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February 2012

The Importance of Agents, Brokers Understanding the Legal Duty of Care for Each State They Sell Insurance

February 2012

 Volume 24, Number 2

The Importance of Agents, Brokers Understanding the Legal Duty of Care in Each State They Sell Insurance

Over the years, we have written a great deal on the issue of the legal duties and obligations that exist for New York insurance agents and brokers. In the 1997 case of Murphy v. Kuhn, the New York Court of Appeals defined the legal obligations of the state’s insurance producers.[1] Many, however, often sell insurance in other states. If you procure a policy for a client that might provide coverage for property, people or activities in another state, you should consider the possibility you will be held to the legal standards of that state rather than New York if anything goes wrong. Accordingly, in this issue of The E&O Report, we will address the legal duties and obligations in other states where New York insurance agents and brokers often sell insurance.

New York law is relatively favorable for agents and brokers. Fortunately for them, there are a number of other states that apply the same or similar standard as New York for the obligations of insurance producers. These states include Alaska, Arkansas, California, Colorado, Delaware, Georgia, Hawaii, Illinois, Iowa, Indiana, Kansas, Kentucky, Maine, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming. Each of these states follow the general rule that, absent a special relationship, an agent or broker’s duty is limited to procuring the insurance requested by their client or timely advising their client that they were unable to do so.

While these states have a similar basic standard of care for insurance agents and brokers, they differ over the difficulty of finding a special relationship to exist between a customer and the agent/broker. On one end of the spectrum is Missouri, where a separate payment may be necessary to create a special relationship, and West Virginia, where the concept of a special relationship may not even exist. On the other end of the spectrum are Alaska and South Carolina, where courts tend to favor finding a special relationship, and Iowa, where the question of the existence of a special relationship tends to be considered a jury question that precludes dismissal of the case by a motion for summary judgment.
Although New York law is quite favorable for insurance agents and brokers, some of the states in which New York producers often sell insurance are not nearly as favorable. For example, the laws of New Jersey, Connecticut, Pennsylvania and Florida place, in varying degrees, a higher legal burden on agents and brokers than New York.

In particular, New Jersey is one of the least broker-friendly jurisdictions in the nation. Under New Jersey law, insurance agents and brokers are considered “professionals” and are required to exercise reasonable skill in advising their clients of both the available types of coverage and whether a particular policy meets a client’s individual needs.[2] Pennsylvania applies a similar standard to agents and brokers when dealing with individuals, although there is no duty to guide or advise a commercial client, unless there is a special relationship that exists with that client.[3]

In Florida, there is generally no duty for insurance agents and brokers to guide and advise. But the state’s courts have been much more willing to find a relationship altering this general rule than they have been in New York. Additionally, Florida courts have held agents responsible for not just obtaining the coverage requested, but also for obtaining the coverage “clearly warranted by the insured’s express needs.”[4]

Connecticut courts have not yet clearly defined the duty owed by insurance agents or brokers. While it often appears that Connecticut follows a rule similar to New York where producers are merely required to obtain the coverage requested[5], there have also been cases where courts found agents and brokers owed a greater duty, even where there is no special relationship.[6]

The prudent insurance agent or broker should always understand the legal duties and obligations that they may have in any state where they sell insurance. By doing so, agents or brokers will not only protect themselves against potential errors and omissions claims and lawsuits, but they can also provide their customers with the level of service required under that state’s law.

Submitted by:
Robert Walker Lewis, Esq.
James C. Keidel, Esq.
of Keidel, Weldon & Cunningham, LLP

[1] Murphy v. Kuhn, 680 N.E.2d 972 (1997)
[2] See, Aden v. Fortsch, 778 A.2d 792 (N.J. 2000)
[3] See, Star Spa Services v. Robert Turano Insurance Agency, Inc., 595 F. Supp.2d 519 (M.D. Pa. 2009)
[4] See, Adams v. Aetna Casualty & Surety Company, 574 So.2d 1142 (Fla. App. 1991)
[5] See, Lewis v. Michigan Millers Mutual Insurance Company, 228 A.2d 803 (Conn. 1967)
[6] See, Dimeo v. Burns, Brooks & McNeil, 504 A.2d 557 (Conn App. 1987)

Keidel, Weldon & Cunningham, LLP concentrates its practice in the defense of insurance agents and broker’s errors and omissions claims and litigation, errors and omissions loss control counsel and education, insurance coverage analysis and litigation and insurance regulatory matters. Please direct any comments or questions to James C. Keidel, Esq. by mail to the main office of Keidel, Weldon & Cunningham, LLP, at 925 Westchester Avenue, Suite 400, White Plains, NY 10604, telephone at (914) 948-7000 or e-mail at The law firm also maintains offices in Syracuse, New York; New York City, New York; Wilton, Connecticut; Bayonne, New Jersey; Warwick, Rhode Island and Philadelphia, Pennsylvania.

Copyright 2012 © Independent Insurance Agents & Brokers of New York Inc. and Keidel, Weldon & Cunningham, LLP
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