insurance agents and brokers—duties, responsibilities, and

Insurance Agents and Brokers—Duties, Responsibilities, and Errors & Omissions Liability

Paul S. White

Wilson Elser Moskowitz Edelman & Dicker LLP

555 South Flower Street, Suite 2900 Los Angeles, CA 90071 (213) 330-8818 (Direct) (213) 443-5101 (Fax) [email protected]

Max J. Cohen

Lowe Stein Hoffman Allweiss & Hauver LLP

701 Poydras Street, Suite 3600 New Orleans, LA 70139 (504) 581-2450 (504) 581-2461 (Fax) [email protected]

mailto:[email protected]

mailto:[email protected]

Paul S. White is a partner at Wilson Elser Moskowitz Edelman & Dicker LLP in the firm’s Los Angeles, California, office. He represents and advises insurers in insurance coverage disputes and extra-contractual litigation. He also defends and advises insurance brokers and agents regarding professional liability claims. Mr. White is a former chair of the DRI Insurance Law Committee. He has authored numerous articles on insurance coverage and bad faith issues as well as on professional liability. Notably, he is the author of “Errors and Omissions Insurance,” New Appleman on Insurance Law Library Edition (LexisNexis 2010, Ch. 25) and contributing editor of “Professional Liability Insurance,” California Practice Guide: Insurance Litigation (Thomson West—The Rutter Group 2010, Ch. 7K).Max J. Cohen is a partner at Lowe Stein Hoffman Allweiss & Hauver LLP in New Orleans. He has extensive experience in state and federal courts defending insurers in coverage disputes, businesses and individuals in personal injury, premises liability, and property damage cases, and insurance agents and brokers, whose conduct has been questioned. Mr. Cohen is a former program chair of the DRI Insurance Coverage and Claims Institute and is a currently a co-chair of the DRI Insurance Law Committee’s Sub-Committee for Customized Industry Training.

Insurance Agents and Brokers—Duties, Responsibilities, and Errors... ■ White and Cohen ■ 3


I. Introduction ...................................................................................................................................................5 II. Errors & Omissions Insurance—An Overview ............................................................................................6 III. The “Role” of an Agent or Broker ..................................................................................................................7 IV. Broker and Agent Liability to “Insureds”—Tort and Contract Theories ....................................................9 V. Conclusion ....................................................................................................................................................26

Table of Contents



I. IntroductionIndividuals, organizations, professionals, and companies of all sizes purchase a variety of insurance

policies: automobile; liability; homeowners; life; disability; professional errors & omissions; directors & offi-cers; media and internet liability; etc. Insurance is used as a mechanism to manage risk. Most individuals and entities procure multiple lines of insurance in order to meet their risk assessment needs. If there is not a form policy to cover a policyholder’s risk concerns, insurers may be willing to draft a manuscript policy to cover a specific risk.

Irrespective of the insurance policy purchased, most of us realize that as an insurance policy has lim-itations. For this reason, generally, policyholders are required to read their insurance contracts.

Insurance agents and brokers frequently assist prospective policyholders with their insurance pur-chases. The purchase of insurance may be a simple and straightforward matter or the purchase of insurance may involve a complex assessment of an individual’s or entity’s risk exposure. While some individuals or enti-ties may elect to purchase insurance on their own, others may employ a risk manager to handle such pur-chases, and many—whether acting on their own or with a risk manager—use an insurance agent or broker to assist in this process or to provide guidance.

The scope of an insurance policy—or the conditions, limitations, and exclusions contained therein—may lead insurers to accept coverage, deny claims submitted to them in whole or in part, further investigate, or reserve rights to deny or limit coverage.

Policyholders typically understand that they have purchased an insurance product with specific limi-tations. However, when confronting the potential financial exposure that accompanies a loss or liability claim, many policyholders submit partially or even uncovered claims to their insurers in hopes of finding coverage, or at least partial coverage. When the denial of coverage arrives, such a denial, in turn, often leaves the poli-cyholder responsible for a loss, for defense expenses associated with defending a lawsuit, or for liability to another party. Alternatively, a policyholder may find itself thrust into coverage litigation with its insurer to determine whether the policy provides coverage.

While an insurer’s denial of coverage may ultimately be a conclusion with which the policyholder agrees or disagrees, some policyholders feel strongly that irrespective of the insurer’s position, the policy-holder’s insurance agent or broker could or should have procured broader coverage that would have extended coverage for the now uncovered loss. In other words, some policyholders believe that if the insurer does not provide the requested insurance benefit in response to the policyholder’s submission of a loss or claim, then the policyholder’s agent or broker should cover the loss. In addition, some policyholders believe that if they are subjected to coverage litigation with their insurer, their insurance agent or broker should cover the attor-neys’ fees and costs incurred in such litigation for failing to procure unambiguous insurance coverage.

This paper explores the liability theories being advanced against insurance agents and brokers and the defenses available to them in response to such claims. By way of reference, Doug Richmond—a Senior Vice President of Aon Global Professions Practice—has prepared an exhaustive summary of the law on agent and broker liability. See, Richmond, Doug, Appleman On Insurance Law Library Edition, Chapter 2 “Agents & Brokers (Matthew Bender & Co. 2012).

6 ■ Insurance Coverage and Claims ■ April 2017

II. Errors & Omissions Insurance—An OverviewProfessional liability insurance or Errors & Omissions (“E&O”) Insurance is the typical risk manage-

ment tool that insurance agents and brokers utilize to protect against claims of professional negligence or mal-practice. For an extensive treatment of Errors & Omissions insurance for insurance professionals, see White, “Errors and Omissions Insurance,” New Appleman on Insurance Law Library Edition (LexisNexis 2010, Ch. 25).

Insuring Agreement and Professional Services. Like many other E&O products, an E&O policy issued to an insurance agent or broker is restricted to professional liabilities arising from the policyholder’s performance or discharge of professional duties. For example, the professional liability generally arises from the insured’s conduct in the course of his business, that of selling insurance.

An insuring agreement for an insurance agent or broker generally provides that “the insurer will indemnify the insured for all sums that the insured may become legally obligated to pay as damages in a claim arising out of any negligent act, error or omission in the conduct of the insured’s insurance agency or broker-age business.” 3 Bender’s New York Insurance Law §40.08 [2][e].

A sample insuring agreement from an insurance agents’ and brokers’ malpractice policy is as follows:

[T]he insurer will pay all sums which the Assured shall become legally obligated to pay by rea-son of liability for any error, omission or negligent act committed, or alleged to have been com-mitted by the Assured … while in the performance of services in the professional capacity of the Assured….

Albert J. Schiff Assocs. v. Flack, 51 N.Y.2d 692, 695, 417 N.E.2d 84, 85 (1980).

Whether a claim against an insured qualifies as a claim for negligence in the performance of “pro-fessional” services is often the first question an insurer evaluating a claim against an insured agent or broker must evaluate. An example of the language representative of an E&O policy’s definition of “Professional Serv-ices” is as follows:

Only insurance services performed for others for a fee as an insurance agent, insurance bro-ker, managing general agent, general agent, surplus lines broker, wholesale insurance broker or insurance consultant, including notary public, premium financing, claims adjusting and loss control services….

Conestoga Servs. Corp. v. Executive Risk Indem., Inc., 312 F.3d 976, 978-79 (9th Cir. 2002) (internal quotations omitted).

Insured Acting Within Scope of Authority. Similarly, questions about whether an agent or broker qualifies as an insured may arise when accompanied by questions about whether the agent or broker was act-ing in a capacity outside the scope of his or her authority or outside the scope of practice identified in either the insurance application or policy. Such an issue may be relevant to either coverage or liability. For exam-ple, in Windom v. Ungerer, 903 A.2d 276 (Del. 2006), the court found that a first agent owed no duty to an insured since he was merely a messenger between the insured and the second agent, informing the insured that he could not provide him with insurance because he dealt exclusively with the insured’s former insurer who would not renew the former policy. Similarly, although not an insurance agent case, the court in Pad-berg v. Travelers Cos., 197 Cal.App.3d 1161, 1166, 243 Cal.Rptr. 266, 268 (1987) found that the language of the policy specified that the realtor was an insured only while he was acting in the scope of his duties as an agent for the company, which excluded acts that took place before the agency was created. See Williams v. Pruden-tial Fin., Inc., 31 N.Y.S.3d 34 (N.Y. App. Div. 2016) (citing Drennan v Sun Indem. Co. of N.Y., 244 App. Div. 571, 579 (N.Y. App. Div. 1935), aff ’d 271 NY 182 (1936) (“Where an agent’s authority is specifically limited by the terms of the policy, he has no right or power to waive the conditions and provisions of the policy relating to


forfeiture and continuance of the insurance”); see also Spiegel v Metropolitan Life Ins. Co., 160 N.E.2d 40 (N.Y. 1959)).

Exclusions and Conditions. An insurer extending E&O coverage to insurance agents and brokers will also typically restrict the scope of coverage by placing additional conditions or exclusions for specified conduct. For example, some insurers preclude coverage for agents or brokers in disputes with insureds or insurers concerning premiums collected by them. Typical exclusions include coverage for “any claim for fees, premiums, taxes, commissions or brokerage monies.” Other exclusions may be geared toward specific types of claims such as investments.

Most agent / broker E&O policies contain exclusions found in other E&O policies:

criminal, dishonest fraudulent conduct; insured vs. insured; bodily injury / property damage; insolvency and bankruptcy; insured activities as trustee, partner, officer or director; business enterprise not named in declarations; acts, errors or omissions that preceded the effective date of the policy; liabilities assumed by contract; ERISA claims; punitive damages; prior knowledge / prior notice; libel or slander; infringement of intellectual property; employment practices; pollution; bond payments; commingling or other financial irregularities; tax advice; securities violations; real estate fluctuations; underwriting or MGA activities; notarization without appearance of signatory; proceedings brought by a department of insurance; class actions; abatement of mold, toxins, vapors; etc.

There are various forms now providing E&O coverage for agents and brokers, and they can vary sig-nificantly depending on the scope of the insured’s work.

III. The “Role” of an Agent or BrokerBroker. California law is similar to many jurisdictions in its definition of a “broker.” California Insur-

ance Code Section 33 provides that an insurance broker is “a person who, for compensation and on behalf of another person, transacts insurance other than life with, but not on behalf of, an insurer.” Almerico v. RLI Ins. Co., 716 So.2d 774, 776 (Fla. 1998) (“As a general principle, an insurance broker is an agent of the insured.”); Boulton Agency, Inc. v. Phoenix Worldwide Industries, Inc., 698 So.2d 1248 (Fla. Dist. Ct. App. 3d Cir. 1997);


Auto-Owners Ins. Co. v. Yates, 368 So.2d 634 (Fla. Dist. Ct. App. 2d Cir. 1979). Consequently, a “broker” is generally a reference to an individual who represents the interests of the individual or entity that seeks to purchase an insurance policy. Rios v. Scottsdale Ins. Co., 119 Cal.App.4th 1020 (2004); Shults v. Griffin-Rahn Insurance Agency Inc., 550 N.E.2d 232 ( Ill. App. Ct. 3d Dist.1990) (“the broker’s primary function as it relates to the insured is to faithfully negotiate and procure an insurance policy according to the wishes and require-ments of his client.”) (citing Economy Fire and Casualty Insurance v. Bassett, 525 N.E.2d 539, 543 (Ill. Ct. App. 5th Dist. 1988); Pittway Corp. v. American Motorist Insurance Company, 370 N.E.2d 1271, 1277 (Ill. Ct. App. 2d Dist. 1977); Lake Cty. Grading Co. of Libertyville v. Great Lakes Agency, Inc., 589 N.E.2d 1128, 1132 (Ill. Ct. App. 2d Dist. 1992) (“An insurance broker’s primary function is to negotiate and procure an insur-ance policy on behalf of an insured.”) (citing State Security Insurance Co. v. Burgos, 583 N.E.2d 547 (Ill. 1991)). But see Almerico v. RLI Ins. Co., 716 So. 2d 774, 776–77 (Fla. 1998) (“[t]he insurance broker may act in the dual capacity of broker for the insured and agent of the insurer.”) (citing American Fire Ins. Co. v. King Lum-ber & Mfg. Co., 77 So. 168, 174 (Fla. 1917); accord Steele v. Jackson Nat’l Life Ins. Co., 691 So.2d 525, 527 (Fla. Dist. Court App. 5th Dist. 1997) (acknowledging that “an independent insurance agent can be the agent of the insurance company for one purpose and the agent of the insured for another”); see also Johnny C. Parker, Does Lack of an Insurable Interest Preclude an Insurance Agent From Taking an Absolute Assignment of His Cli-ent’s Life Policy?, 31 U. Rich. L.Rev. 71, 98 (1997) (explaining “dual agency” principle as limited exception to general rule that insurance agent cannot serve two masters)); Isidore Newman Sch. v. J. Everett Eaves, Inc., 2009-2161 (La. 7/6/10), 42 So.3d 352, 356 (“where there is an agreement to procure insurance, the duty of the broker is analogous to the duty of the agent”) (citing Crayton v. Sentry Ins. Co., 612 So.2d 767, 771 (La.App. 1 Cir.1993); Micheau v. Hughes & Havinga Ins. Agency, No. 307914, 2013 WL 2226956, at *3 (Mich. Ct. App. May 21, 2013) (“The general rule is that an independent agent or broker acts on behalf of the insured rather than the insurer.”); West American Ins Co v. Meridian Mut. Ins. Co., 583 N.W.2d 548 (Mich. Ct. App. 1998); Harwood v. Auto–Owners Ins. Co, 535 N.W.2d 207 (Mich. Ct. App. 1993).

Agent. In contrast to a broker, an insurance “agent” generally includes an individual or entity that an insurer authorizes to act on its behalf in the sale and / or issuance of an insurance policy. Miller v. Mill Creek Homes, Inc., 97 P.3d 687, 689 (Or. Ct. App. 2004); Auto-Owners Ins. Co. v. Yates, 368 So.2d 634 (Fla. Ct. App. 2d Dist. 1979), cert. denied, 378 So.2d 351 (Fla.1979) (“[a]n “insurance agent” is one who represents an insurer under an employment by it.”) (quoting 3 Couch on Insurance 2d, section 25:92 (1960)); RLI Ins. Co. v. Collado, 678 So. 2d 1313, 1315–16 (Fla. Dist. Ct. App. 1996), decision quashed, cause remanded sub nom; Almerico v. RLI Ins. Co., 716 So.2d 774 (Fla. 1998); Slovak v. Adams, 753 N.E.2d 910, 915 (Ohio Ct. App. 6th Dist. 2001) (“An insurance agent’s duty to his client is to exercise good faith and reasonable diligence in undertaking to acquire insurance coverage.”); Damon’s Missouri, Inc. v. Davis, 590 N.E.2d 254, 258, fn. 2, (Ohio 1992) (citing First Catholic Slovak v. Buckeye Union Ins. Co. 499 N.E.2d 1303, 1305–1306 (Ohio Ct. App. 8th Dist. 1986)); Mich. Comp. Laws Ann. §500.1232; Deremo v. TWC & Associates, Inc., No. 305810, 2012 WL 3793306, at *2 (Mich. Ct. App. Aug. 30, 2012) (In Michigan, only licensed insurance counselors may advise or counsel clients about benefits, terms, value, and effect of different insurance policies). A “captive” or “exclusive” agent typi-cally works exclusively for a single insurer. While the captive or exclusive agent may, in fact, work completely independently of the insurer, he is usually compensated by the insurer through commissions on the insurance policies sold. Many agents, however, may work for several insurers and may place several different insurance product lines.

General Agent. An agent that offers products from multiple insurers is often referred to as a “gen-eral” agent,” a “special” agent, or a “soliciting” agent. Of these, a “general” agent generally possesses the most significant authority. Typically, a general agent has the authority to “bind” an insurer to provide coverage.


In other words, an insurer may allow a general agent to agree to accept the risk presented by an individual or entity; agree to the terms, conditions, and exclusions of coverage; and agree to issue, renew, or otherwise modify a contract of insurance. See, e.g., Dodds v. Hanover Ins. Co., 880 S.W.2d 311, 314-15 (Ark. 1994); Nich-ols v. Prudential Ins. Co. of Am., 851 S.W.2d 657, 662 (Mo. Ct. App. 1993); Columbia Mut. Cas. Ins. Co. v. Ingra-ham, 896 S.W.2d 903, 904 (Ark. 1995).

Managing General Agent. Similar to a general agent, a “managing general agent” or “MGA” has authority to bind an insurer, but typically will be authorized to act on the insurer’s behalf as to a specific assignment. For example, an MGA may represent all of the insurer’s interests geographically or as to a specific product line. Inclusive within an MGA’s responsibilities are often similar business and administrative tasks such as underwriting, marketing, premium collection, reinsurance, claims adjusting, or reinsurance.

Special Agent. A “special” agent usually has specific limits placed on its authority from the insurer. See, e.g., Booker v. Pettey, 770 So.2d 39, 44 (Miss. 2000).

Soliciting Agent. A “soliciting” agent is generally a special agent with the specified task of “soliciting” business for the insurer by way of accepting and forwarding applications for insurance to the insurer or its agent or collecting premiums. However, most “soliciting” agents” are not authorized to bind the insurer. See, e.g., Earth Scientists (Petro Servs.) Ltd.v. USF&G, 619 F.Supp. 1465, 1472-73 (D. Kan. 1985); Dodds. v. Hanover Ins. Co., 880 S.W.2d 311, 315 (Ark. 1994).

Wholesale and Retail Brokers. Given various issues that arise in insurance procurement, such as the type of insurance product or difficult to place policyholders, there are also distinctions made regarding whether a broker is a “retail” broker or a “wholesale” broker. A “retail” broker generally works directly with the insured. A “wholesale” broker usually has direct dealings with the insurer. Essex Ins. Co. v. Hoffman, 168 F.Supp. 2d 547, 549 (D. Md. 2001). It is important to note, however, that wholesale brokers are not agents of the insurers with whom they place coverage. National Union Fire Ins. Co. v. Midwestern General Brokerage, Inc., No. 06-0782-CV-W-NKL, 2007 WL 1529011 (W.D. Mo. May 23, 2007).

Producer. The terms “producer” and “sub-producer” are often utilized in insurance and may be refer-enced on the insurance policy itself. A producer may be an agent or a broker. The terms generally refer to the individual or entity to which the insurer owes a commission for the placement of the insurance, but attention must be placed on the context in which the terms are used.

As a practical matter, the use of these terms can be interchangeable and is often confusing. There may be insurance agencies and agents who exclusively represent policyholders and, consequently, are technically brokers. There may be “brokers” who have exclusive contracts with insurers and who, consequently, are tech-nically agents. Agents and brokers develop unique relationships with both policyholders and insurers. Agents and brokers may create unique business entities. Some agents and brokers may do business in a manner that allows them to work in a dual capacity, representing both the interests of the insurer and the policyholder. As always, the facts ultimately dictate the role and the title. See, e.g. Secura Ins. Co. v. Saunders, 227 F.3d 1077, 1080 (8th Cir. 2000); Layne Christensen Co. v. Zurich Canada, 38 P.3d 757, 768 (Kan. Ct. App. 2002); Rich-mond, Doug, Appleman On Insurance Law Library Edition, Chapter 2 “Agents & Brokers (Matthew Bender & Co. 2012).

IV. Broker and Agent Liability to “Insureds”—Tort and Contract TheoriesAn agent or broker may be sued under any number of theories by the insured for whom the agent or

broker procured insurance. The viability of theories against insurance agents or brokers can vary by jurisdic-


tion, but common theories include, but certainly are not limited to, negligence / professional negligence, neg-ligence per se, breach of fiduciary duty, misrepresentation, fraud, and breach of contract.

Insurance agents and brokers are required to use reasonable care in procuring the insured’s requested insurance. See, e.g., Butcher v. Truck Ins. Exch., 77 Cal.App.4th 1442, 1461(2000); Southtrust Bank & Right Equip. Co. of Pinellas Cty. v. Exp. Ins. Servs., Inc., 190 F. Supp.2d 1304, 1310 (M.D. Fla. 2002) (“An insurance agent has a duty to “use reasonable skill and diligence” when dealing with an insured.”); Warehouse Foods, Inc. v. Corporate Risk Management Services, Inc., 530 So.2d 422 (Fla. Dist. Ct. App. 1st Dist. 1988) (citing Sheridan v. Greenberg, 391 So.2d 234 (Fla. Dist. Ct. App. 3d Dist. 1981)); Caplan v. LaChance, 219 So.2d 89 (Fla. Dist. Ct. App. 3d Dist. 1969); Tornado Techs., Inc. v. Quality Control Inspection, Inc., 977 N.E.2d 122, 125 (Ohio Ct. App. 8th Dist. 2012) (“an insurance agency has a duty to exercise good faith and reasonable diligence in obtaining insurance that its customer requests.”); Moor v. Am. Family Ins. Co., No. 4–09–13, 2009 WL 2710071 (Ohio Dist. Ct. App. 3d Dist. Aug. 31, 2009); Fry v. Walters & Peck Agency, Inc., 750 N.E.2d 1194 (Ohio Dist. Ct. App. 6th Dist. 2001); First Catholic Slovak Union v. Buckeye Union Ins., 499 N.E.2d 1303 (Ohio Dist. Ct. App. 8th Dist. 1986); Stuart v. Natl. Indemn. Co., 454 N.E.2d 158 (Ohio Ct. App. 8th Dist. 1982); Karam v. St. Paul Fire & Marine Ins. Co., 281 So.2d 728, 730 (La. 1973) (“[a]n insurance agent who undertakes to procure insur-ance for another owes an obligation to his client to use reasonable diligence in attempting to place the insur-ance requested and to notify the client promptly if he has failed to obtain the requested insurance.”); Roger v. Dufrene, 613 So.2d 947, 949 (La. 1993) (“an insurance agent owes a duty of reasonable diligence to his cus-tomer.”).

Micheau v. Hughes & Havinga Ins. Agency, No. 307914, 2013 WL 2226956, at *4 (Mich. Ct. App. May 21, 2013) (“[a]n agent employed to effect insurance must exercise such reasonable skill and ordinary dili-gence as may fairly be expected from a person in his or her profession or situation, in doing what is neces-sary to effect a policy, in seeing that it effectually covers the property to be insured, in selecting the insurer, and so on.”) (citing 3 Couch, Insurance, 3d, §46:30, pp 46–57.); Minor v. Allstate Ins. Co., 675 N.E.2d 550, 554 (Ohio Ct. App. 2d Dist. 1996) (“[a]n insurance agent who, with a view to compensation, undertakes to procure insurance for another is obligated to do so. The agent is liable if, as a result of his or her negligent failure to perform that obligation, the other party to the contract suffers a loss because of a want of the insurance cover-age contemplated by the agent’s undertaking”) (citing Couch On Insurance 3d (1995), §46:46).

In circumstances where an agent or broker fails to deliver the agreed-upon coverage, the insurer may be held liable for the agent’s failure to perform. Id. at 1461-1462. See also Richmond, Doug, Appleman On Insurance Law Library Edition, Chapter 2 “Agents & Brokers (Matthew Bender & Co. 2012); Southtrust Bank & Right Equip. Co. of Pinellas Cty. v. Exp. Ins. Servs., Inc., 190 F.Supp.2d 1304, 1310 (M.D. Fla. 2002) (“An insur-ance agent’s liability may result from a negligent failure to obtain coverage which is specifically requested or clearly warranted by the insured’s expressed needs.”) (internal quotations omitted); Romo v. Amedex Ins. Co., 930 So.2d 643, 654 (Fla. Dist. Ct. App. 3d Dist. 2006); Klonis for Use & Benefit of Consol. Am. Ins. Co. v. Arm-strong, 436 So.2d 213 (Fla. Dist. Ct. App. 1st Dist. 1983) (“where an insurance agent or broker undertakes to obtain insurance coverage for another person and fails to do so, he may be held liable for resulting damages to that person for breach of contract or negligence.”); Bennett v. Berk, 400 So.2d 484, 485 (Fla. Dist. Ct. App. 3d Dist. 1981) (“An insurance broker may be liable for damages where there is an agreement to procure insur-ance and a negligent failure to do so.”); Caplan v. La Chance, 219 So.2d 89 (Fla. Dist. Ct. App. 3d Dist. 1969) (holding that an insurance agent’s negligence in failing to procure the proper insurance coverage requested by the insured is a recognized cause of action); Tornado Techs., Inc. v. Quality Control Inspection, Inc., 977 N.E.2d 122, 125 (Ohio Ct. App. 8th Dist. 2012) (“an action for negligence may be based upon an insurance agent’s fail-ure to procure insurance.”); Gerace–Flick v. Westfield Natl. Ins. Co., No. 01 CO 45, 2002 WL 31168883 (Ohio Ct.


App. 7th Dist. Sept. 26, 2002) (citing Minor v. Allstate Ins. Co., 675 N.E.2d 550 (Ohio Ct. App. 2d Dist. 1996); Karam v. St. Paul Fire & Marine Ins. Co., 281 So.2d 728, 730–31 (La. 1973) (“The client may recover from the agent the loss he sustains as a result of the agent’s failure to procure the desired coverage if the actions of the agent warranted an assumption by the client that he was properly insured in the amount of the desired cover-age.”); Kieran v. Commercial Union Insurance Company of New York, 271 So.2d 889 (La.App. 4 Cir. 1973); Hight v. Stewart, 265 So.2d 640 (La.App. 2 Cir. 1972); Bordelon v. Herculean Risks, Inc., 241 So.2d 766 (La.App. 3 Cir. 1970); Shrv. Teletype Coin Exchange, Inc. v. Commercial Union Ins. Co. of New York, 191 So.2d 208 (La.App. 2 Cir. 1966); Arceneaux v. Bellard, 149 So.2d 444 (La.App. 3 Cir. 1963); Brown v. Stephens Buick Company, 139 So.2d 579 (La.App. 4 Cir. 1962);

Zaremba Equip., Inc. v. Harco National Ins. Co., 761 N.W.2d 151 (Mich. 2008) (holding that an insur-ance agent who does not procure the insurance coverage requested breaches his or her duty, suggesting a neg-ligence claim).

Negligence. The majority of liability theories against agents and brokers arise from the fundamental premise that the agent or broker was negligent in the procurement of insurance. Indeed, the most common theory for a suit against an agent or broker in the procurement of insurance is negligence or professional neg-ligence.

In a negligence cause of action, the insured alleges that the agent or broker breached the duty of care that an ordinary agent or broker would have used in a same or similar situation. In most negligence cases, the insured must prove the following elements:

(1) duty;

(2) breach of that duty;

(3) causation; and

(4) damages.

Burgess v. Superior Court (1992) 2 Cal.4th 1064, 1077 (quoting Budd v. Nixen (1971) 6 Cal.3d 195, 200); Cintron v. Osmose Wood Preserving, Inc., 681 So.2d 859, 861 (Fla. Dist. Ct. App. 5th Dist. 1996) (citing Simon v. Tampa Electric Company, 202 So.2d 209, 213 (Fla. Dist. Ct. App. 2d Dist.1967)); Anderson v. St. Fran-cis–St. George Hosp., Inc., 671 N.E.2d 225, 227 (Ohio 1996). An insured must prove that but for the insurance agent’s negligence, the insured would have had insurance coverage for the loss that occurred. “Without such a showing, there is no cause of action because there are no damages caused by the breach of the professional’s duty.” Roger H. Proulx & Co. v. Crest-Liners, Inc., 119 Cal.Rptr.2d 442 (Cal. Ct. App. 2d Dist. 2002). Thus, the insured seeks to establish that the agent or broker did not act with the reasonable care, skill, and diligence as an ordinary member of the profession.

Negligence—Duty of Care. A seminal case in California that has been cited throughout the country is Jones v. Grewe, 189 Cal.App.3d 950, 954 (1987). In sum, the court held that an insurance agent has no duty to recommend adequate coverage for the insured or to advise that additional coverage may be available. See Shults v. Griffin-Rahn Ins. Agency, Inc., 550 N.E.2d 232, 235 (Ill. App. Ct. 3d Dist. 1990) (“an insurance broker has no such duty to advise clients of possible increased UM coverage and failure to do so does not breach the fiduciary relationship or support a claim for negligence.”); Smith v. Millers Mutual Ins. Co., 419 So.2d 59 (La.App. 2 Cir.1982) (finding no authority for the proposition that an insurance agent has a duty to recommend to an insured that he increase his personal liability limits); Fortier v. State Farm Fire & Cas. Co., No. 06-10065, 2007 WL 678990, at *2 (E.D. La. Feb. 28, 2007) (“Louisiana law does not impose a duty on an insurance agent to counsel an insured on policy limits.”); Isidore Newman Sch. v. J. Everett Eaves, Inc., 2009-2161 (La. 7/6/10), 42 So.3d 352, 357; Graves v. State Farm Mutual Auto Ins. Co., 01–1243 (La.App. 3 Cir. 6/26/02), 821 So.2d 769


(holding that the insurance agent had no affirmative duty to inquire into the client’s financial condition and make recommendations about higher auto liability coverage, or that the client purchase an umbrella policy); Zinsel Co. v. J. Everett Eaves, Inc., 99–691 (La. App. 5 Cir. 11/30/99), 749 So.2d 798 (holding that any duty the agent had to notify his client of the availability of increased limits was satisfied by the agent’s letter to the insured); Murphy v. Kuhn, 682 N.E.2d 972, 974 (N.Y. 1997) (“insurance agents have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so; however, they have no continuing duty to advise, guide or direct a client to obtain additional cover-age”); Wied v. New York Cent. Mut. Fire Ins. Co., 618 N.Y.S.2d 467 (N.Y. App. Div. 1994); Hjemdahl–Monsen v. Faulkner, 611 N.Y.S.2d 309 (N.Y. App. Div. 1994); Rogers v. Urbanke, 599 N.Y.S.2d 697 (N.Y. App. Div. 1993); Harnish v. Joseph J. Naples & Assoc., 581 N.Y.S.2d 504 (N.Y. App. Div. 1992); Erwig v. Edward F. Cook Agency, 570 N.Y.S.2d 64 (N.Y. App. Div. 1991). But see Holton v. A+ Ins. Associates, Inc., 661 N.W.2d 248, 252 (Mich. Ct. App. 2003) (“Michigan law recognizes a cause of action in tort for an insurance agent’s failure to procure requested insurance coverage, which includes an insurance agent’s duty to advise an insured upon a showing of a special relationship.”); Haji v. Prevention Ins. Agency, Inc., 492 N.W.2d 460 (Mich. Ct. App. 1992); Stein v. Continental Cas. Co., 313 N.W.2d 299 (Mich. Ct. App. 1981), mod in part in Harts v. Farmers Ins. Exch., 597 N.W.2d 47 (Mich. Ct. App. 1999). Notably, no New York court has applied the “special relationship” analysis to add such continuing duties to the agent-insured relationship. See Wied v. New York Cent. Mut. Fire Ins. Co., 618 N.Y.S.2d 467 (N.Y. App. Div. 1994).

In Jones v. Grewe, the California Court of Appeal, in affirming the trial court’s sustaining of a demur-rer without leave to amend, determined that allegations that “an insured has purchased insurance from an insurance agent for several years and followed his advice on certain insurance matters was insufficient to imply the existence of a greater duty. Such reliance is not at all uncommon when an insured has done business with an insurance agency over a period of time.” Jones, 189 Cal.App.3d 953, 956 (citations omitted). The Jones court also held that assurances by the agent to the insureds regarding the adequacy of their liability coverage did not impose a greater duty on the insurance agent. Id. Accordingly, the Jones court held that:

An insurance policy arises out of the insured’s desire to be protected in a particular manner against a specific kind of obligation. It is the insured’s responsibility to advise the agent of the insurance he wants, including the limits of the policy to be issued. [citations omitted.] Ordinarily, the person seeking liability insurance knows better than the insurance agent the extent of his personal assets, and the premium he can afford or is willing to pay. … Absent such allegations [regarding the insured’s financial information, insured’s personal assets, insured’s willingness to pay a higher premium, insured’s delegation to the insurance agent the burden of determining liability coverage sufficient to protect the insured, the insured] retained the responsibility of deciding how much liability insurance to carry and how much premium to pay.

Id. at 956-57.

Thus, the Jones court held that an insurance agent has a duty to use reasonable care, diligence, and judgment in procuring the insurance requested by its client, but the “general duty of reasonable care which an insurance agent owes his client does not include the obligation to procure a policy affording the client com-plete liability protection.” Id. at 956. In California, in addition to the duties delineated in Jones, an insurance agent may be negligent if he fails to procure the specifically requested coverage for an insured. Fitzpatrick v. Hayes, 57 Cal.App.4th 916, 927 (1997). See also Warehouse Foods, 530 So.2d at 423 (Fla. Dist. Ct. App. 1st Dist. 1988); Southtrust Bank & Right Equip. Co. of Pinellas Cty. v. Exp. Ins. Servs., Inc., 190 F.Supp. 2d 1304, 1310 (M.D. Fla. 2002).


As a practical matter, however, many of the disputes brought against agents and brokers on this basis reflect that while a request was made for a specific coverage, requests are usually broad-based for a specific type of policy, and the insured’s complaint in litigation is that the policy provided included limita-tions or exclusions. As Jones made clear, however, an insurance agent or broker does not have a duty to rec-ommend adequate coverage for the insured, to advise that additional coverage may be available, or to ensure that the client has complete protection. Jones, 189 Cal.App.3d at 954, 956 (an insurance agent does not owe a duty to volunteer to an insured that the insured should procure additional or different coverage or “to advise the insured on specific insurance matters.”); Roberts, 163 Cal.App.4th at 1403-4. (Pursuant to client’s request, insurance agent obtained course of construction insurance and did not have a duty to volunteer that client should obtain different or additional insurance coverage. Insurance agent was not negligent in obtaining the requested course of construction insurance.); Fitzpatrick, 57 Cal.App.4th at 926 (An insurance agent sold an auto policy that did not contain sufficient uninsured motorist coverage to the insured. The insurance agent was not liable for failing to advise the insured that a personal umbrella policy could have been purchased that would have covered damages above the auto policy limits.). This is the rule because “[o]rdinarily, the person seeking liability insurance knows better than the insurance agent the extent of his personal assets, and the premium he can afford or is willing to pay.” Jones, 189 Cal.App.3d at 956. Even when the insurance broker has assisted in insurance procurement for the client for many years and the client always follows the insurance broker’s advice, it is still insufficient to imply the existence of a duty to recommend or procure additional cov-erage. Jones, 189 Cal.App.3d at 956. “In the absence of an express agreement to ensure adequate coverage or a holding out by the agent to assume greater duties than otherwise implied in the agency relationship, the onus is thus squarely on the insured to inform the agent of the insurance he requires.” Paper Savers, Inc. v. Nacsa (1996) 51 Cal.App.4th 1090, 1096, citing Jones, 189 Cal.App.3d at 956. See also Wallman v. Suddock, 134 Cal.Rptr.3d 566, 585 (Cal. Ct. App. 2d Dist. 2011).

However, some Florida courts have found a duty to advise. See Adams v. Aetna Cas. & Sur. Co., 574 So.2d 1142, 1155 (Fla. Dist. Ct. App. 1991) (“This general duty requires the agent to exercise due care in cor-rectly advising the insured of the existence and availability of particular insurance, including the availability and desirability of obtaining higher limits, depending on the scope of the agents undertaking.”) (emphasis added); Seascape of Hickory Point Condominium Association v. Associated Insurances Services, Inc., 443 So.2d 488 (Fla. Dist. Ct. App. 2d Dist. 1984) (“there can be circumstances under which an insurance broker has a duty to volunteer advice to his client”); Woodham v. Moore, 428 So.2d 280 (Fla. Dist. Ct. App. 4th Dist. 1983) (“we believe issues of fact existed with respect to the obligation of the agent to advise the appellants of their right to leave the assigned risk plan.”) (citing Luckey v. Willis Ins. Agency, Inc., 409 So.2d 1218 (Fla. Dist. Ct. App. 3d Dist. 1982); Sheridan v. Greenberg, 391 So.2d 234 (Fla. Dist. Ct. App. 3d Dist. 1981); State Farm Mut. Auto. Ins. Co. v. Duckworth, 660 F.Supp. 2d 1323, 1339 n.16 (M.D. Fla. 2009), aff ’d, 648 F.3d 1216 (11th Cir. 2011).

Courts have granted motions for summary judgment, or in the alternative, summary adjudication, where no triable issue of material fact exists in a professional negligence cause of action. Roberts v. Assurance Co. of Am. (2008) 163 Cal.App.4th 1398, 1403-6 (Summary judgment granted and affirmed in favor of insur-ance agent in a professional negligence action when client requested course of construction insurance and received course of construction insurance. Courts have gone so far as to state that an insurance agent did not have a duty to volunteer that a client should obtain different or additional insurance coverage. Such affirma-tions of summary judgment in the absence of a greater duty being assumed are not unique to agent / broker malpractice cases.) See, e.g., Jambazian v. Borden, 25 Cal.App.4th 836, 844-45 (1994) (Summary judgment granted and affirmed in favor of doctor in a medical malpractice action where plaintiff ’s claim of diabetes was


not supported by documents or declarations and was insufficient to defeat the doctor’s motion for summary judgment); Goldberg v. Frye (1990) 217 Cal.App.3d 1258, 1267-68 (Summary judgment affirmed in legal mal-practice action brought by estate’s legatees because administrator’s attorney represented the administrator and not the legatees based upon documentation filed with motion for summary judgment); Fox v. Pollack (1986) 181 Cal.App.3d 954, 958-59 (Summary judgment granted and affirmed in favor of attorney in a legal malprac-tice action where no triable issue of fact existed regarding whether plaintiffs were clients of the attorney and whether a duty of professional care was owed to plaintiffs when attorney represented opposing party in a real property exchange transaction). But see Woodham v. Moore, 428 So.2d 280 (Fla. Dist. Ct. App. 4th Dist. 1983) (reversing a summary judgment exonerating an insurance agent for failing to advise certain policyholders of the availability and desirability of obtaining higher limits of liability insurance); see also Seascape of Hickory Point Condo. Ass’n, Inc., Phase III v. Associated Ins. Servs., Inc., 443 So.2d 488, 489 (Fla. Dist. Ct. App. 2d Dist. 1984).

Not only may malpractice claims be dismissed on summary judgment, courts have been willing to dismiss them at the initial pleading stage, on demurrer. Jones v. Grewe, 189 Cal. App.3d 950, 954 (1987). In an effort to avoid having their case dismissed either at the initial pleading stage or on summary judgment, poli-cyholders have sought to plead that the agent or broker presented himself as an expert or that the insured requested specific insurance coverage but that the agent or broker failed to deliver the requested coverage.

Even where an agent or broker obtains the requested coverage, however, he may still face liability in circumstances where the insured was forced to engage in coverage litigation to obtain the necessary cov-erage. In Third Eye Blind, Inc. v. Near North Entertainment Ins. Services, LLC, 127 Cal.App.4th 1311, 1322, 26 Cal.Rptr.3d 452, 460-461 (2005), the court determined that a broker was potentially liable “for failing to help (insureds) secure more direct, and certain coverage . . .” that would have avoided the costs of defend-ing a third party claim and then suing the insurer in a coverage action. In Third Eye Blind, the broker did not advise the insured—who was in the entertainment business—that the policy being procured included a “Field of Entertainment Business” exclusion. The exclusion came to light when the insured was sued and the insurer denied coverage based on the exclusion. While the court concluded the exclusion was ambiguous and the insured entitled to coverage, the broker was liable for the defense and settlement costs in the action against the insured, plus the insured’s attorneys’ fees in the coverage litigation. Thus, the fact that a claimed but disputed loss may ultimately be proven to be covered does not necessarily shield the agent or broker from claims of negligence in procuring the policy. Under the analysis of Third Eye Blind, a court could find that cov-erage exists for the insured, but simultaneously conclude that the agent or broker was negligent in its failure to procure clear and certain coverage and that would have avoided the need for coverage litigation between the insurer and the insured. In such circumstances, the insured may also be able to recover its attorneys fees incurred in litigating with the insurer. Id.

Negligence—Expertise / Specialized Knowledge. The net effect of Jones, supra, is that more atten-tion is paid to the relationship between the insured and its agent or broker. In circumstances where the agent or broker presented a certain expertise or a specialized knowledge, dispositive motions are subjected to greater scrutiny. Kirtz, Richards, Wilson & Co. v. Ins. Communicators Mktg. Corp., 12 Cal.App.4th 1249 (1992) (claimed expertise in health insurance, but erroneous advice plan was not subject to medicare); Valentine v. Membrila Ins. Svcs., 118 Cal.App.4th 462 (2004) (negligence for not disclosing a “broad assault and bat-tery exclusion”); Williams v. Hilb, Royal & Hobbs, Ins. Svcs., 177 Cal.App.4th 624 (2009) (if expertise for niche insurance is advised, not allowed to subsequently deny); Seascape of Hickory Point Condo. Ass’n, Inc., Phase III v. Associated Ins. Servs., Inc., 443 So.2d 488, 491 (Fla. Dist. Ct. App. 2d Dist. 1984); Warehouse Foods, Inc. v. Corp. Risk Mgmt. Servs., Inc., 530 So.2d 422, 424 (Fla. Dist. Ct. App. 1st Dist. 1988) (“When an insured rea-


sonably relies upon an agent’s claimed expertise and advice, liability may be based upon the agent’s negligent failure to properly advise the insured as to coverage.); Offshore Production Contractors, Inc. v. Republic Under-writers Insurance Company, 910 F.2d 224, 230, (5th Cir.1990); Cormie’s Grocery & Deli, Inc. v. Colony Ins. Co., No. CIV.A. 12-562, 2012 WL 2906634, at *4 (W.D. La. July 16, 2012); AYH Holdings, Inc. v. Avreco, Inc., 826 N.E.2d 1111, 1130–31 (Ill. App. Ct. 1st Dist. 2005) (“whether due to common knowledge or unequal knowl-edge, a broker in Illinois has a duty to inform an insured of material information in its possession) (citing Lake County Grading Co. of Libertyville, Inc, 589 N.E.2d 1128 (Ill. App. Ct. 2d Dist. 1992) (“[t]he broker must inform the insured of all material facts within the broker’s knowledge that may affect the transaction or the subject matter of the relationship.”); S. Bay Cardiovascular Associates, P.C. v. SCS Agency, Inc., 963 N.Y.S.2d 688, 691 (N.Y. App. Div. 2013) (“where the insured relied on the expertise of the agent, or there was a course of dealing over an extended period of time which would have put objectively reasonable insurance agents on notice that their advice was being sought and specially relied on, the agent could be found to have a duty to advise because of a special relationship with the insured”); see also Murphy v. Kuhn, 682 N.E.2d 972 (N.Y. 1997); Nunez v. Mohamed, 104 A.D.3d 921, 962 N.Y.S.2d 338, 2013 N.Y. Slip Op. 02058 (2d Dept. 2013); Axis Constr. Corp. v. O’Brien Agency, Inc., 87 A.D.3d 1092, 929 N.Y.S.2d 869); First Catholic Slovak v. Buckeye Union Ins. Co. 499 N.E.2d 1303 (Ohio Ct. App. 8th Dist.1986) (“When the agency knows that the customer is relying upon its expertise, the agency may have a further duty to exercise reasonable care in advising the customer.”); Wanner Metal Worx, Inc. v. Hylant Maclean, Inc., No. 02CAE10046, 2003 WL 1826558, at *6 (Ohio Ct. App. 5th Dist. 2003) (“insurance agent must not only obtain the insurance requested, but also, advise a customer who is relying on his expertise.”); Bedillion v. Tri-County Ins. Agency, No. 15722, 1993 WL 27381 (Ohio Ct. App. 9th Dist. Feb. 3, 1993). Such decisions have created a model for policyholders to plead an agent or broker presented himself as an expert or possessed special skills. Nevertheless, the facts must exist to support such a claim.

Near the end of 2011, the California Court of Appeal placed further parameters on information that will be necessary to defeat a dispositive motion. In Wallman v. Suddock, 200 Cal.App.4th 1288 (2011) the court held that conclusory factual allegations are not sufficient to defeat a dispositive motion. In Wallman, the policyholders (Wallmans) had owned the Ingraham building since 1994. Crusader Insurance began provid-ing coverage the same year. During that year, Anthony Rodriguez—a child—fell from the building and suf-fered a serious head injury. In 2001, the Wallmans sold the building. In 2004, the Wallmans utilized Benjamin Suddock to obtain insurance for their numerous businesses and real properties. Suddock obtained primary, excess, business liability, and property policies. American Guarantee issued the excess and umbrella insur-ance. Rodriguez brought suit, via his guardian ad litem, against the Wallmans in 2006. The Wallmans tendered the suit to Crusader, which agreed to defend. When the Wallmans determined their potential liability may exceed the Crusader policy limits, the Wallmans tendered the suit to American Guarantee. American Guaran-tee denied responsibility.

In the professional negligence suit that followed, Suddock sought summary judgment on the basis that the Wallmans did not seek coverage for buildings that they had previously owned. Suffolk argued that under California law, he did not have a duty to seek or recommend such coverage. The trial court granted summary judgment, and the appellate court affirmed. Singificantly, the evidence established that the Wall-mans could not recall having ever asked for coverage for past years for properties they no longer owned. Under such circumstances, the court determined that Suddock could not reasonably have known that the Wallmans wanted excess insurance for past years for properties they no longer owned.

Significantly, the Court of Appeal also addressed the growing theory against insurance agents and brokers by responding to the Wallmans’ argument that Suddock presented himself as an “expert” in insur-


ance matters generally and, more specifically, for the type of risks the Wallmans’ family business encountered. Notwithstanding such allegations, the appellate court, in affirming summary judgment, held that the “mere existence” of a broker/client “relationship imposes no duty” to advise the policyholder of specific insurance matters. “Instead, in the ordinary case, ‘the onus is . . . squarely on the insured’” to identify the insurance that it seeks to procure. But see Wachovia Ins. Servs., Inc. v. Toomey, 994 So.2d 980, 990 (Fla. 2008) (“Indeed, insur-ance brokers will often have both a fiduciary duty to their insured-principals and a common-law duty to prop-erly procure requested insurance coverage.”) (citing Romo v. Amedex Ins. Co., 930 So.2d 643, 654 (Fla. Dist. Ct. App. 3d Dist. 2006) (“where an insurance agent or broker undertakes to obtain insurance coverage for another person and fails to do so, he may be held liable for resulting damages to that person for breach of contract or negligence.”) (quoting Klonis v. Armstrong, 436 So.2d 213, 216 (Fla. Dist. Ct. App. 1st Dist. 1983)), review denied, 949 So.2d 197 (Fla. 2007); Randolph v. Mitchell, 677 So.2d 976, 978 (Fla. Dist. Ct. App. 5th Dist. 1996) (stating that an insurance broker owes a fiduciary duty to the insured-principal, and as a result, negligence and breach of fiduciary duty can be pled in the alternative.)

While there are several cases that hold that a broker may be held to a greater duty to the policyholder by presenting himself as an “expert,” Wallman elaborated on the specific evidence—or lack thereof—relevant to such an argument. In particular, Wallman found that a policyholder’s vague statements and requests, or the insurance agent / broker’s general responses thereto, were insufficient to impose an increased duty on the agent / broker. But see Warehouse Foods, Inc. v. Corp. Risk Mgmt. Servs., Inc., 530 So.2d 422, 424 (Fla. Dist. Ct. App. 1988) (“But the record contains testimony that appellants did express a desire to be fully insured, questioning whether “everything” was covered and specifically inquiring about acts of God; that the agent repeatedly advised appellants that the insurance proposal contained all the coverage they needed; and that in accepting the proposal appellants relied upon the agent’s expertise and assurances that the policy would pro-vide full coverage.”) See also Murphy v. Kuhn, 682 N.E.2d 972 (N.Y. 1997); Hoffend & Sons, Inc. v. Rose & Kier-nan, Inc., 851 N.E.2d 1149, 1152 (N.Y. 2006) (“A general request for coverage will not satisfy the requirement of a specific request for a certain type of coverage.”).

Negligence—Duty to Read Policy. Many jurisdictions require an insured to read and/or know the terms of his policy upon receipt. “It is a general rule that the receipt of a policy and its acceptance by the insured without an objection binds the insured as well as the insurer and he cannot thereafter complain that he did not read it or know its terms. It is a duty of the insured to read his policy.” Taff v. Atlas Assur. Co., 58 Cal.App.2d 696, 703 (1943) (insured accepted and retained five successive policies each excluding loss when jewelry was left in an unattended vehicle and was prohibited from reforming policy because a reading of the policy would have revealed the exclusion on the first page.); Hackethal v. Nat’l Cas. Co., 189 Cal.App.3d 1102, 1112 (1987) (insured was charged with a duty to read his policy – rather than relying on a two-page bro-chure highlighting certain portions of a policy – especially in light of the fact that insured never inquired as to whether coverage was available for administrative hearings during the nine subsequent renewals of the policies.); Hadland v. NN Investors Life Ins. Co., 24 Cal.App.4th 1578, 1586-89 (1994) (agent not liable when agent omitted to tell insureds they were not receiving the coverage they had requested, the certificate on the policy clearly indicated the type of coverage received, and indicated the insureds should contact agent if any questions arose.); Malcom v. Farmers New World Life Ins. Co., 4 Cal.App.4th 296, 304, fn. 6 (1992) (court held that exclusion regarding suicide-related deaths during the first two years of policy inception could be used to exclude coverage for beneficiaries because the insured did not read the policy and the insured did not ask about coverage for suicide-related deaths to place agent on notice.); Aetna Cas. & Sur. Co. v. Richmond, 76 Cal.App.3d 645, 652 (1977) (where insured’s wife gave instruction to exclude certain policy provisions, insured was charged with knowledge of the absence of coverage because of a duty to read the policy.); Casey v. Auto


Owners Ins. Co., 729 N.W.2d 277, 283 (Mich. Ct. App. 2006) (“It is well established that an insured is obligated to read his or her insurance policy and raise any questions about the coverage within a reasonable time after the policy is issued.”); Amankwah v. Liberty Mut. Ins. Co., No. C–150360, 2016 WL 1244482 (Ohio Ct. App. 1st Dist. March 30, 2016) (“Ohio law also recognizes a corresponding duty on the part of an insured to review the insurance policy and know the extent of insurance coverage issued.”); Roberts v. Maichl, C–040002, 2004 WL 1948718 (Ohio Ct. App. 1st Dist. Sept. 3, 2004); Rose v. Landen, No. CA2004–06–066, 2005 WL 752431 (Ohio Ct. App. 12th Dist. April 4, 2005); Kincaid v. Erie Ins. Co., 944 N.E.2d 207 (Ohio 2010); Dupont Bldg., Inc. v. Wright & Percy Ins., 2011-1449 (La.App. 3 Cir. 4/4/12), 88 So.3d 1263, 1266 (“Under Louisiana law, an insured has a duty to read his insurance policy and know its provisions.”) (citing Stephens v. Audubon Ins. Co., 665 So.2d 683, 686 (La.App. 1 Cir. 2/6/95); Matthews v. Business Men’s Assur. Co. of America, 478 So.2d 634, 637 (La.App. 2 Cir.1985)); Perkins v. Shelter Ins. Co., 540 So.2d 488 (La.App. 1 Cir.1989). Fidelity Homestead Ass’n v. Hanover Ins. Co., 458 F.Supp.2d 276, 280 (E.D. La. 2006)); but see Butcher v. Truck Ins. Exch., 92 Cal.Rptr.2d 521, 536 (Cal. Ct. App. 2d Dist. 2000); Southtrust Bank & Right Equip. Co. of Pinellas Cty. v. Exp. Ins. Servs., Inc., 190 F.Supp. 2d 1304, 1310 (M.D. Fla. 2002) (holding negligent failure to secure insurance “clearly warranted by the insured’s expressed needs” on the agent’s part is not overcome by the insured’s failure to read the underlying documentation) (citing Blumberg v. American Fire & Casualty Co., 51 So.2d 182, 184 (Fla.1951) (determining that often insured may never read insurance policy unless and until a controversy as to coverage arises); Furtak v. Moffett, 671 N.E.2d 827 (Ill. App. Ct. 1st Dist. 1996); Foster v. Crum & Forster Insurance Cos., 345 N.E.2d 49 (Ill. App. Ct. 5th Dist. 1976); Golf v. Henderson, 876 N.E.2d 105 (Ill. App. Ct. 1st Dist. 2007). Perelman v. Fisher, 700 N.E.2d 189 (Ill. App. Ct. 1st Dist. 1998); Babiarz v. Stearns, No. 1–15–0988, 2016 WL 3569560, at *12 (Ill. Ct. App. 1st. Dist. June 30, 2016) (“Where a fiduciary relationship exists, failure to read an insurance policy does not prevent a claim as a matter of law.”); Black v. Illinois Fair Plan Ass’n, 409 N.E.2d 549 (Ill. App. Ct. 5th Dist. 1980); Louisiana Home Builders Ass’n Self–Insurers’ Fund v. Adjustco, Inc., 633 So.2d 630 (La.App. 1 Cir.1993) writ denied, 94–234 (La.3/18/94), 634 So.2d 857, (no duty to read or examine the policy because insured had a close trusting relationship); Dupont Bldg., Inc. v. Wright & Percy Ins., 2011-1449 (La.App. 3 Cir. 4/4/12), 88 So.3d 1263, 1266.

Notwithstanding the foregoing, however, circumstances may exist where an insured is entitled to rely on the representations of its broker even when the policy contains terms that contradict the representations. “Absent some notice or warning, an insured should be able to rely on a (broker’s) representations of coverage without independently verifying the accuracy of those representations by examining the relevant policy pro-visions.” Clement v. Smith, 16 Cal. App.4th 39, 45, 19 Cal.Rptr.2d 676, 679 (1993) (broker advised insured his “contractual liability” policy covered damages that might be awarded against it in a lawsuit, although policy was limited to personal injury and property damage.). See also Am. Bldg. Supply Corp. v. Petrocelli Grp., Inc., 979 N.E.2d 1181, 1185 (N.Y. 2012) (“While it is certainly the better practice for an insured to read its policy, an insured should have a right to “look to the expertise of its broker with respect to insurance matters”) (citing Baseball Off. of Commr. v. Marsh & McLennan, 742 N.Y.S.2d 40 (N.Y. App. Div. 1st Dept. 2002); Bell v. O’Leary, 744 F.2d 1370, 1373 (8th Cir.1984).

Negligence—Onus To Prove Available Coverage. It is also somewhat common for a policyholder to bring suit against its agent or broker on the basis that the insured had requested the broadest possible cover-age—perhaps even specific coverage—but that the insurer had denied the very loss that the policyholder had hoped would be covered. What may be lost in such allegations, however, is the fact that the basis for denial was common, upheld by courts, and that coverage would not have been available.

It is well-established law that for an insured to succeed in a claim that an insurance agent or broker failed to procure coverage, he must prove that the coverage was available prior to the loss at issue. Roger H.


Proulx & Co. v. Crest-Liners, Inc., 98 Cal.App.4th 182, 195 (2002) (“Proulx”). Courts throughout the nation have followed this rule of law. See e.g., Grande v. St. Paul Fire & Marine Ins. Co., 365 F.Supp.2d 57, 63-64 (D. Me. 2005); Hawk v. Roger Watts Ins. Agency 989 So.2d 584, 590-91 (Ala. Civ. App. 2008); United Fire & Cas. Co. v. Northwind Developers, L.L.C., No. 01-1945, 2003 WL 21069502, at *5 (Iowa Ct. App. May 14, 2003); Haggans v. State Farm Fire & Cas. Co., 803 So.2d 1249, 1252 (Miss. Ct. App. 2002); Wolfson v. Bernstein, 955 S.W.2d 814, 817 (Mo. Ct. App. 1997); Herdendorf v. GEICO Ins. Co., 909 N.Y.S.2d 277, 279 (N.Y. App. Div. 2010); Metro Allied Ins. Agency, Inc. v. Lin, 304 S.W.3d 830, 836 (Tex. 2009); Seascape of Hickory Point Condo. Ass’n, Inc., Phase III v. Associated Ins. Servs., Inc., 443 So.2d 488, 491 (Fla. Dist. Ct. App. 1984) (“A statement that no seawall insurance is available is manifestly different from one which says that appellees cannot obtain seawall insurance.”). The agent / broker must have been able to place the requested coverage prior to the subject loss. Proulx, ibid. In other words, the insured “can recover on its cause of action against [the agent / broker] only if it can show that, but for [the agent / broker’s] negligence, [the insured] would have had at least some coverage for [the] claim under [the] policies.” Id. “Without such a showing, there is no cause of action because there are no damages caused by the breach of the professional’s duty.” Id., citing Budd v. Nixen, 6 Cal.3d 195, 200 (1971) (“The mere breach of a professional duty, causing only nominal damages, speculative harm, or the threat of future harm – not yet realized – does not suffice to create a cause of action for negligence”); see also Walker v. Pacific Indemnity Co., 183 Cal.App.2d 513, 516-17 (1960) (cause of action against insurance agent for negligence procuring insurance in amount less than ordered by insured did not accrue until judgment was entered against insured for more than coverage amount, unless insured could show special facts to establish other injury.)

For example, a homeowner’s policy generally extends coverage to personal property, but such cover-age is generally not without exclusions or limitations. The personal property coverage often contains special limits of liability for certain unscheduled items, such as money, gift certificates, bank notes, bullion, gold, securities, personal records, tickets, stamps, watercraft, trailers, grave markers, jewelry, watches, furs, pre-cious and semiprecious stones, firearms, silverware, business property, home computers, laptops, Oriental rugs, bicycles, trading cards, comic books, autographed memorabilia, compact discs, cassettes, and tapes. See also, Couch On Insurance 3d, “Property Insurance: Introduction” §148:43 and “Property Insurance: Carriage, Bailments” §154:63, p. 154-73 (“Unless the property is specifically scheduled, the insured’s recovery may be subject to a stated maximum dollar limitation.”) Notwithstanding the common existence of such provisions, policyholder plaintiffs have pursued claims on the premise that such conditions exist in their policies that deprived them of their greater “personal property” limit.

Although standard homeowner’s insurance policies often contain special limits of liability for the above-listed items, an insured may schedule their “sub-limit” items. For example, jewelry coverage may be purchased for an additional premium or via a floater policy or some other policy. Inland marine insurance, like scheduling jewelry and a floater policy, specifically provides coverage for “any and all kinds of loss of or damage to: ¶ … (c) Precious stones, jewels, jewelry, gold, silver and other precious metals, whether used in business or trade or otherwise and whether the same be in course of transportation or otherwise.” Cal. Ins. Code §103. In contrast, the California Insurance Code sets forth standard provisions in the standard home-owner’s insurance policy, which does not necessarily provide coverage for jewelry. See Cal. Ins. Code §2070, et. seq. For an insured to obtain higher limits for specialty items, such as jewelry, he would either need to schedule his jewelry and pay the appropriate premium or purchase a floater policy and pay the appropriate premium. See Micheau v. Hughes & Havinga Ins. Agency, No. 307914, 2013 WL 2226956, at *5 (Mich. Ct. App. May 21, 2013).

Negligence—Policy History. Many policyholders who bring professional malpractice claims against their insurance agent or broker may argue that the court should preclude the introduction of evidence regard-


ing their prior insurance policies. The reason is usually that the prior policies evidence a history of the same policies being in place for years. Policyholders argue that the introduction will cause them undue prejudice, confuse the issues, or mislead the jury. Notwithstanding such arguments, California Evidence Code Sec-tion 352 provides a court with the discretion to exclude evidence if the probative value is outweighed by the substantial danger of undue prejudice. See People v. Cardenas (1982) 31 Cal.3d 897, 904. This discretionary authority has long been employed in California and requires the court to balance the value of the evidence against a combination of the four negative factors (time, prejudice, confusion, and misleading effect) and to consider both the relationship between the evidence and the relevant inferences to be drawn from it, (i.e., whether the evidence is relevant to a main or only a peripheral issue), and also the necessity of the evidence to the proponent’s case. Kessler v. Gray, 77 Cal.App.3d 284, 291 (1978). Prejudice, as contemplated in Evidence Code Section 352, is that which uniquely evokes an emotional bias against a party and has no effect on the issues in the case. See Vorse v. Sarasy, 53 Cal.App.4th 998, 1008-09 (1997).

Evidence concerning a policyholders’ prior insurance policies is directly relevant and pertinent to the policyholder’s knowledge of the terms, conditions, and provisions in his prior homeowner’s policies and also directly relevant to the policyholder’s course of dealings with the insurance agent / broker. This evidence has great probative value as it will directly affect the agent’s or broker’s defense of the policyholder’s claim of professional negligence and breach of fiduciary duty. Exclusion of this evidence will result in prejudice to the agent/broker.

Negligence—Certificates of Insurance. Suits have also been brought against agents and brokers on the basis that insurers failed to provide coverage to an individual or entity, either as an insured or additional insured, after issuance of a Certificate of Insurance.

As a practical matter, Certificates of Insurance generally provide that they do not extend any insur-ance. For example, a Certificate may state:

THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THE CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.

The Certificate generally identifies the “Insured,” may identify “additional insureds,” and usually identifies the “Certificate Holder.” Nevertheless, in an effort to support an argument that they are insured under a policy, certificate holders often confuse the issuance of a Certificate of Insurance with being an actual insured or with the existence of an Additional Insured Endorsement. Foremost, if the claim is brought by the certificate holder rather than the individual or entity identified as an “Insured,” arguably such an individual or entity has a duty to read the Certificate. Hackethal v. Nat’l Cas. Co., 189 Cal.App.3d 1102 (1987) (insured was charged with a duty to read his policy – rather than relying on a two-page brochure highlighting certain por-tions of a policy – especially in light of the fact that insured never inquired as to whether coverage was avail-able for administrative hearings); Hadland v. NN Investors Life Ins. Co., 24 Cal.App.4th 1578 (1994) (agent not liable when agent did not omit to tell insureds they were not receiving the coverage they had requested and the certificate on the policy indicated insureds should contact agent if any questions arose.)

Moreover, and significantly, a Certificate is not an “additional insured” endorsement and does not convey an interest in an insurance policy. A “certificate of insurance is merely evidence that a policy has been issued. California Ins. Code §384. It is not a contract between the insurer and the certificate holder.” Pardee Construction Co. v. Ins. Co. of the West, 77 Cal. App.4th 1340, 1347 n.2 (2000) (citing Empire Fire & Marine Ins. Co. v. Bell, 55 Cal.App.4th 1410, 1423 fn. 25 (1997)).

Negligence Per Se. Insureds may also assert negligence per se to establish that the agent or broker breached his duty to the insured. Simply put, negligence per se establishes the agent’s or broker’s negligence in


circumstances where a statute, designed to protect against the harm that was allegedly caused by the agent’s or broker’s conduct, was violated.

Nevertheless, if an agent or broker is negligent per se, the insured generally must still establish the elements of causation and damages since, in the context of an agent / broker malpractice case, negligence per se does not always equate to liability per se. There may be various defenses still available to a broker similar to the defenses to a standard negligence cause of action. See, e.g., Nowlon v. Koram Ins. Ctr., Inc., 1 Cal.App.4th 1437, 1441, 2 Cal.Rptr.2d 683, 686 (1991) (violation of statute prohibiting sale of insurance by insurers not admitted to transact insurance business in California other than through surplus lines brokers led to pre-sumption of negligence against broker).

Breach of Fiduciary Duty. Another theory commonly asserted by the insured is breach of fiduciary duty.

Fiduciary Duty—Agent. This theory can generally only be asserted against a broker because an agent does not usually owe a fiduciary duty to the insured - their relationship is an ordinary business rela-tionship. See, e.g., Wesiblatt v. Minn. Mut. Life Ins. Co., 4 F.Supp.2d 371, 382 (E.D. Pa. 1998); Long v. Time Ins. Co., 572 F.Supp.2d 907, 914 (S.D. Ohio 2008) (applying Ohio law); Seckinger-Lee Co. v. Allstate Ins. Co., 32 F.Supp.2d 1348, 1354 (N.D. Ga. 1998) (discussing Georgia law); Moore v. Johnson County Farm Bureau, 798 N.E.2d 790, 793 (Ill. App. Ct. 2003); Farmers Ins. Co. v. McCarthy, 871 S.W.2d 82, 86-87 (Mo. Ct. App. 1994); Pitts v. Jackson Nat’l Life Ins. Co., 574 S.E.2d 502, 508 (S.C. Ct. App. 2002); E.R. Dupuis Concrete Co. v. Penn Mut. Life Ins. Co., 137 S.W.3d 311, 318 (Tex. App. 2004); but see Seascape of Hickory Point Condo. Ass’n, Inc., Phase III v. Associated Ins. Servs., Inc., 443 So.2d 488, 491 (Fla. Dist. Ct. App. 1984); State Farm Mut. Auto. Ins. Co. v. Duckworth, 660 F.Supp.2d 1323, 1339 n.16 (M.D. Fla. 2009), aff ’d, 648 F.3d 1216 (11th Cir. 2011) (apply-ing Maryland insurance law, but noting that Florida law may allow a fiduciary duty to agents under certain circumstances); Genesee Foods Servs., Inc. v. Meadowbrook, Inc., 760 N.W.2d 259, 262 (Mich. Ct. App. 2008) (“[t]he fiduciary duty that the insurance agent owes each party varies in relation to the agent’s status as an independent or exclusive agent.”); Deremo v. TWC & Associates, Inc., No. 305810, 2012 WL 3793306, at *2 (Mich. Ct. App. Aug. 30, 2012); see Micheau v. Hughes & Havinga Ins. Agency, No. 307914, 2013 WL 2226956, at *4 (Mich. Ct. App. May 21, 2013) (finding the agent owed a general fiduciary duty of loyalty and good faith); Burton v. Burton, 51 N.W.2d 297 (Mich. 1952); Slovak v. Adams, 753 N.E.2d 910, 915 (Ohio Ct. App. 6th Dist. 2001); Craggett v. Adell Ins. Agency, 635 N.E.2d 1326, 1332 (Ohio Ct. App. 8th Dist. 1993); First Catholic Slovak Union v. Buckeye Union Ins. Co. 499 N.E.2d 1303 (Ohio Ct. App. 8th Dist. 1986); Wanner Metal Worx, Inc. v. Hylant Maclean, Inc., No. 02CAE10046, 2003 WL 1826558 (Ohio Ct. App. 5th Dist. April 7, 2003).

Fiduciary Duty—Broker. Depending on the jurisdiction, special circumstances may be required to establish that the broker had a fiduciary duty. For example, a broker may owe a fiduciary duty if the bro-ker holds himself out to the public as an expert. See, e.g., Clark & Lavey Benefits Solutions v. Educ. Dev. Ctr., Inc., 949 A.2d 133, 138-40 (N.H. 2008) (discussing broker’s advertisements and its executives’ understanding of their roles). However, jurisdictions can vary dramatically on whether this tort will be recognized against a broker. See Garrick v. Mesirow Fin. Holdings, Inc., 994 N.E.2d 986, 991(Ill. App. Ct. 1st Dist. 2013); Prime Leasing, Inc., 773 N.E.2d 84 (Ill. App. Ct. 1st Dist. 2002) (“A fiduciary relationship and the attendant duties can arise as the result of the special circumstances of the parties’ relationship, where one party places trust in another so that the latter gains superiority and influence over the former.”); but see Southtrust Bank & Right Equip. Co. of Pinellas Cty. v. Exp. Ins. Servs., Inc., 190 F.Supp. 2d 1304, 1308–09 (M.D. Fla. 2002) (“An insur-ance broker has a fiduciary relationship with an insured.”); Beardmore v. Abbott, 218 So.2d 807, 808-809 (Fla. Dist. Ct. App. 3d Dist. 1969) (finding that an insurance counselor has a fiduciary duty to an insured because


of the inherent trust and confidence that the insured places in the counselor); Randolph v. Mitchell, 677 So.2d 976 (Fla. Dist. Ct. App. 5th Dist. 1996).

The judicial strain as to whether this tort is recognized against brokers is evidenced, perhaps dramat-ically, in California where courts have issued holdings or dicta that provides both policyholders and brokers with arguments as to why the tort does or does not exist by a policyholder against a broker. Generally, in order to plead a claim for breach of fiduciary duty, the claimant must allege:

(1) the existence of a fiduciary relationship giving rise to a fiduciary duty;

(2) breach of that duty; and

(3) damage proximately caused by the breach.

Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1101; Prime Leasing, Inc. v. Kendig, 773 N.E.2d 84 (Ill. Dist. Ct. App. 1st Dist. 2002); Garrick v. Mesirow Fin. Holdings, Inc., 994 N.E.2d 986, 991 (Ill. Dist. Ct. App. 1st Dist. 2013). As a practical matter, the elements and facts tied to a breach of fiduciary duty count are often subsumed within a professional negligence count. Thus, if a court recognizes the breach of fiduciary duty cause of action, it may still find it is subsumed within the professional negligence count and dismiss it based on redundancy.

Jurisdictions vary on whether they recognize the existence of a fiduciary relationship. “[T]he rela-tionship between an insurance broker and its client is not the kind which would logically give rise to such a [fiduciary] duty. The duty of a broker, by and large, is to use reasonable care, diligence, and judgment in pro-curing the insurance requested by its client.” Kotlar v. Hartford Fire Ins. Co., 83 Cal.App.4th 1116, 1123 (2000), citing Kurtz, Richards, Wilson & Co. v. Ins. Communicators Marketing Corp., 12 Cal.App.4th 1249, 1257 (1993); see also Miniace v. Pacific Maritime Assoc., No. C 04-03506 SI, 2005 U.S. Dist. LEXIS 40708, at *33-*34 (N.D. Cal. Sept. 13, 2005) (“This Court will not expand the doctrine of fiduciary duty to include insurance brokers, given that it has not been recognized by California courts.”). “It is unclear whether a fiduciary relationship exists between an insurance broker and an insured.” Hydro-Mill Co. v. Hayward, Tilton and Rolapp Ins. Assoc., 115 Cal.App.4th 1147, 1156 (2004). Moreover, “[i]t is not clear in what respect the ‘fiduciary duty’ owed by an independent insurance agent differs from the duty of due [reasonable] care. As used in respect to an indepen-dent agent, ‘fiduciary duty’ may refer merely to avoidance of conflict of interest, self-dealing, excessive com-pensation, etc.” Hydro-Mill, 115 Cal.App.4th at 1158 (citations omitted).

Once an agency relationship is shown to exist between an insured and its broker, some courts may find a fiduciary relationship as a matter of law or with certain limitations. Dod Tech. v. Mesirow Ins. Svcs., Inc., 887 N.E.2d 1, 6 (Ill. App. Ct. 2008); A.G. Edwards & Sons, Inc. v. Drew, 978 S.W.2d 386 395 (Mo. Ct. App. 1998); Melrose Park Sundries, Inc. v. Carlini, 927 N.E.2d 132, 135-36 (Ill. App. Ct. 2010) (statute may dictate limitations on fiduciary relationship); Skaperdas v. Country Cas. Ins. Co., 2015 IL 117021, ¶ 46, 28 N.E.3d 747, 758; Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 901 A.2d 106, 113-14 (Del. 2006); Baldwin Crane & Equip Corp. v. Riley & Rielly Ins. Agency, Inc., 687 N.E.2d 1267, 1269 (Mass. App. Ct. 1997); Slovak v. Adams, 753 N.E. 2d 910, 916-18 (Ohio Ct. App. 2001). Wachovia Ins. Servs., Inc. v. Toomey, 994 So.2d 980, 990 (Fla. 2008).

Insurers, however, do not generally have a fiduciary relationship with policyholders. In fact, the Cali-fornia Supreme Court has held that an insurer is not in a fiduciary relationship with the insured. Vu v. Pruden-tial Property & Casualty Ins. Co. (2001) 26 Cal.4th 1142, 1150–1151. Based on this premise, some courts have determined that if an insurer is not a fiduciary then similar factors should support that an agent or broker is not a fiduciary. Hydro-Mill, 115 Cal.App.4th at 1158 (“If an insurer is not a fiduciary, then arguably, neither is a broker.”). Assuming arguendo a fiduciary duty exists between an insurance agent and client, California courts have defined the scope of the fiduciary duty. Hydro-Mill Co. v. Hayward, Tilton and Rolapp Ins. Assoc., 115 Cal.App.4th 1147, 1156-57, 1158-59 (2004). In Hydro-Mill, the court wrote:


Whether or not the broker-insured relationship is a fiduciary one, a broker still has certain fidu-ciary duties. For example, “[a]ll funds received by any person acting as an insurance agent[] [or] broker … as premium or return premium on or under any policy of insurance … are received and held by that person in his or her fiduciary capacity.”

Hydro-Mill, 115 Cal.App.4th at 1158. Hydro-Mill further elaborated that:

As one leading treatise has observed: “It is not clear in what respect the ‘fiduciary duty’ owed by an independent insurance agent differs from the duty of due (reasonable) care. As used in respect to an independent agent, ‘fiduciary duty’ may refer merely to avoidance of conflict of interest, self-dealing, excessive compensation, etc.”

Hydro-Mill, 115 Cal.App.4th at 1158, citing Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2003) ¶ 11:166, p. 11-34 (rev. #1, 2003).

In summary, these courts have identified the following situations may involve a fiduciary duty: (1) funds received by the insurance agent; (2) avoidance of a conflict of interest; (3) avoiding self-dealing; and (4) avoiding excessive compensation.

Policyholders arguing for the existence of a fiduciary duty cause of action often place great weight on Eddy v. Sharp, a California Court of Appeals case where the court wrote, in dicta, that “[w]here the agency relationship exists there is not only a fiduciary duty but an obligation to use due care.” Eddy v. Sharp, Cal.App.3d 858, 865 (1988). However, this is not the holding of the case. See Hydro-Mill Co., Inc. v. Hayward, Tilton and Rolapp Ins. Assoc., Inc. (2004) 115 Cal.App.4th 1145, 1158. The dicta discussion was whether an agency relationship exists: “[W]hen an insurance agent is the agent for several companies and selects the company with which to place the insurance or insures with one of them according to directions, the insurance agent is the agent of the insured.” Id. Following this discussion, the Eddy court indicated that the insurance agent “owed a duty of care to [the insureds] under agency principles.” Id. The case does not further discuss fiduciary relationship between an insurance agent and an insured. Hydro-Mill referenced Eddy and noted that the comment was merely dicta without any further emphasis.

Wilson v. All Service Ins. Corp., 91 Cal.App.3d 793 (1979) supports that a claim of breach of fiduciary duty claim may be subsumed within a professional negligence claim. In Wilson, the insurance broker was sued on five theories, including negligence and breach of fiduciary duty, for placing insurance without look-ing beyond the insurer’s certificate of authority to conduct business and investigating its financial condition. The Wilson court held that “[e]ach of the four remaining counts incorporates all of the allegations of the [neg-ligence count] and, no matter how denominated (breach of express and implied agreements, breach of fidu-ciary duty, breach of warranty), depends for its validity upon the existence of an alleged duty on defendant’s part.… Since no such duty exists, defendant is not liable to plaintiffs under any of the theories pleaded.” Id. at 799. Thus, the Wilson Court supports that the breach of fiduciary duty was subsumed within the professional negligence claim under the standard duty of care.

Kotlar v. Hartford Fire Ins. Co., 83 Cal.App.4th 1116, 1123 (2000) further supports that breach of fidu-ciary duty is not a valid cause of action against an agent or broker. Kotlar states that “[t]he duty of a broker, by and large, is to use reasonable care, diligence, and judgment in procuring the insurance requested by its cli-ent.” Id.

Jones v. Grewe, 189 Cal.App.3d 950 (1987) states “[o]rdinarily, an insurance agent assumes only those duties normally found in any agency relationship. This includes the obligation to use reasonable care, dili-gence, and judgment in procuring the insurance requested by an insured.” Id. at 954. But see Warehouse Foods, Inc. v. Corp. Risk Mgmt. Servs., Inc., 530 So.2d 422, 423–24 (Fla. Dist. Ct. App. 1988) (“An agent is required to


use reasonable skill and diligence, and liability may result from a negligent failure to obtain coverage which is specifically requested or clearly warranted by the insured’s expressed needs.”); Sheridan v. Greenberg, 391 So.2d 234 (Fla. Dist. Ct. App. 3d Dist. 1981); Caplan v. LaChance, 219 So.2d 89 (Fla. Dist. Ct. App. 3d 1969). Jones further provides that “[t]he general duty of reasonable care which an insurance agent owes his client does not include the obligation to procure a policy affording the client complete liability protection.” Id. at 956.

The Northern District of California observed: “California courts have recognized that ‘it is unclear whether a fiduciary relationship exists between an insurance broker and an insured.’” Miniace v. Pac. Mari-time Assoc. (N.D. Cal. Sept. 13, 2005) 2005 U.S. Dist. LEXIS 40708, * 33. Indeed, the Miniace Court held that it would “not expand the doctrine of fiduciary duty to include insurance brokers, given that it has not been recognized by California courts.” Id. at *33-*34. At least one California court, Jones v. Grewe, noted that an insurance agent may owe a special duty to the client. Jones v. Grewe, 189 Cal.App.3d 950, 954 (“An agent may, however, assume additional duties by an express agreement or a holding out.”). However, there is no evidence, dicta, or holding that a “special” duty is the same as a fiduciary duty. While the question of whether a fidu-ciary duty exists between a broker and an insured may play out for some time in California, there are cases also supporting that a fiduciary duty may exist under specific circumstances such as a broker’s misappro-priation of premium payments (California Insurance Code §1733) (misappropriation punishable as theft) or where a broker does not obtaining best available rates. Westrec Marina Management, Inc. v. Jardine Ins. Bro-kers Orange County, Inc., 85 Cal.App.4th 1042, 1049, 102 Cal.Rptr.2d 673, 677 (2000).

Misrepresentation / Fraud / Concealment. Misrepresentation is another theory which may be claimed by the insured in a lawsuit. LeDonne v. Axa Equitable Life Ins. Co., 411 F.Supp. 2d 957, 963 (N.D. Ill. 2006) (“barring a negligent misrepresentation claim against an insurance agent, but may allow such a claim against a broker because an insurance agent is considered to be in the business of providing non-informa-tional products, while an insurance broker is in the business of supplying information to clients.”). In such a situation, the insured will likely assert causes of action for intentional misrepresentation and negligent mis-representation. Generally, the insured alleges that the agent or broker misrepresented the terms of the policy, the policy’s coverage, and/or whether the policy was suitable for the insured. In addition, the agent or broker must have misrepresented a material issue, and that misrepresentation must have caused the insured’s dam-ages. Furthermore, the insured must establish that he justifiably relied on the agent’s or broker’s misrepresen-tation.

Under California law, in order to prevail on a misrepresentation or fraud count, a policyholder must allege with specificity:

(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.”

5 Witkin, Summary of Cal. Law, Torts, §772, p. 1121 (10th ed. 2005). Lazar v. Superior Court, 12 Cal.4th 631, 645 (1996). “Every element of the cause of action of [intentional misrepresentation] must be alleged with suf-ficient specificity to allow defendant to understand fully the nature of the charge made.” Tarmann v. State Farm Mutual Automobile Insurance Co., 2 Cal.App.4th 153, 157 (1991), citing Roberts v. Ball, Hunt, Hart, Brown & Baerwitz, 57 Cal.App.3d 104, 109 (1976). See also Cooper v. Auto Club Ins. Ass’n, 751 N.W.2d 443, 451 (Mich. 2008); Hi-Way Motor Co., 398 Mich. at 336, 247 N.W.2d 813.

A claim for negligent misrepresentation may also be measured in accord with Section 552 of the Restatement (Second) of Torts, which provides:


One who, in the course of his business, profession or employment . . . supplies false informa-tion for the guidance of others in their business transactions, is subject to liability for pecuni-ary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information. To withstand a demurrer, a policyholder must specifically plead each and every element of intentional misrepre-sentation and “show how, when, where, to whom, and by what means the [fraudulent] represen-tations were tendered.”

See, Richmond, Doug, Appleman On Insurance Law Library Edition, Chapter 2 “Agents & Brokers (Matthew Bender & Co. 2012) and cases cited therein. See also Harrington v. Lexington Insurance Co., 06–1440, 2006 WL 2192853 (E.D. La. 8/1/06) (holding that an agent has a duty to provide the insured with correct informa-tion, otherwise the agent may be liable for negligent misrepresentation); Venture Associates Inc. of Louisiana v. Transportation Underwriters of Louisiana, 93–539 (La.App. 3 Cir. 3/2/94), 634 So.2d 4; Isidore Newman Sch. v. J. Everett Eaves, Inc., 2009-2161 (La. 7/6/10), 42 So.3d 352, 354 n.3.

While the standard would generally be higher to prove intentional as opposed to negligent misrepre-sentation, even with negligent misrepresentation, the insured will have the burden to show that the Agent’s or broker’s statement or omission was material to its purchase of insurance. Redmond v. State Farm Ins. Co., 728 A.2d 1202, 1207-08 (D.C. 1999). The claimed misrepresentation or omission must also be the proximate cause of the insured’s claimed damages. See, e.g., Tri-Town Marine, Inc. v. J.C. Milliken Agency, Inc., 924 A.2d 1066, 1070 (Me. 2007); Roberts v. Maichl, No. C–040002, 2004 WL 1948718 (Ohio Ct. App. 1st Dist. Sept. 3, 2004).

In instances where an agent or broker negligently (or intentionally) misrepresents the nature, scope, or extent of coverage, the agent / broker may have liability for losses suffered by an insured who reason-ably relied on the representations. Free v. Republic Ins. Co., 8 Cal.App.4th 1726, 1730, 11 Cal.Rptr.2d 296, 297 (1992). See also Troost v. Estate of DeBoer, 155 Cal.App.3d 289, 298, 202 Cal.Rptr. 47, 53 (1984) (Broker liable for $150,000 “gap” between primary and excess policies based on representations to insured. Insurer, however, was not liable because broker acted in capacity of broker, not agent of insurer); Reserve Ins. Co. v. Pisciotta, 30 Cal.3d 800, 816, 180 Cal.Rptr. 628, 637 (1982) (broker was negligent in procurement of primary coverage with $200,000 gap less than excess insurer required); Eddy v. Sharp, 199 Cal.App.3d 858, 865-866, 245 Cal.Rptr. 211, 214-215 (1988) (Broker proposal with representations re new policy as “all risk” subject only to certain listed exclusions, which then omitted an exclusion for water backing up through drains or sewers, was breach of duty of care); Cincinnati Ins. Co. v. Guccione, 719 N.E.2d 787, 791 (Ill. Ct. App. 2d Dist. 1999); Lake County Grading Co. of Libertyville, Inc. v. Great Lakes Agency, Inc., 589 N.E.2d 1128 (Ill. Ct. App. 2d Dist. 1992); Econ. Fire & Cas. Co. v. Bassett, 525 N.E.2d 539 (Ill Ct. App. 5th Dist. 1988); Harts v. Farmers Ins. Exch., 597 N.W.2d 47, 52 (Mich. 1999) (“the general rule of no duty changes when (1) the agent misrepresents the nature or extent of the coverage offered or provided, (2) an ambiguous request is made that requires a clarification, (3) an inquiry is made that may require advice and the agent, though he need not, gives advice that is inaccurate, or (4) the agent assumes an additional duty by either express agreement with or promise to the insured.”).

Essential to either an intentional or negligent misrepresentation claim is the element of detrimental reliance. This is significant because if the policy was delivered to the insured, it will be difficult for the insured to claim he relied on the agent / broker’s misrepresentation if the written policy terms contradict agent / bro-ker’s statement or omission. See discussion above regarding insured’s obligation to read policy.

Concealment claims most typically arise as a result of an agent / broker’s failure to disclose to an insured that agent / broker has an exclusive relationship with an insurer or is in a dual agency relationship (that he is representing both the policyholder and the insurer). See, e.g., Wender v. Gilberg Agency, Inc., 757 N.Y.S.2d 286, 286-87 (N.Y. App. Div. 2003) (rejecting insured’s claim). The inherent premise of most conceal-


ment claims is that if the insured had known about the agent / broker’s relationship with the insurer he would have acted differently. For example, he would have sought additional premium bids; he would have compared different insurers’ products; or he would have looked further into premium or commission calculations.

An insured has a heavy burden to meet in order to prevail on a fraudulent concealment claim. In order for an agent / broker to have a duty to disclose, it usually is necessary for the agent / broker to have a special relationship with the insured, a relationship that does not ordinarily exist. See Weisblatt v. Minn. Mut. Life Ins. Co., 4 F.Supp.2d 371, 380-82 (E.D. Pa. 1998) (applying Pennsylvania law). Significantly, if a disclosure obligation does exist, the insured has to prove that it was material to its purchase of insurance. State Farm Fire & Cas. Co. v. Owen, 729 So.2d 834, 842-43 (Ala. 1998) (“the value of the particular fact” is to be taken into consideration when evaluating fraudulent concealment allegations). Finally, often times the information the insured claims is concealed is, if fact, disclosed in correspondence, premium billings, or on the policy itself. See, e.g., Berardino v. Ochlan, 770 N.Y.S.2d 75, 77 (N.Y. App. Div. 2003) (holding for agents where information allegedly concealed was contained in policy illustrations).

It is also worth noting that some courts have found that an insurer does not owe a duty of care to a prospective insured in negotiating the price of an insurance policy. Courts have reasoned that the procure-ment of an insurance contract is an arm’s length transaction governed by traditional standards of freedom to contract. Thus, an insured cannot maintain a negligence action against the insurer for failure to disclose information about premium pricing to a potential policyholder. See, e.g., California Service Station & Auto. Repair Ass’n v. American Home Assur. Co. 62 Cal.App.4th 1166, 1173, 73 Cal.Rptr.2d 182, 187(1998) (workers’ compensation insurer failed to disclose information about past dividend calculations which affected cost of premiums). In contrast, an insured pursuing a concealment claim against an agent / broker may have better arguments available to it than an insured pursuing such a claim against an agent / broker, particularly if in a jurisdiction that recognizes the existence of a fiduciary relationship between the insured and the agent / bro-ker. Nevertheless, an insured bringing a concealment claim against an agent / broker still has a difficult task. As Richmond notes:

Even when a broker is involved, however, fraudulent concealment claims rarely should succeed. [fn. See, e.g., DOD Techs. v. Mesirow Ins. Servs., Inc., 887 N.E.2d 1, 11 (Ill. App. Ct. 2008) (stat-ing fraudulent concealment elements and rejecting plaintiff ’s claim against broker in connec-tion with contingent commissions).] First, plaintiffs must plead fraudulent concealment claims with “a high standard of specificity,” which is not easily done. [fn. Id. (failing to adequately plead reliance).] Second, a fraudulent concealment claim hinges on the defendant’s duty to speak, and there are many things that brokers are not obligated to reveal to or discuss with their clients. Third, as with agents, the materiality of the facts allegedly concealed, the insured’s efforts and opportunities to learn the information from another source, and industry custom and practice, still must be analyzed before concluding that the broker had a duty to reveal the facts at issue.

See, Richmond, Doug, Appleman On Insurance Law Library Edition, Chapter 2 “Agents & Brokers (Matthew Bender & Co. 2012).

Breach of Contract. Insureds who claim that their agent or broker improperly represented their interests may also bring a breach of contract claim. While tort claims against agents and brokers are most commonly plead, circumstances may exist in the relationship that support the agent or broker assumed a con-tractual obligation to procure insurance. Hydro-Mill Co. v. Hayward, Tilton & Rolapp Ins. Assocs., Inc., 10 Cal.Rptr.3d 582, 589 (Cal. Ct. App. 2004); Rametta v. Stella, 572 A.2d 978, 981 (Conn. 1990); Schuck v. Habicht, 672 So.2d 559, 562 (Fla. Dist. Ct. App. 1996); Marshel Inv., Inc. v. Cohen, 634 P.2d 133, 141-42 (Kan. Ct. App. 1981); Int’l Bhd. of Teamsters v. Willis Corroon Corp. of Md., 802 A.2d 1050, 1057 (Md. 2002); Swickey v. Silvey


Cos., 979 P.2d 266, 268 (Okla. Ct. App. 1999); Harris v. Albrecht, 86 P.3d 728, 730-32 (Utah 2004); Stephens v. Worden Ins. Agency, LLC, 859 N.W.2d 723, 729 (Mich. Ct. App. 2014), appeal denied sub nom. Stephens v. Wor-den Ins. Agency, L.L.C., 869 N.W.2d 614 (Mich. 2015) (“Although the [Michigan] Supreme Court has described the relationship between the insurer and insured as a contractual one, it has not held that the provision of negligent advice or the negligent procurement of insurance may support a claim for breach of contract.”) (cit-ing Harts v. Farmers Ins. Exch., 597 N.W.2d 47 (Mich. 1999)) (internal quotations omitted).

The contract at issue need not be in writing and may be oral. See Hydro-Mill, 10 Cal. Rptr.3d at 589; Schuck, 672 So.2d at 562; Harris, 86 P.3d at 730-32; Southtrust Bank & Right Equip. Co. of Pinellas Cty. v. Exp. Ins. Servs., Inc., 190 F.Supp.2d 1304, 1307 (M.D. Fla. 2002). (“An insurance agent may be held liable for fail-ure to provide insurance coverage pursuant to an oral contract.”); Robinson v. John E. Hunt & Assoc., Inc., 490 So.2d 1291, 1293 (Fla. Dist. Ct. App. 1st Dist.1986); Monogram Products, Inc. v. Berkowitz, 392 So.2d 1353 (Fla. Dist. Ct. App. 2d Dist. 1980); State Farm Fire & Casualty Co. v. Hicks, 184 So.2d 685 (Fla. Dist. Ct. App. 2d Dist. 1966) (“oral contracts to procure insurance and oral contracts of insurance” are enforceable as long as the oral contract can be performed within one year, so as not to implicate the Statute of Frauds.”). It may even be premised on an agent / broker’s representation that he will “take care of ” the insured. See, e.g., Caddy v. Smith, 877 P.2d 667, 668-69 (Or. Ct. App. 1994); Massengale v. Hicks, 639 S.W.2d 659, 660 (Tenn. Ct. App. 1982); Warehouse Foods, Inc. v. Corp. Risk Mgmt. Servs., Inc., 530 So.2d 422, 424 (Fla. Dist. Ct. App. 1988) (the agent repeatedly advised appellants that the insurance proposal contained all the coverage they needed).

As a practical matter, damages against an agent or broker for breach of contract are likely to track damages in tort because the failure of the agent / broker to perform generally results in the same conse-quences to the insured. One of the most significant differences between a tort and a contract theory of recov-ery by an insured against an agent or broker may be in the timing available to an insured to bring a claim. Generally, most states have a statute of limitations for professional negligence that is shorter than for a breach of contract claim. Thus, an insured could find himself in a situation where the statute of limitations has expired for his right to bring a tort claim, but not to bring a breach of contract claim. However, at least one state, Louisiana, has enacted a statute of limitations that provides for the time to bring suit against an insur-ance agent arising out of an engagement to provide insurance services, regardless of the basis for the claim (tort, breach of contract, or otherwise). See La. Rev. Stat. 9:5606 (suit must be brought “within one year from the date of the alleged act, omission, or neglect, or within one year from the date that the alleged act, omis-sion, or neglect is discovered or should have been discovered. However, even as to actions filed within one year from the date of such discovery, in all events such actions shall be filed at the latest within three years from the date of the alleged act, omission, or neglect”).

V. ConclusionThe denial of an insurance claim or an insurer’s pursuit of coverage litigation continues to spawn

claims of professional malpractice against insurance agents and brokers. In turn, these theories and lawsuits are generating their own litigious world that addresses the agent’s or broker’s liability to the insurer or directly to the claimant. The liability confronting these agents and brokers is real and often includes potentially “bet the company” damages figures. While courts are increasingly requiring insured’s to plead with specificity and respond to discovery with specificity, courts are also putting agents and brokers on notice to exercise appro-priate care in their procurement and placement of insurance.

insurance agents and brokers—duties, responsibilities, and

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