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21 Hamline L. Rev. 9 (1997-1998)
An Insurance Agent's Legal Duties to Customers

handle is hein.journals/hamlrv21 and id is 19 raw text is: ARTICLES AN INSURANCE AGENT'S LEGAL DUTIES TO CUSTOMERS R.D. Blanchard' I. INTRODUCTION This article examines the basis for holding an insurance agent liable to an insurance customer for failing to advise the customer to buy additional liability insurance to cover a loss that subsequently materializes. Whether an insurance agent has any duty to advise an insured to buy additional coverage depends upon whether the agent and customer have a special relationship between them. Therefore, the article examines the meaning of a special rela- tionship and how it may be created. The purpose of the article is to explain the proper legal analysis for determining whether an agent should be held liable to a customer for not recommending additional coverage. This type of claim against an insurance agent is always complicated by the fact that the additional insurance, which could have protected the insured against a seri- ous loss, was relatively inexpensive. Although the discussion centers on Minnesota law and cases, the proposed legal analysis should apply in all states. The analysis is based upon the authors' experience in handling numer- ous insurance agent cases'in state and federal courts. Too often, insureds buy only a minimum of liability insurance, leaving various potential risks and losses uninsured. They usually choose a mini- mum of coverage to keep their premiums low. But when an uninsured loss occurs and a claim is made against the insured, the reality of being underin- sured or uninsured may be devastating. Some insureds are inclined to blame their selling-agents for not requiring them to buy additional coverage or, at least, recommending the additional coverage. The insureds usually rational- ize that the selling-agent knows all about insurance, and the customer knows hardly anything about insurance, so the selling-agent should have deter- mined what coverages the insured should have bought. Of course, the insured is absolutely certain that he or she would have purchased the addi- tional coverage if the agent had recommended it. The insured fails to con- sider the fact that most selling-agents know very little about their insureds' circumstances, how much money they are really willing to spend on insur- ance and what risks they are willing to assume. Ordinarily, the selling-agent would like to sell as much insurance as possible to their customers. Indeed, I. Mr. Blanchard practices insurance law as apartner with Meagher & Geer in Minneapolis, Minnesota.

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