How does a person in Grand Prairie, Arlington, Mansfield, Hurst, Euless, Bedford, Fort Worth, Burleson, or anywhere else in Texas know when their insurance agent or insurance company has committed an act of negligence? This is a fair question and maybe this article will give you something to think about.
Insurance companies and insurance agents do not have a general duty to obtain coverage or to make sure the coverge they get for you is adequate. On the other hand though, courts have found insurance companies and insurance agents liable for affirmative misrepresentations, and the courts have stated that an insurance agent who undertakes to procure insurance for someone owes a duty to a client to use reasonable diligence in attempting to place the requested insurance and to inform the client promptly if unable to do so. This was discussed in the Texas Supreme Court case, May v. United Services Association of America, in 1992. Also, this issue was discussed by the Court of Appeals in Houston, in the 1999 case, Frazer v. Texas Farm Bureau Mutual Insurance Company. In Frazier the court allowed Frazier to go forward with his claim against Texas Farm Bureau Insurance Company and his agent where it is alleged he asked his agent to raise his coverage limits and the agent failed to do so.
The Texas Supreme Court in the case, Kitching v. Zamora, in 1985, stated an agent has a duty to keep the customer informed about the insurance policy’s expiration date when the agent receives information pertaining to the expiration date that is intended for the customer. This was restated by the Texas Court of Appeals of Amarillo, in 1992, in the case Horn v. Hedgecoke Insurance Agency.
The courts in Texas have suggested an insurance agent could be found negligent if an explicit agreement or course of conduct showed the agent undertook to determine the customer’s insurance needs and counseled the customer as to how they could be met and then failed in this understanding.
Even a seven year relationship between a customer and an insurance agent was not enough to create such a special relationship where, even though the customer sought advice on the types of coverage available, the customer alone decided the total dollar amounts of insurance he wanted. This was the ruling in McCall v. Marshall, decided by the Supreme Court in 1965. Likewise, in Pickens v. Texas Farm Bureau Ins Co., the court stated the insurance agent for Texas Farm Bureau was not liable for failing to sugggest higher liability limits. The court stated there was no course of dealing and no history of taking care of the customer’s needs. There, the customer purchased insurance over the phone from the secretary in the office, did not seek advice from the agent on how much coverage they should get, the customer did not question the amount of coverge and did not inquire about the possible coverage available, and the customer had previously called and raised another type of coverage.
In the May case above, the court suggested that an agent may be held liable for his negligence in obtaining an adequate policy where the adequacy of the policy can be “assessed by some objective measure.” For this proposition the May court cited, McAlvain v. General Insurance Co. of America, a 1976, Idaho case. There, the agent for McAlvain, was held liable after McAlvain requested sufficient insurance to cover his business, including inventory, fully, and furnished to the agent for General Insurance Co. of America, an appraisal showing that the inventory was worth $45,000, and the agent procured a policy with only a $30,000 limit.
Most these cases, where there is a possible claim of negligence against an insurance agent or an insurance company need to be reviewed by an experience Insurance Law Attorney. Each of these situations need to be looked at on a case by case basis.
In the Kitching case cited above, the court upheld the jury’s finding that the agent negligently failed to notify the insureds about information he had received pertaining to the expiration date of their flood insurance. The agent had received copies of two policy renewal forms before the policy expired and did not notify the insureds about his having received such information. In addition, he received a “speed letter” from the insureds’ mortgage company requesting the agent to look into the insureds’ lack of payment of the renewal premium, but he disregarded the instructions. Thus, the insureds did not pay their premium and their policy expired.
Updated: