Calling the insurance company for failing to predict the future?

August 17, 2022 – It’s 2020 – a young family with a child is working from home during the pandemic and wants to buy a house. They hire a real estate agent who finds them a small house with a nice yard. The couple will take out the loan and close escrow.

Two years later, the children are twins. And, no longer working at home, both parents take new jobs, miles away from the house the owner helped them buy. They want a bigger house, in another town.

Although real estate agents and businesses are sued, it’s usually not because they failed to anticipate what their customers might need in a home. Few people would seriously consider suing a real estate agent because the lender failed to predict how future events would affect the needs of their clients.

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In contrast, insurers and brokers who help individuals and businesses purchase insurance are sued; and often it is due to a failure to predict the future – an inability to predict what type and amount of insurance their customers will need.

•”My agent screwed up: my auto insurance limit was only $250,000 per person. When I hit the young surgeon and he fell off his bike, he broke his surgeon’s arm.”

•”My agent messed up: when I wrote a letter saying that my neighbor was selling drugs, I didn’t know it was Amway.

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

Are lawsuits against insurers and brokers justified? Usually, they are not. For example, the Texas Supreme Court in a 1992 decision, May v. United Servs. Ass’n, citing a 1987 California appellate decision, Jones v. Grewe, stating that “a request for a ‘sufficient’ provision or guarantee by the agent of the adequacy of the interest that may be attached to such a contract; ‘would make the agent a blanket insurance for his principal.’

A recent New York court decision in 2018, Fox Paine & Co., LLC v. Houston Cas. Co., cited the California case of Jones v. Grewe said that “In the absence of special and special circumstances based on the broker’s actions or a well-known agreement, the role of the broker is only to obtain what he has requested and there is no fiduciary relationship between the insurance broker and the client ….”

In emphasizing the limitations of the insurer’s role, the California Court of Appeal in Murray v. UPS Capital Ins. Agency, Inc. in 2020 it explained that “an insurance agent only performs duties inherent in any corporate relationship such as due care, diligence, and judgment in purchasing the insurance requested by the insured.”

This means that an individual or business buying insurance cannot rely on their agent to accurately predict their future (or even current) insurance needs. In fact, in most cases, the provider only needs to be as good as the target group needs to be.

An insurance buyer who tells the insurance agent about the special risks that they may face or the need to protect more assets has the opportunity to get more money or the higher policies that they need. But if you just tell your insurance broker that you need car insurance because you can’t drive without it; Homeowner’s insurance because your mortgage company insists on it; or business insurance because some clients won’t let you work for them without them, you may not have the amount or the amount of insurance you expect.

Like almost every rule, the minimum rule has exceptions. The main exception to the limited liability insurance agent and broker duty rule is that the agent or broker may be liable to the insured if:

(1) wrongly representing the size of the Learning purchase of the policyholder; or

(2) the applicant is requesting or inquiring about another type of insurance; or

(3) the agent is self-employed if he has special skills in the field of insurance required by the insured.

Unless misrepresentation, direct solicitation, or claims of special expertise are documented, otherwise these may be difficult to prove.

As discussed in the 2021 California election, Vulk v. State Farm General Ins. Co., simply asking for the “best plan” or “full information” is not enough to satisfy a request for some type of audit trail.

Similarly, an insurance agent may not appear to have special skills based on the length of their relationship with the insurer, or the high level of knowledge the insurance agent has always had. Again, however, the most sensitive and connected insurance buyer – especially the one who communicates by text, email or letter – can confirm that the services of the agent have been increased due to misrepresentation and the amount of protection that the agent receives, genuine requests. publication, or claimed technology.

For example, policyholders who specifically request the type of coverage they want may be adding to the service provider’s services.

The technical exception was addressed in a 2020 California appellate decision, Murray v. UPS Capital Ins. Agency, Inc., where the plaintiff wanted to ship $40,000 worth of computer equipment from California to Texas with UPS. The equipment was damaged during shipping. The decision was rejected because the policy only covered serious damage, not damage caused by poor maintenance.

The court reversed the insurer’s summary judgment motion, allowing the suit to proceed because, among other things, UPS’s agent recommended UPS Capital and claimed that UPS Capital was the company’s authorized broker to ship the ocean liners. needs.

A case from Wisconsin, on the other hand, shows how an agent’s duties are reduced when the insurer shows little interest in its insured. In a 1994 decision, Lisa’s Style Shop v. Hagen Ins. Agency, the Wisconsin Supreme Court found that the representative neglected his insurance needs until the loss occurred.

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

placing such a duty on the agents “could have given the insurer the option of post-loss reassurance simply by saying that they would have purchased additional coverage. [or, in this case, increased their liability limits] He would have been betrayed.” Lisa is now trying to do that.” Six years before the fire, Lisa ignored the importance of insurance. [Lisa’s president] he admitted that he had never checked Lisa’s points. Also, he did not ask for advice or help. Now that Lisa has given up, [Lisa’s president] they cannot say that they would have bought more insurance if [the agent] He only advised him to do so.

When it comes time to buy insurance, consider getting 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 want.

Erin Mindoro Ezra is a full-time insurance columnist 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, under the Trust Principles, is committed to integrity, independence, and freedom from discrimination. Westlaw Today is owned by Thomson Reuters and operates independently of Reuters News.