Insurance Agent Responsibility in Securing Adequate Coverage
Conflicting State Standards Increase Agent Liability Risk
Insurance agents are the first line of defense in helping policyholders obtain adequate insurance coverage. However, recent court decisions demonstrate that an agent’s legal responsibility varies significantly depending on the state.
When coverage is not obtained or critical exclusions are overlooked, agents face negligent procurement claims. The extent of that liability, however, differs from jurisdiction to jurisdiction.
Alabama: Insureds Must Read Their Policies
In a recent Alabama Supreme Court decision involving OMS Pharmacy, the court ruled in favor of the insurance agent and agency after finding that the insured had access to the policy and failed to review the coverage provided. The decision reinforces Alabama’s long-standing principle that policyholders have a duty to read their policies and understand coverage limitations.
Opinion: OMS Pharmacy Decision
Georgia: Expanded Exposure for Insurance Agents
Georgia recently took a broader view of agent liability. In Plummer v. Commercial Insurance Agency, the Georgia Court of Appeals allowed a negligent procurement claim to proceed after an insurer denied coverage based on an assault-and-battery exclusion. The ruling increases potential exposure for agents by recognizing that claims arising from inadequate coverage procurement survives even when the insurer correctly denied coverage.
Court Filing: Georgia Court of Appeals Filing
Florida: Duty to Procure vs. Duty to Advise
Florida requires agents to obtain the coverage requested by the insured but does not automatically impose a duty to advise clients regarding every potential coverage gap. Liability may arise when an agent assumes an advisory role or develops a special relationship with the insured that extends beyond simply placing coverage.
Florida Court Document: Florida Appellate Filing
Key Takeaway
The law governing insurance agent responsibility in securing adequate coverage remains highly state specific. Alabama emphasizes the insured’s duty to review coverage, Georgia has expanded potential negligent procurement exposure, and Florida limits liability absent a special advisory relationship. For insurance agents, thorough documentation, clear communication, and regular coverage reviews remain the best defenses against errors and omissions claims.
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Lee Norcross, MBA, CPCU
California License # 0D87292
L Squared Insurance Agency, LLC ® DBA in California as L2 L Squared Insurance Agency, License # 0L93416
Managing Director, CEO
Lee@L2Ins.com
616-726-7080
This Blog is for information purposes only and does not provide any legal advice.