As an industry that provides vital benefits to everyday Americans and collects over $1 trillion in premiums each year, the insurance industry is heavily regulated. Because of the crucial role insurance plays in your life and in the financial sector as a whole, state and federal laws impose certain responsibilities on insurance agents who sell and promote policies to the public. If your insurance agent fails in his or her duties to you and you’re later denied coverage, you might have a claim for negligence against the agent. Read on to learn more about insurance agent negligence or misrepresentation.
In general, suing someone for negligence requires you to prove the following elements:
Duty: The person you’re suing had a duty to act or refrain from acting in a certain way.
Breach: The person failed in their duty toward you.
Causation: The breach of duty caused you harm that the offender should have foreseen. (link to proximate cause)
Damages: The harmed person suffered actual damages (such as lost wages and medical expenses).
Note that someone can be guilty of negligence without intending to cause harm. Regardless of intentions, if you can prove the elements above, then the negligent person is legally responsible for the harm caused.
Insurance Agent Duties and Actions That May Constitute Negligence
The primary duty of insurance agents is to use reasonable care, diligence, and judgment in selling insurance policies that are appropriate for their customers based on each one’s requests and requirements. Specific duties are spelled out in more detail in each state’s codes or statutes, but there are many similarities across the board. The following actions may amount to insurance agent negligence in your state:
Failing to sign you up for requested coverage available in the marketplace: Agents are supposed to assess your needs and requests before selling you the appropriate amount and type of insurance.
Misrepresenting what’s in your policy: Agents should be well-versed in what a given policy does and doesn’t cover and shouldn’t lead you to believe that you’re covered for something not actually included in the policy.
Application misrepresentations: As an agent walks you through the insurance application, they are required to complete the application accurately and truthfully.
Failing to pass-on notification of your claim: If you notify your agent of a claim under your policy, they must then notify the actual insurer of the claim.
Failing to notify you that your policy is about to be cancelled: Your agent must let you know if your policy is going to be prematurely cancelled by the insurer.
Failing to notify you of insurer issues: If your insurer is facing financial problems, such as insolvency, the agent must notify you.
Additionally, agents who hold themselves out as experts or specialists in a given area usually owe you an even higher duty of care. Any of these actions could mean that you don’t have the insurance coverage you thought you had, or could lead to a claim denial by the actual insurer. Because of these significant consequences, insurance agent negligence should not be taken lightly.
Compensation for Insurance Agent Negligence
The types of damages you can seek in a lawsuit for negligence are generally more limited than those for intentional actions like insurance fraud, and limitations vary by state. However, if you were denied coverage or suffered other damages because of insurance agent negligence, you could be entitled to a large sum. For example, if successful, you could be awarded an amount equal to what you would have received in benefits or payments if it weren’t for the agent’s negligence.
You may also be able to seek damages for the inconvenience and emotional costs of being denied the expected coverage. In California, for example, the measure of damages is “the amount which will compensate for all the detriment approximately caused thereby, whether it could have been anticipated or not.”
It’s important to note that in most jurisdictions agents can’t escape liability by claiming that you failed to read your policy. However, the agent may argue that neglecting to do so makes you at least partially responsible for the harm done (a principle known as contributory negligence). So, while you should read your policy, you may still have a claim even if you simply relied on your agent’s advice and representations regarding the coverage contained in that policy.
Find Out If You Have a Claim for Insurance Agent Negligence
Negligence by an insurance agent can have huge ramifications on your financial circumstances and general well-being. But it’s difficult to know what constitutes negligence and how much time you have to file such a lawsuit. If you suspect your insurance agent is guilty of negligence or even fraud, contact an experienced insurance attorney who can advise you of your options and legal rights.