Insurance Agent Has No Duty Following the Sale of a Policy

Posted by Pamela A. Crowther on 19 July 2012

Simply stated, an insurance agent has no general duty to advise its insureds with regard to essentially anything after the issuance of the policy.  In many jurisdictions, the basis for not holding agents to an ongoing duty to advise stems from a fear that to do so would create a situation where the tort floodgates would open to allow claims against brokers whenever an incident surrounding the policy occurs.  When viewed exclusively in the insurance context, once the policy is issued, the insured is responsible for noticing any problems with the policy and bringing them to the attention of the agent immediately. With regard to administration of the policy following issuance, the basis for not requiring a duty of care stems from a belief that such would require an agent to continuously monitor a clients assets and adjust coverage accordingly. Since agents are generally in a position where they must rely on the information given to them by the insured, imposing such a duty of care is considered unreasonable.

This reasoning is consistent with the Superior Court’s opinion in Wisniski v. Brown Brown Ins. Co. of PA EMC. Judge Lally-Green comments, “It very well may be a wise and sound business practice for a broker to inspect premises and recommend insurance based on that inspection.”  In the Court’ view, imposing a duty would be onerous for many reasons.   “First, the time and expense of inspecting every property may very well outweigh the relative value of an inspection, particularly for low-value properties.  Second, a knowledgeable insured may be able to provide all the information necessary for adequate coverage in an interview, without the need for a personal inspection. Third, we stress that we are concerned with extending this duty to brokers, not insurance companies or agents. While brokers may provide a variety of services, they are primarily in the business of acting as an intermediary between insurance companies and clients.  Some brokers may not have the expertise to conduct a thorough inspection, and instead may rely on loss control experts at the insurance companies themselves to assess risks.   Fourth, it is far from clear where the duty to inspect would end. If this Court recognized a duty of brokers to inspect business properties, it is difficult to see a principled basis for failing to extend that duty to homes, land, cars, boats, and other insurable items. Fifth, imposing a duty to inspect would unreasonably diminish the insured's own responsibility to ascertain and ask for appropriate coverage.”  

Only in rare circumstances will courts go beyond the above mentioned bright-lined approach, which may occur in limited situations where there is a "special relationship". Otherwise, any causes of action arising after the policy has been issued are prosecuted against the actual policy provider (i.e., the insurance company), not the agent.  Keep in mind, however, that there still may be a potential action against an agent for negligence in certain situations where, for example, the agent did not recommend the proper amount of coverage or failed to list the proper parties or beneficiaries.


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