Insurance Agent and Insurance Broker Liability – Part I

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It is not uncommon that a business and commercial property owners are unaware that they do not have any or enough insurance coverage for losses that they thought were insured under their insurance policies, until the claim is denied by the insurance carrier or, after incurring attorneys’ fees and costs in a coverage lawsuit, a court rules that their policy does not provide a particular kind of coverage, or that there is insufficient coverage to cover the loss. However, many insureds are also unaware that they may have potential claims against their insurance agent or broker for recovery of such uninsured losses.

It is important for an insured to know whether they are dealing with an “insurance broker” or “insurance agent,” which are not synonymous and treated differently under Florida law. This first post in this blog series focuses on the differences between an insurance broker and agent, which could impact an insured’s claim.

Under Florida law, an insurance broker acts as an agent for the insured, not the insurance company. An independent insurance broker is indeed an agent of the insured (which is likely why many insureds commonly and mistakenly refer to their insurance broker as their insurance agent). An insurance broker acts as a middleman between the insured and the insurance company and solicits insurance from several insurance companies without being employed by or solely representing any single particular insurance company.

Importantly, the acts of an insurance broker are typically imputable to the insured. As will be discussed in Part 2, if the insurance broker’s actions or negligence result in a failure to procure any coverage, adequate coverage, or coverage which is specifically requested or clearly warranted by the insured’s expressed needs, the broker may be liable for the uninsured loss to the same extent that an insurer would have been if the insurance was properly obtained.

An insurance agent represents a specific insurer and is the agent of that insurance company which he/she represents. An insurance agent’s actions can be imputed to the particular insurance company it represents. For example, a State Farm agent is an agent of State Farm and acts on State Farm’s behalf. Thus, the State Farm agent’s actions can bind State Farm. Assume that a State Farm agent fails to obtain a specific coverage that the insured requested and that the agent represented be included in a particular policy. State Farm then denies a claim that would have been covered had that particular coverage been procured by the agent. Under such circumstances, a court may prevent State Farm (insurer) from denying coverage that was not placed due to State Farm’s (agent’s) negligence or wrongdoing and require State Farm to provide coverage for the loss, including by the court applying an equitable doctrine that reforms, or re-writes, the policy to include such coverage.

Although insurance agents may be held liable to insureds in certain circumstances, because an agent’s acts can be imputed to an insurer, Part 2 of this blog will primarily cover potential circumstances in which insurance brokers may be liable to insureds.

 

 

Lauren_Fallick-2017-197x300About the Author 

Lauren Fallick is a partner with Haber Law with over 10 years of practicing complex business and civil litigation. She also has extensive experience in construction defect litigation, insurance coverage litigation, business and partnership disputes, real estate disputes, and professional liability litigation.