knowledge” that requires extra diligence in determining your client needs? Consider some cases where insurance agents have been held liable for what they “should have known”:

Campbell v. Valley State Agency – Blunder #98 The client was a founder and director of a bank that owned and operated an insurance agency. The insurance agent was also manager of the agency and knew that the client was a millionaire. The agent obtained automobile coverage for the client in the amount of $100,000 per person and $300,000 per occurrence. A major accident occurred which exceeded the limits of the policy. The client sued the insurance agent for these additional damages. Although the case was scheduled for a new trial, the original court found that a jury could have found the insurance agent had a duty to advise the client about his liability coverage needs due to the special relationship that existed. Thus, the insurance agent was potentially liable for the damages that exceeded policy limits.

Europeon Bakers v. Holman – Blunder #97 After handling the client’s insurance needs for approximately six years the insurance agent proposed that the client, a bakery, change its business interruption coverage to a policy that included a coinsurance provision. The insured accepted the proposal but found that it covered only 28% of his loss caused by the interruption of business when an oven accidentally exploded. The agent was sued for negligence by the bakery which was seeking the full amount of the lost business production it suffered. The court held that the insurance agent was responsible since he had a duty to advise the client about its business interruption needs, especially since insurance agent held himself to be an “expert” in this area and client had relied on him in the past. Tough cookies for this agent.

Read about these cases and more in our Preferred Practices Course # 171.