Special Circumstances May Mean Agents,
Brokers Owe Greater Duties To Clients
BY PETER J. BIGING
RECENT COURT rulings con- firm that agents and brokers do not owe duties to their
insureds to provide complete coverage for liability and property damage—under ordinary circumstances.
In these standard situations, agent
and broker obligations typically stop
at providing only coverage that insureds have specifically requested, according to a growing body of court
decisions—several of which were outlined in Part 1 of this series, published
in the April 11 print edition NU.
Still, special relationships or circumstances may exist which broaden
a broker’s duty to advise, such as when:
J The agent/broker has been asked for specific advice or guidance on a coverage issue
and provided it.
J The agent/broker has undertaken special
duties in handling the customer’s account.
J The broker has agreed to accept or has
charged special compensation in addition
to the standard commission for advice/
guidance with regard to coverage.
J The agent or broker has held himself out
as an expert and knows or has reason to
believe that the customer is relying upon
his expressed expertise with regard to a
J The agent/broker and the customer have
a relationship of such significance in terms
of time, trust and reliance that the agent/
broker should know or have reason to
know that the customer is relying upon his
advice with regard to coverage issues.
Two recent court cases examined these
“special circumstances”—with divergent
endings for the agents involved.
E FAILURE TO APPLY a promised cost-guide estimate left
one agent on the hook for some, but not all of the replacement costs when his clients' home was destroyed in a fire.
GREATER DUTY OWED
In Peterson v. Big Bend Insurance Agency, Inc.,
a couple with a home that was insured
against fire loss asked their agent for help
in trying to get their home insured for
its full replacement value. The agent had
advised he would use a computer-software
program’s “cost-guide estimate” to deter-
mine a replacement value for the home.
IOWA COURT STANDS BY AGENT
In other special circumstances, where one
might arguably suggest that an agent or broker
had access to information to justify imposing
a duty to question the insured about coverage
or to offer advice regarding possible coverage
changes or options, recent decisions have
shown circumspection in taking that leap.
In a recent decision, Merriam v. Farm
Bureau Insurance, the Supreme Court in
Iowa considered the question of whether
an agent had breached a duty of care to a
self-employed truck driver by assisting him
with certain insurance coverages, but never
recommending that the driver buy self-employment workers’ compensation coverage.
This case is significant because in the
context of the interactions between the
agent and customer, the court had ample
opportunity to find a basis for concluding