In general and more or less, all states impose some responsibility on insurance agents to assist their insureds in obtaining proper insurance coverage. This would be expected under the theory of “ reasonable expectation” which when applied in Arizona includes the theory that when insurance terms cannot be understood by the reasonably intelligent consumer, the court will interpret those terms in a manner that allows the benefit of those terms to inure to the consumer, even when there is no coverage. (Hanks v. American Family Mutual, Gordinier v. Aetna Casualty). “reasonable expectation”. This leads to the question of agent responsibility in helping an insured in obtaining coverage.
In Arizona, an auto body shop discovered that an employee had stolen a great deal of money. The company turned to its insurance agent to submit a claim to the insurer for this loss because the insured had thought he had purchased coverage for such a thing. The insured did purchase employee defalcation insurance in the past but, at the time of this devastating theft, the insured did not have such coverage. This brought to light a serious question: should the agent be charged with the obligation to obtain proper coverage? The Arizona Supreme Court thought so and, as a result, agents must take care in their discussions of needed insurance for their customers. If they fail to do this properly or mislead an insurance consumer, they can be held liable. This supreme court decision is diametrically opposed to the prevailing law in Oklahoma.
In Oklahoma, insurance producers only owe a limited duty of care to customers. A court of proper jurisdiction has ruled that imposing liability upon an agent to place proper coverage would remove all burden from the insured to take care of his/her own financial needs and expectations and would transform insurance companies from the competitive marketplace into personal financial counselors or guardians of the insured. (Mueggenborg v. Ellis). Such a decision greatly alters the ability of an insured to bring an action against an agent. (Cosper v. Farmers Insurance Company).
So in this examination of two states, Arizona and Oklahoma, we find two diametrically opposing court decisions. In one state an insurance agent has a great deal of responsibility and in the other, there is only limited responsibility imposed upon the agent. Please understand this is just a review of two states and a comprehensive review of other states could well lead to different conclusions regarding obligations imposed on insurance agents. However, the courts in many states have quoted the two separate decisions as they have pursued equity for agents and insurance consumers.
In all states, however, insurance companies wish to remain competitive and many people look to the costs of policies as a factor in making a decision as to what policy to purchase. (We have covered this issue in our blog in the past). It may not be a good decision to select insurance on price. One of our Brown – O’Haver employees recently received a letter from Liberty Mutual offering a policy for almost fifty percent less than what our employee was paying. However, from our experience, we know the difficulty of adjusting Liability Mutual claims and, regardless of cost, when based upon our experience in adjusting claims for our clients with Liberty Mutual, we passed on this cheaper alternative in obtaining an insurance policy.
One of the major problems we have with claims in Oklahoma involves the fact that there are many properties that are underinsured. Could such a problem come about because we have a “perfect storm” of two concepts: (1) being competitive and (2) an agent is not so much on the hook to help an insured obtain proper coverage? A policy with lesser policy limits is certainly cheaper than one with higher limits.
Check your policy limit on the properties you have insured. Such a thing is very important. At Brown – O’Haver, we stand ready to assist you in the adjustment of your insurance claims in a resolute and positive manner based upon our company experience of thirty-three years.