19 Quick Agency E&O Points from The Courts
Courts, in citing legal precedent, often add a legal nugget from the case that states a useful point of law. This article has nineteen legal snippets from insurance agent errors and omissions from Massachusetts appellate decisions.
Agency Checklists has published over one hundred articles concerning insurance-related decisions by the Massachusetts and Federal court. Some of these decisions have related to the errors and omissions claims against independent agents.
In writing all legal opinions, Massachusetts courts rely upon the precedential value of earlier cases. This rule, stare decisis, is the basis of judicial decision-making. The courts, in citing such prior precedents, often add to the legal citation a short statement of the prior decisions’ central holdings.
I decided to compile, for this article, some of these legal snippets that directly provide key legal points that apply to independent insurance agencies and their potential error and omission exposures. These short summaries provide a quick listing of the law’s scope and range in defining the legal liability of insurance agents and brokers dealing with insureds.
As publisher of Agency Checklists, I thought that these decisions, all involving agent E&O claims, might provide our agency and company readers with a handy refresher. I hope it is useful. If you have any comments or questions, you can email me at ogallagher@agencychecklists.com.
An insurance producer’s general duties owed to their insureds in placing insurance
1. Rozen v. Cohen, 350 Mass. 21, 233 (1966). A broker, in procuring an insurance policy for the insured, is customarily deemed to be the agent of the insured and not the insurer.
2. Bicknell, Inc. v. Havlin, 9 Mass. App. Ct. 497, 500 (1980). The ordinary duty of a broker is to use due care in the implementation of [its] agency and in carrying out instructions of the insured.
3. Rae v. Air-Speed, Inc., 386 Mass. 187, 192 (1982). The “well-settled rule [is] that an insurance agent or broker who, with a view to compensation for his services, undertakes to procure insurance for another, and through his fault and neglect fails to do so, will be held liable for any damage resulting therefrom.”
4. Couillard v. Pick, 397 Mass. 756, 758 (1986). [The Supreme Judicial Court has] “never recognized a duty to procure insurance, absent a statute or regulation establishing such an obligation” and “in a case analogous to this [case], “explicitly rejected a claim that an insurance agent committed a tort against a traveler injured on the highway by failing to obtain optional liability coverage for the insured tortfeasor’s automobile.”
5. International Mobiles Corp. v. Corroon & Black/Fairfield & Ellis, Inc., 29 Mass. App. Ct. 215 218 (1990).”A negligence action may be maintained against an insurance agent or broker who undertakes to procure an insurance policy and fails to do so”)
6. Construction Planners, Inc. v. Dobax Ins. Agency, Inc., 31 Mass. App. Ct. 672, 675 (1991). A broker generally has no duty to obtain insurance or renew an expiring policy.
7. Robinson v. Charles A. Flynn Ins. Agency, Inc., 39 Mass. App. Ct. 902, 902-903 (1995). “Absent special circumstances of assertion, representation, and reliance,” an agent owes no general duty “to inform and advise [the insured] as to the availability of uninsured and underinsured motor vehicle coverage up to the limits of the bodily injury liability coverage the [the insured carried].”
8. Campione v. Wilson, 422 Mass. 185, 195 (1996). When an insured makes an agreement with a broker calling for the purchase of particular coverage, the insured may reasonably rely on the broker’s superior expertise and may assume that the broker has performed his duty.
9. Capital Site Mgmt. Assocs. v. Inland Underwriters Ins. Agency, Ltd., 61 Mass. App. Ct. 14, 18 (2004). In a contract for professional services, the agreement between the parties embraces an obligation for the service provider to use “that skill and judgment which can be reasonably expected from similarly situated professionals. Accordingly, an insurance broker’s failure to perform to this standard in obtaining coverage for its client may support a claim for breach of contract.”
10. Martinonis v. Utica Natl. Ins. Group, 65 Mass. App. Ct. 418, 420-421 (2006). “There is no general duty of an insurance agent to ensure that the insurance policies procured by [them] provide coverage that is adequate for the needs of the insured, and the agent does not, in general, have a fiduciary duty to the insured in this regard.”
11. Baldwin Crane & Equip. Corp. v. Riley & Rielly Ins. Agency, Inc., 44 Mass. App. Ct. 29, 31-32 (1997). [Broker has] no duty to ensure that client understood the full import or meaning of the terms of coverage in a policy.
12. Guida v. Herbert H. Landy Insurance Agency, Inc. 84 Mass. App. Ct. 1105 (2013). “The general relationship between an insurance agency and its policyholder customer does not impose a duty on the agency to investigate the customer’s needs for a particular coverage or to advise about the availability of insurance products to meet those needs.”
13. Perreault v. AIS Affinity Insurance Agency of New England, Inc., 93 Mass. App. Ct. 673, 677-678 (2018). Absent special circumstances, an insurance agent does not have a duty to ensure that the policies provide adequate coverage for the need of the insured. See Agency Checklists’ article of August 18, 2018, “Mass. Appeals Court Finds Affinity Agency Had No Duty To Insured To Ensure Coverage Adequate.”
14. Masonic Temple Association of Quincy, Inc. v. Patel, 489 Mass. 549, 561 (2022). Brokers have a duty to obtain insurance coverage that their client asks them for but do not have a general duty to inquire further about a confused or unintelligible request as such a duty aligns “more closely with the heightened duty [the Court] appl[ies] when there exists “special circumstances of assertion, representation and reliance” between a broker and their client.” See Agency Checklists’ article of May 24, 2022, “Confused Voicemail Leads to E&O and Coverage Suits.”
“Special circumstances” involving insurance producers and insureds bring enhanced duties
Most, but not all, successful error and omission claims against insurance agents involve interactions with insureds where the court finds that the agent and insured’s relationship involved “special circumstances.” When the court finds such special circumstances exist, the foregoing general duties of care no longer apply, and the court uses an enhanced duty of care to judge the agent’s alleged errors or omissions.
Factors creating special circumstances may include (1) a prolonged business relationship; (2) the complexity and comprehensiveness of the customer’s coverages; (3) the frequency of contact between a customer and agent to attend to the customer’s insurance needs; and (4) the extent to which a customer relies on the advice of the agent by reason of the complexity of the policies, or (5) if the agent receives additional fee income from the insured for consultation and advice apart from commissions from premiums.
Decisions discussing “special circumstances” between insureds and agents:
15. Rapp v. Lester L. Burdick, Inc., 336 Mass. 442 (1957). There is a “heightened duty [the court] appl[ies] when there exists “special circumstances of assertion, representation and reliance” between a broker and their client.”
16. McCue v. Prudential Ins. Co., 371 Mass. 659, 661-663 (1976). Jury could have properly found special circumstances based upon the nature and duration of the relationship where there was a twenty-eight-year relationship between the insured and the insurer’s agents who made monthly visits to the insured; and the insured had seven different insurance policies with the insurer.
17. Bicknell, Inc. v. Havlin, 9 Mass. App. Ct. 497, 500-501 (1980). The nature and extent of the duty of care owed by an independent insurance agent to [their] client depends…upon the degree of skill which [they] represents himself to possess. “If he holds himself out to the world as possessing … particular skill…[as] an insurance broker, then [the insured] is justified in relying upon the knowledge which [the broker] professes to possess, and [the broker] is bound to exercise the skill and to use the knowledge which the business requires.”
18. Construction Planners, Inc. v. Dobax Ins. Agency, Inc., 31 Mass. App. Ct. 672, 676 (1991). ‘Special circumstances’ existed after an extended relationship between the plaintiff and agent; the agent handled all of the plaintiff’s insurance needs, and the agent renewed some of the plaintiff’s policies without consulting with the plaintiff.
19. Wilson v. James L. Cooney Ins. Agency, 66 Mass. App. Ct. 156, 163 (2006). “An expanded agency agreement, arrangement or relationship, sufficient to require a greater duty from the agent than the general duty, generally exists when the agent holds himself out as an insurance specialist, consultant or counselor and is receiving compensation for consultation and advice apart from premiums paid by the insured.”
Owen Gallagher
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
Over the course of my legal career, I have argued a number of cases in the Massachusetts Supreme Judicial Court as well as helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth.
Connect with me directly, by calling me at 617-598-3801 or by sending an email using the button below.
