In California, an insurance agent who fails to procure insurance coverage requested by an insured can be sued for professional negligence. Well, can an agent’s negligence be imputed to the insurance company that issued the policy? The answer is yes, especially when the agent is a "captive" agent, i.e., an agent who works for one insurance company and is compensated directly by that insurance company—often as a company employee.

In the case of Desai v. Farmers Ins. Exchange,1 the insured demanded a certain level of coverage at the outset before agreeing to purchase a policy. The agent told the insured he was receiving the demanded level of coverage from the insurer. It was not until after a loss and making a claim did the insured discover the coverage he purchased was not what he had originally requested. The insured sued both the agent and the insurer. As against the insurer, the insured alleged that insurer was vicariously liable for the agent’s negligence because of their agency relationship. The trial court ruled that the insurer could not be held responsible for the negligence of the agent. However, the appellate court reversed the trial court’s order dismissing the insurer and held:

An insurer, as a principal, may be vicariously liable for the torts of its agent if the insurer directed or authorized the agent to perform tortious acts, or if it ratifies acts it did not originally authorize. Layered atop the principal/agent relationship of the insurer to its agent is the insurer’s fiduciary duty to conduct itself with the utmost good faith for the benefit of the insured."

Upon proving the existence of an agency relationship between the agent and the insurer, an insured can also pursue a recovery against the insurer. For cases of agent negligence, the insured should not overlook that he or she may also have an actionable claim against the insurer.

1 Desai v. Farmers Ins. Exchange (1996) 47 Cal. App. 4th 1110.
2 Id. at 1118.