An insurance producer (also referred to as an insurance broker or insurance agent) is an individual or business entity authorized to sell, solicit or negotiate insurance.1
In some cases, a negligence claim can be brought against the insurance producer in conjunction with claims of breach of contract and tortious bad faith claims handling. Generally speaking, a negligence claim requires:
- The defendant(s) owed a standard of care;
- their actions breached that standard of care;
- their breach caused injury to the plaintiff(s); and
- plaintiff(s) suffered actual damages.2
The chief case on insurance producer negligence is Darner Motor Sales v. Universal Underwriters Insurance Company,3 in which the Arizona Supreme Court held that an insurance producer owes a duty to their insured to “exercise reasonable care, skill and diligence” when procuring insurance. The court viewed this duty similar to that of an attorney:
[A] person who holds himself out to the public as possessing special knowledge, skill or expertise must perform his activities according to the standard of his profession. If he does not, he may be held liable under…principles of negligence for the damage he causes by his failure to adhere to the standard.
Once a duty exists, the next question is the level of care the parties’ duty-inducing relationship triggers.4 The duty of reasonable care is founded on the insurance producer’s status as one with special knowledge “who undertakes to act as an advisor.”5
Most recently in Madison Alley Transportation & Logistics Inc. v. W. Truck Insurance Company,6 a United States District Court in Arizona clarified that while insurance producers are generally not required to inform their insureds of optional coverages, advising their insureds as to the adequacy or appropriateness of their insurance coverage is a question for the trier of fact.
Notably, Arizona courts have repeatedly found whether the insurance producer’s conduct breached the standard of care is question for the trier of fact, which may require proof in form of expert testimony.7 Expert testimony is often obtained from insurance industry professionals who are able to demonstrate how the insurance producer’s conduct failed to meet insurance industry standards, practices, or procedures.
2 Gipson v. Kasey, 214 Ariz. 141, 143 (2007).
3 Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co., 140 Ariz. 383, 397 (1984).
4 BNCCORP, Inc. v. HUB Int’l Ltd., 243 Ariz. 1, 9 (App. 2017).
5 Wilks v. Manobianco, 237 Ariz. 443, 445 (2015).
6 Madison Alley Transportation & Logistics Inc. v. W. Truck Ins. Co., No. 17-03038, 2019 WL 3017621, at *4 (D. Ariz. July 10, 2019).
7 Darner Motor Sales, 140 Ariz. at 398; BNCCORP, Inc., 243 Ariz. at 10; Sw. Auto Painting & Body Repair, Inc. v. Binsfeld, 183 Ariz. 444, 448 (Ct. App. 1995), corrected (June 2, 1995).