Interesting article by Peter Biging at Property-Casualty360.com.
It follows then, as a general rule, that absent special circumstances, an insurance agent or broker has no special duty to advise customers what coverage to obtain, or to provide continuing advice or guidance with regard to coverage procured.
An insurance agent or broker’s basic duty of care is simply to obtain the coverage that has been requested. If the agent or broker cannot procure the requested coverage within a reasonable timeframe, then the producer must tell the customer that he or she cannot do so. But that’s it.
The rationale that guides this general principle is that the agent or broker should not be placed in the position of being the guarantor of the sufficiency of the customer’s coverages. (See related textbox, “Becoming Special.”) While insureds are making efforts to get courts to read the basic duty of care more expansively, recent decisions indicate courts are not taking the bait.
via www.propertycasualty360.com
The Murphy v. Kuhn precedent in New York holds that an insurance producer's legal obligation is to obtain the coverage requested by the client or to advise the client of the inability to do so. This appears to be the rule in many other states as well. This should give New York agents and brokers some sense of security when they write business in other states.
I am based in the UK and as a insurance broker we have the choice of either offering clients advice or providing information only on the products and letting the client make the choice.The broker must at the outset of the first meeting or call inform the client if advice or no advice will be given and follow this up with a written confirmation via an initial disclosure document which sets out the terms of business and how the the broker will engage with the client.I have to say most brokers in the UK will provide advice on a face to face basis,but if business is done online it will in most cases be on a non advice basis
Posted by: Mike D | August 12, 2011 at 03:36 AM
Mike,
Thanks for the input from the other side of the pond. Most broker-insured relationships in the U.S. aren't so formal, in that the services to be provided are not generally described in writing. I wonder if the UK practice will eventually work its way over here, particularly in states where the standard of care may be higher.
Posted by: Tim Dodge | August 12, 2011 at 02:20 PM