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Client Who Had Significantly Less UM/UIM vs. Liability Coverage Sues Agency

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Insurance agents frequently tout their expertise as a reason consumers should buy coverage from them. Expertise can be both a selling point and a risky claim. Does it mean that the agent will tell the consumer what coverage to buy and how much? Some consumers think so.

An independent agency in California obtained auto insurance for a family for almost three decades. For most of those years, one producer within the agency handled their account. According to the wife, the agent "held herself out as an expert in personal insurance coverage." The wife had heard her speak at a real estate conference about the importance of adequate insurance. The producer also supposedly told her that she would be the family’s “personal expert and advisor in insurance,” making sure they had the right types and amounts of coverage.

She conducted periodic reviews of the family’s home and auto insurance coverages. In 2005 or 2006, she recommended that they increase their Bodily Injury Liability limit from $300,000 to $1,000,000, and their Uninsured/Underinsured Motorist limit from $30,000 to $100,000. The insureds did so. Because the BI Liability limit was $1,000,000, they could have increased the UM/UIM limit to that amount. The court’s opinion stated that the producer did not tell them this.

Some years later, a driver ran a red light and fatally injured the husband, who was on a bicycle. The driver carried only $100,000 BI Liability coverage, so the wife made a claim for UM/UIM coverage. However, because her UM/UIM limit was equal to the driver’s BI limit, she was not entitled to any benefits under that coverage.

The wife sued the insurance agency for $900,000, claiming that, had she known that $1,000,000 UM/UIM coverage was available, she would have bought it. In turn, she would have been able to collect $900,000 for her husband’s death. She accused the agency of professional negligence, breaching its fiduciary duty to her, and fraud and misrepresentation. Her argument was that the agency assumed a duty to advise her to buy different types or larger amounts of insurance when the producer advertised herself as an expert.

The trial court ruled in favor of the agency. The widow appealed, but the appellate court agreed with the lower court. The judges noted that she had asked general questions such as, “Am I adequately covered?” California court precedents, however, had ruled that an agent assumes a higher duty to recommend coverage and limits “when ‘there is a request or inquiry by the insured for a particular type or extent of coverage.’” General questions did not trigger that duty.

The court also found nothing exceptional about the producer’s claims of expertise. Rather than claiming expertise in some complicated insurance products, she did not assert that she handled “anything other than straightforward, garden-variety insurance policies.” The court found that she certainly did not claim unusual expertise in UM/UIM coverage. For these same reasons, they found no basis for a charge of fraud. They also ruled that the agency did not have a fiduciary duty to the insureds.

While the courts ruled that the agency did not owe their client $900,000, this case illustrates the peril of using terms like “expert” and “advisor” in advertising. The law interprets these terms narrowly, but clients may hear something entirely different. They may expect the agent to tell them what to buy. That is not an agent’s role. Agencies must take care when they promote their services so that clients do not later feel misled.

 

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