Do you have the proper business or homeowner’s insurance coverage? The average person relies on their insurance agent or broker to make sure they have the proper insurance coverage. In California, such reliance may be misplaced. Generally, an insurance agent does not have a duty to suggest an insured should purchase additional or a different type of coverage.1

What this means is an insurance agent does not owe a duty to the insured to:

  1. recommend additional coverage;
  2. purchase for the insured any additional coverage that is not specifically requested; or
  3. advise that any particular type of coverage is available.

However, there is good news for the insureds in California. Although an agent doesn’t have to explain the types of insurance available, an agent is still liable to the insured in instances when the agent has a duty of care owed to the insured.

An agent has a duty to properly and appropriately represent the nature of the insurance coverage sold to the insured. Under Fitzpatrick v. Hayes,2 any material misrepresentations regarding insurance coverage may trigger liability of an agent if the insured reasonably relied upon the representations. On the flipside, if an agent fails to disclose material information regarding the insurance coverage requested by the insured, then there may also be liablilty.3

Additionally, if an agent doesn’t procure a particular type of insurance coverage an insured requests, in the event of a loss, the agent may also be liable. All this culminates in the fact that when an agent that holds himself out to be an expert in advising and obtaining the proper coverage for an insured, it creates a special duty and may create liability if improper insurance coverage is purchased.

Insureds should attempt to know the ins and outs of their. Asking questions of agents and brokers, as well as memorializing the understanding of what an insured is actually purchasing, may mean the difference between recovering after a loss or walking away with a bigger disaster.

1 See Fitzpatrick v. Hayes (1997) 57 Cal. App. 4th 916.
2 Fitzpatrick v. Hayes (1997) 57 Cal. App. 4th 916.
3 See Westrick v. State Farm Ins.(1982) 137 Cal. App. 3d 685.