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
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
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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April 18, 2011 | National Underwriter Property & Casualty | 29