Last month, I discussed the difference between insurance agents and insurance brokers, and how the actions of insurance agents, (and during limited circumstances, those of insurance brokers), can bind an insurance carrier. Here, I will discuss two different causes of action that may be brought against an insurance broker or an insurance agent: breach of fiduciary duty and negligence.
Fiduciary duties arise from a fiduciary relationship that can be express or implied.1 Because insurance is a business significantly affected by the public trust, courts have expressly found that both insurance agents and insurance brokers have a fiduciary relationship with both the client and insurance company.2 If a fiduciary relationship is established, the fiduciary has a legal duty to “disclose all essential or material facts pertinent or material to the transaction in hand.”3 Black’s Law Dictionary defines a fiduciary duty as the following:
A duty of utmost good faith, trust, confidence, and candor owed by a fiduciary (such as an agent or a trustee) to the beneficiary (such as the agent’s principal or the beneficiaries of the trust); a duty of utmost good faith, trust, confidence, and candor owed by a fiduciary (such as a lawyer or corporate officer) to the beneficiary (such as a lawyer’s client or a shareholder); a duty to act with the highest degree of honesty and loyalty toward another person and in the best interests of the other person (such as the duty that one partner owes to another).4
Negligence, on the other hand, may be found when an insurance agent or broker “voluntarily, without consideration or expectation of remuneration or reward, agrees to procure a policy” and fails to do so.5 If an insured relies on the insurance agent’s undertaking (even if that undertaking is gratuitous), that is sufficient to trigger the insurance agent or broker’s duty to exercise reasonable skill and care to obtain the appropriate coverage.6 If such negligence can be established, the insurance agent or broker may be held liable for resulting damages for that negligence.7 To calculate the damages to the insured, a court would compare what an insured would have recovered had the premises been fully insured, with his or her actual net recovery.8
Overall, in Florida, breach of fiduciary duty and negligence are separate causes of action that may be brought against insurance agents and brokers. Both should be mindful of their duties and liabilities under the law to avoid unnecessary legal pitfalls.
1 See Greenberg v. Miami Children’s Hosp. Research Inst., Inc., 264 F. Supp. 2d 1064, 1071 (S.D. Fla. 2003).
2 Wachovia Ins. Services, Inc. v. Toomey, 994 So. 2d 980, 990 (Fla. 2008) (distinguishing between claims brought under a breach of fiduciary duty and negligence and finding that both are separate causes-of-action). Natelson v. Dept of Ins., 454 So. 2d 31, 32 (Fla. 1st DCA 1984); Randolph v. Mitchell, 677 So. 2d 976, 978 (Fla. 5th DCA 1996).
3 Miami Children’s Hosp., 264 F. Supp. 2d at 1071 (interpreting Florida law with citations omitted).
4 Black’s Law Dictionary (11th ed. 2019); Klonis v. Armstrong, 436 So. 2d 213, 216 (Fla. 1st DCA 1983) (finding that an insurance agent or broker can be held liable for resulting damages to that person for breach of contract or negligence).
5 Sheridan v. Greenberg, 391 So. 2d 234, 236 (Fla. 3d DCA 1980); Armstrong, 436 So. 2d at 216.
6 Sheridan, at 236 (citing to Reed Mfg. Co. v. Wurts, 187 Ill. App. 378 (1914)).
7 Armstrong, 436 So. 2d at 216.