National Underwriter - April 18 2011

that there was a justified reliance upon the agent’s expertise and to conclude the agent had a broader duty to advise regarding possible coverage concerns and options.

In this case, the agent worked for Farm Bureau Insurance and had been assigned to the account of the Merriams, a married couple who had insurance on their primary residence with Farm Bureau. He met with the Merriams in early 2005 to discuss insuring a second residence they were purchasing for Mr. Merriam’s mother.

During this meeting, the agent suggested the Merriams consider insuring their personal vehicles with Farm Bureau. At the same time, the Merriams indicated an interest in obtaining insurance on their horses, and the agent agreed to get them a quote. They also asked about getting a quote on insurance on the husband’s guns, as well as adding their new garage and chicken coop onto their homeowners policy and obtaining life insurance on Mr. Merriam’s mother.

The agent was aware that Mr. Merriam was a self-employed truck driver and, in fact, Mrs. Merriam mentioned that he had a million-dollar policy in place if he were killed in his truck. But there was no discussion regarding whether he had unemployment insurance, and the agent neither asked questions about it nor suggested it as a consideration.

Just a few weeks later, Mr. Merriam sustained severe injuries to his arm, which was crushed by a dump truck he was operating while he was patching the driveway where he parked his truck.

In the absence of workers’ comp insurance, the Merriams sued Farm Bureau, alleging the agent was negligent in failing to advise them that, as a self-employed truck driver, Mr. Merriam had no workers’ comp insurance unless he purchased it himself.

The Merriams claimed that the agent “was
in a position of superior knowledge pertain-
ing to available insurance products and was
negligent for failing to initiate a conversation
with them regarding this issue.”
In this case, the agent admitted he was
aware that Mr. Merriam was self-employed
because in rating their personal vehicles
he needed to know what their occupations
were, where they worked, how far it was to
and from work, etc.

The Merriams argued that the agent’s
knowledge of [Merriam’s] self-employed
status and million-dollar life insurance pol-
icy was sufficient to trigger a duty of inqui-
ry. The fact that [the agent] was a trained
and licensed insurance agent with arguably
‘superior knowledge as to what insurance
products someone in [the client’s] position
would require to be adequately protected
from injury or loss’ cannot be the basis
to find an implied agreement to expand
[the agent’s] duty. If that were the case,
then every trained and licensed insurance
agent would have a duty to provide an as-
sessment of all of the insureds’ insurance
needs, whether requested or not.” NU

awareness of his client’s self-employment status and his life insurance policy, combined with the agent’s unsolicited recommendation for additional vehicular insurance coverage, supported a conclusion that the agent was holding himself out as an insurance specialist and thereby assumed a greater duty of care to the Merriams, including a duty to make recommendations regarding the workers’ comp coverage.

In rejecting this argument, the Iowa Supreme Court noted that the Merriams had made no specific inquiry with respect to self-employed workers’ comp insurance and did not either expressly or implicitly seek the agent’s assistance in assessing any of their insurance needs other than those specifically requested.

Further, there was no evidence of a longstanding relationship between them that would support an implied agreement to expand his duty to include assessment of the Merriams’ other insurance needs; no evidence that he had advised them he was an insurance specialist; no evidence he offered to consult with them regarding additional insurance needs; and no evidence he had received any additional compensation above his commission.

Summing up, the court stated: “The plaintiffs contend [the agent’s]

E Peter Biging is a partner at Lewis Brisbois Bisgaard & Smith LLP, where he is vice chair of the firm’s nationwide professional liability group. He may be reached at BIGING@lbbslaw.com

See Part 1:

“Courts Shield Agents, Brokers From Added Duties To Procure Coverage,” published in the April 11, 2011 edition of NU, for an examination of the (limited) duties owed by agents and brokers under ordinary circumstances.

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