Before addressing the above question, I have to acknowledge that I have already failed in my New Year’s resolution to make a post to this blog at least once a week in 2019. That is the fastest I have ever failed to live up to such a resolution and will give me pause before making another one. With that out of the way, the above question is one that has become a hot topic. especially in the personal lines area. With companies regularly coming out with new types of coverages to address the sharing economy (ride sharing, house sharing) and other issues that were unknown just a few years ago (private motor vehicle delivery of Amazon packages), whether an agent has a duty to their insured to tell them about new coverages that may be of benefit to the insured is an important E&O issue.
Over five years ago, I addressed the general issue of an agent’s duties to their insured in a post on this blog. The gist of that post, which is still true today, is that it depends on what type of relationship an agent has with the insured in question and in particular, on what an agent has either done for the insured or told the insured about what they would do. If all the agent has ever done for the insured is obtain the insurance coverage requested by the insured and made no commitment to do anything else, the agent would have no duty to inform the insured of additional or new coverages that may be of benefit to the insured. However, as noted in a subsequent blog post on how the language used on an agency’s website or in its social media can create additional duties to the insured, such an “order taker” approach to being an insurance agent will most likely result in the agent not being in business very long. In today’s insurance marketplace, the emphasis is on differentiating oneself from the competition by providing “value added” services to the insured. The provision of those services and statements made about them on an agency’s website, in its social media activities, or other marketing materials will create a duty to perform them in a non-negligent manner and to live up to any promises made about the extent or quality of those services.
If the agent or agency has indicated to the insured by their words or actions that “our agents will help you choose the amount of coverage that best fits your needs”, “we work hard to ensure that you are fully covered for all those risks that apply to you”, or “we will obtain coverage to fully protect the financial stability and assets of our customers,” then they have likely created a duty to inform their insureds of additional or new coverages that would fulfill those promises. Agents and agencies should carefully review their websites, past social media activity, and other marketing materials to determine what they have told their customers and potential customers they will do for them. If any of those media contain statements like the above, the agent and agency have probably committed to inform their customers of additional or new coverages that may be of benefit to them. That will certainly be the argument made by the insured’s attorney in their lawsuit claiming inadequate coverage. For suggestions on what statements to avoid and what statements to use, see this article from the VUpoint Newsletter.
One way to fulfill any duty that may have been created to inform insureds about additional or new coverages that may be of benefit to them is to use checklists for every new customer and at renewal time for every existing customer. Click here for a good general article on the use of checklists and links to other resources.