The Michigan Court of Appeals has just issued a ruling that describes the duties and responsibilities of not only insurance agents, but also the insured. In General Agency Company v. Huron Oil Company (2010) (Click here to download a PDF), the Court of Appeals reinforced that an “insurance agent has no duty to advise an insured regarding the adequacy of insurance coverage.” The Court went on to state that the agent represents the insurance company, not the insured. The Court stated that “the agent’s job is merely to present the product of his principal and take orders from those who want to purchase coverage.”
There are several exceptions to this general rule. Specifically, an insurance agent can form a “special relationship” with the insured when the agent does one or more of the following:
(1) the agent misrepresents the nature or extent of the coverage offered or provided;
(2) an ambiguous request is made that requires a clarification;
(3) an inquiry is made that may require advice and the agent, though he need not, gives advice that is inaccurate; or
(4) the agent assumes an additional duty by either express agreement or promise to the insured.
In the above-mentioned case, the insured claimed that the insurance premiums they were charged were too high and that the insurance agent did not seek enough competitive bids. The insured claimed that the insurance agent had “represented that it would work diligently to obtain the best appropriate insurance coverage for the best premium reasonably available in the market.” The Court of Appeals ruled that this was insufficient to warrant a legal action against the agent by the insured. The Court of Appeals affirmed a ruling on this issue in favor of the insurance agent without a trial.
This case shows the importance of researching insurance rates and premiums on your own, or seeking competitive bids from more than one insurance agent. The agent’s first goal is to sell the insurance and it is not necessarily a top priority to find the best or least expensive insurance coverage for the insured. Furthermore, the insured will have no recourse if it later decides that it got a bad deal on the insurance coverage.
This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.
