Authority to Make Changes to an Insurance Policy – Part II

I have been informed that my post last week generated a comment on IIAG’s Facebook page.  That comment made a valid point that I neglected to make in my post, but also expressed an attitude that may be shared by many other agents, which attitude I think could cause problems for the agent in some situations.

The point made that I neglected to make was that, if the language of an insurance policy states who is authorized to make changes to it, then that language will control in the absence of any statute or regulation to the contrary.  The same principle applies to any questions that may arise about an insurance policy.  My post last week addressed the situation in which the policy does not contain any language about who is authorized to make changes to its coverages.

The person who posted the Facebook comment went on to say that agents should advise their customers to look out for themselves in the divorce situation that I used as an example in last week’s post.  Georgia law does presume that an insured has read their policy and therefore, understands what coverages and other rights they have under it.

However, as noted in an earlier blog post, an agent may well have a duty to an insured that goes beyond just obtaining the type of insurance coverage requested by the insured and leaving it up to the insured to take care of themselves after that.  An agent’s words, conduct, or both can give rise to duties to the insured that go beyond those of a mere order taker.  In the context of a family personal lines insurance policy, an agent who is trying to provide “added value” to the family can easily say or do things that would lead the husband and wife to reasonably believe that they both have control over what happens to that policy.

I think an agent will expose themselves to potential liability if they are aware of a divorce proceeding and do not at least ask the spouse requesting a change in the insurance policy if there has been an order entered in the proceeding that addresses what can be done with the policy in question.  In the absence of any attempt by the agent to make such a determination and the occurrence of a subsequent uninsured event involving the other spouse, the agent can expect to be sued for negligent performance of their duty to the other spouse, who was a named insured.  It will then be up to the agent to explain to a jury why it was unreasonable to expect them to make any effort to determine whether the requesting spouse had the authority to request the change in question.  The agent may win in the end, but at the cost of significant time and expense that could have been avoided by asking a simple question.