Many agencies are apparently not totally aware of the exact legal standard they are going to be held to. Unfortunately, the time they actually become aware of it could be the time that they are facing a claim from one of their clients / carriers.
The subject of the legal liability standard has been heavily determined by case law and the rulings from the courts. Without going into a lot of detail, essentially agents are considered order takers and thus responsible for securing the coverage the client has requested. There are circumstances that could raise this standard to one of a special relationship but that is not what I am looking to address today. I have spoken to this in other blog articles and agents would benefit by knowing more of what those circumstances are.
The issue that I want to address deals with one of the requirements / expectations that agents will typically be held to. As I briefly mentioned, agents are order takers and thus your objective, as the agent, is to secure that coverage requested. What if the coverage the client is requesting is not available in the marketplace or at a minimum, you don’t have a market that will provide it?
Take the following situation: The client requests a personal umbrella that includes the client’s two kids. The problem was that the two kids were not the best of drivers and the umbrella carrier agreed to provide an umbrella but with an exclusion for any auto claims involving either of the two kids.
The policy is delivered to the client but apparently with no mention of the exclusion. While client’s do have a duty (in most states) to read the policy, apparently the client took the position that since the agent did not tell him otherwise, it was presumed the umbrella policy provided the coverage requested.
One of the kids causes a horrific accident resulting in extensive injuries to the occupants of the vehicle they struck. When the claim was submitted to the umbrella carrier, they denied the claim because the son involved was excluded from coverage. The agency was subsequently sued.
A key issue of the trial involved the question of whether the agent advised the client of the exclusion. Part of the legal liability standard is that if you cannot secure the coverage the client has requested, you, as the agent, need to advise the client, preferably in writing. Counting on the client’s duty to read the policy should not be presumed. This duty of the client will probably come into play but it will probably, at best, just minimize the award.