I am still catching up from vacation. I have lots of news I want to share, including about the various Awards I received at the Pacific Palisades’ annual awards dinner, but the case below quickly got my attention: Insurance broker has no fiduciary duty to obtain the best available terms of coverage.
UPDATED : On June 2, 2011, the Court of Appeal granted rehearing in the case discussed below.
In Workmen’s Auto Insurance Company v. Guy Carpenter & Company, Inc., Second District; Div. Two, the Court stated: “Turning to the issue at hand, we are unaware of even a single California precedent permitting a client to sue an insurance broker for breach of fiduciary duty.” Id., Second District; Div. Two, filed May 4, 2011, Cite as B211660. Furthermore, “a broker does not have a duty of care to advise a client on insurance matters unless ―(a) the agent misrepresents the nature, extent or scope of the coverage being offered or provided . . . , (b) there is a request or inquiry by the insured for a particular type or extent of coverage . . . , or (c) the agent assumes an additional duty by either express agreement or by ‗holding himself out‘ as having expertise in a given field of insurance being sought by the insured.’” (quoting Fitzpatrick v. Hayes (1997) 57 Cal.App.4th 916, 927.)
In most cases, the exceptions should swallow the general rule, but the general rule is harsh. The case is a reminder to be pro-active when obtaining insurance. Asks lots of questions. Read the policy forms before you purchase the policy. Further note that your broker may be beholden to a few producers or wholesales and may not be able to advise you on all of the potential coverages that are available. No two insurance policies are alike.
Some clients have their attorneys get involved in helping clients obtain and negotiate insurance coverage. From their experience as litigating coverage disputes, attorneys can add value for clients seeking the best possible insurance coverage.