Suing insurance brokers in California is not easy. The California Courts have narrowly defined insurance broker malpractice.
The general rule of law is: “insurance agent’s duty is ‘to use reasonable care, diligence, and judgment in procuring the insurance requested by an insured.’” Williams v. Hilb, Rogal & Hobbs Ins. Services of California, Inc. (2009) 177 Cal.App.4th 624, 635 (citation omitted).
But the exceptions have swallowed the rule, as noted in the recent Wallman v. Suddock case (filed November 17, 2011, Second District, Div. Four):
• “’an insurance agent does not have a duty to volunteer to an insured that the latter should procure additional or different insurance coverage.’”
• “’the onus is … squarely on the insured to inform the agent of the insurance he requires.’”
• “In other words, while agents do not generally have a duty to advise insureds regarding the sufficiency of their liability limits …”
Most insureds heavily rely on their insurance agents to understand their insurance needs and to select the appropriate coverages and limits, and would disappointed to learn that such reliance is not actionable when the broker does not obtain the insurance protection that they expected or which was otherwise available. It is when the insurance claim is denied that the insured gets upset at the broker.
In Williams, the court specifically stated that insurance broker liability requires one of the following three things: “(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….” Id., at 635-36. Because of these exceptions, I have often been asked by clients to be involved in helping them obtain insurance and reviewing their insurance coverage. Although I am not licensed insurance broker, the majority of my law practice over the past twenty years has involved insurance coverage related issues. Thus, although I cannot provide same scope of services as an insurance broker, my clients have found that having an attorney involved in obtaining and reviewing insurance adds value.
I have also handled many insurance broker cases. All have survived demurrer challenge.
I plan to be writing more on the topic of insurance broker liability as time permits. Please do not hesitate to email me comments or questions on this issue.