We live in a world where unfortunate events happen. Cars crash. People trip and fall. Businesses face financial ruin from embezzlement to data theft. Houses burn. Things that are out of our control can arrive in our lives and cause a lot of trouble.

That’s why we have insurance.

But what happens when the insurance agent and broker who was supposed to be advising you on your insurance needs drops the ball? What happens when they give poor advice or fail to provide the best products for your needs? It can leave you exposed in ways you never expected — and it can be devastating. When this happens, you may have a claim for insurance producer malpractice.

A DUTY TO ADVISE

Selling insurance in Arizona isn’t like selling mattresses or watches. Insurance producers (agents and brokers) owe you a professional duty of care when they sell you insurance products. Arizona insurance agents and brokers are licensed professionals, which means they have special knowledge and expertise in the insurance area. Therefore, they must use reasonable care, skill, and diligence when helping you with your insurance needs. Arizona insurance agents and brokers also have a duty to advise you on key aspects of products, coverage, and limits — even if you don’t ask. They can’t force you to buy a certain product, of course, but they need to give you the best professional advice.

Insurance agents and brokers can breach their duty to advise if they fail to provide sufficient information or advice to help clients make an informed coverage decision. For example, assume you tell your insurance broker you want an inexpensive auto insurance policy. They sell you a policy with no “uninsured motorist” coverage to keep the price low. No discussion takes place, nor are any forms signed. Simply a quote. You purchase the policy and a month later, an uninsured motorist hits you. Your claim for injuries is denied. Did your insurance producer tell you about the consequences of failing to purchase uninsured motorist coverage? Did they simply provide the cheapest policy in response to your request? Did your agent assure you that “you’re covered” without explaining what that means or the consequences of failing to purchase other types of coverage?

We rely on experts to give us the best advice possible. When they don’t, the results can be disastrous.

UMBRELLA COVERAGE

Many issues arise when insurance clients fail to have appropriate levels of coverage given one’s occupation, income, assets, and travel.   

One way to lower this risk is through purchasing an umbrella insurance policy. Umbrella policies go over and above coverage in a certain type of policy — such as an auto policy — in case your coverage isn’t enough. If you have a $100,000 liability limit in your auto coverage, and you hit someone, you could be responsible for damages over and above those limits. Umbrella policies protect against such things.

According to the Insurance Information Institute, the average umbrella policy costs between $150 and $300 per year for a one-million-dollar policy, so it can be an economical way to add a layer of protection — especially for high-net-worth individuals or people who make a high income. Many umbrella policies contain world-wide coverage. So if you’re overseas and you injure someone, a personal umbrella policy may step in an cover the loss and pay your defense fees. 

ASSIGNING A CLAIM

In Arizona, a claim against an insurance agent or broker who has breached his or her professional duty of care is assignable. Under certain circumstances this may make sense to a person assigning the claim (assignor) and the person receiving the assigned claim (assignee) as part of a settlement

When would this arise?

An Arizona couple owned a restaurant that served both food and alcohol. The owners consulted with their insurance agent or producer for what coverage was needed. The insurance agent and producer advised that they would need a commercial general liability policy to cover the business should a customer become injured on the premises (e.g. slip and fall to food poisoning). However, the insurance agent and broker failed to advise the owners that they need a liquor liability policy to cover the business should a patron injure himself, herself or a third person as a result of alcohol being sold and served by restaurant staff. 

One evening, the restaurant sold alcohol to a minor. The minor left the restaurant after consuming alcohol, got behind the wheel of his vehicle and drove off. A couple of miles from the restaurant, the minor runs a red light and crashes into a family of four riding in a mini-van. The crash kills two and seriously injures the others. The insurance company denies the claim citing no coverage for claim arising from the service of alcohol. The restaurant is sued. Once in litigation lawyers for the restaurant and the plaintiffs’ lawyers begin discussions of a settlement. Included in the settlement is assignment of the insurance agent and broker malpractice claim. This enables the plaintiffs in the wrongful death and personal injury claims to stand in the shoes of the restaurant owners and sue the insurance agent and producer for his or her malpractice. 

WHAT ARE YOUR LEGAL OPTIONS?

Insurance issues can be complicated. Even with the best research on your part, it’s difficult to know what types of policies and coverage you need. When you go to a licensed professional, it’s because you need advice. Solid advice.

When that doesn’t happen, McFadden Ticen & Beam can help. We have the experience to help you determine whether your insurance agent and broker breached his or her duties and whether to pursue a claim. Or whether the insurance agent and broker breaches his or her professional duty of care to the at fault party in considering whether to accept the assignment as part of a settlement.