A Michigan insurance coverage agent has an obligation to obtain insurance coverage protection requested by an insured. Usually, until a particular relationship exists between a policyholder and the agent, a Michigan insurance coverage agent has no responsibility to advise concerning the adequacy of insurance coverage protection.
A not too long ago determined Michigan case mentioned these insurance coverage agent duties within the gentle of the next details:1
Juliana Reineke (Julie Reineke) and her husband, Leland Matthew Reineke (Matt Reineke), are the principal brokers for 5 Waters. In 2017, Matt Reineke labored with defendant Mark Bone, an unbiased insurance coverage agent employed by Bailey Company Inc, to obtain a industrial insurance coverage coverage for 5 Waters. Bone testified that Matt Reineke requested insurance coverage for his enterprise. He didn’t recall the particular language of the request. With the intention to decide ample protection quantities, he visited 5 Waters’ facility and walked via it with Matt Reineke. In keeping with Matt Reineke, he decided the worth of the tools and offered that info to Bone. The protection limits had been decided utilizing alternative worth. Like Bone, Matt Reineke didn’t testify as to any particular language that he used when requesting insurance coverage for 5 Waters. Following the on-site assembly, Bone procured a industrial insurance coverage coverage for 5 Waters that had alternative protection for 5 Waters’ tools within the quantities decided by Matt Reineke.
5 Waters’ industrial insurance coverage coverage was renewed in 2018, 2019, and 2020. Annually they acquired correspondence inviting them to schedule a evaluate of 5 Waters’ coverage with defendants. They didn’t accomplish that. Furthermore, they didn’t absolutely learn the coverage procured for 5 Waters by Bailey Company.
After the 2020 flooding, Matt Reineke contacted Bone. It was at the moment that he realized from Bone that 5 Waters didn’t have flood insurance coverage. He said that he was ‘fully shocked’ as a result of he thought that the enterprise was coated. He later learn his coverage, nevertheless, and it clearly offered that damages attributable to flooding, together with flooding injury occurring as the results of a dam failure, was expressly excluded from the coverage. 5 Waters filed a declare with their insurance coverage firm, however, as a result of the injury attributable to the flood was excluded from its protection, the declare was denied.
…5 Waters introduced a declare in opposition to defendants, alleging negligence in opposition to them arising from its lack of insurance coverage protection for flood injury to its Midland enterprise property.
In its evaluation, the court docket famous that:
An insurance coverage agent, nevertheless, might owe an obligation to advise if ‘an occasion happens that alters the character of the connection between the agent and the insured.’ In Harts, our Supreme Court docket described 4 occasions that give rise to a ‘particular relationship’ between the insurance coverage agent and the insured such that there’s a responsibility to advise on the a part of the agent: (1) the agent misrepresents the character or extent of the protection provided or offered, (2) an ambiguous request is made that requires a clarification, (3) an inquiry is made which will require recommendation and the agent, although he needn’t, offers recommendation that’s inaccurate, or (4) the agent assumes a further responsibility by both categorical settlement with or promise to the insured.
The court docket additional defined that this rule is identical no matter whether or not the licensed agent is a captive or unbiased agent:
Additional, the [Harts] Court docket mentioned MCL 500.2116 and the way it treats captive brokers the identical as unbiased brokers with regard to order-taking features, in addition to MCL 500.1232, which restricts those that may give recommendation about insurance coverage insurance policies to licensed insurance coverage counselors, other than ‘the customary recommendation provided by a licensed insurance coverage agent.’ .. Therefore, the Court docket in Harts concluded, a licensed insurance coverage agent might give ‘customary recommendation,’ however just isn’t underneath any responsibility to take action….Moreover, we notice [that] nothing within the Court docket’s opinion in Harts particularly indicated that the Court docket solely supposed to deal with captive brokers, moderately than unbiased brokers, with regard to the responsibility at situation. And, though plaintiffs cite circumstances comparable to [Genesee Foods Servs, Inc v Meadowbrook, Inc, 279 Mich App 649; 760 NW2d 259 (2008)], for the concept unbiased brokers owe a fiduciary responsibility to the insured, these circumstances don’t expressly point out an obligation to advise the insured concerning the adequacy of protection.2
The Michigan court docket then dominated in favor of the insurance coverage agent, discovering:
As a result of there isn’t any particular relationship between defendants and 5 Waters, we conclude that defendants didn’t have an obligation to advise 5 Waters as to the adequacy of its protection.
5 Waters argues that—no matter what particular protection it requested—as an unbiased insurance coverage agent Bone owed it a fiduciary obligation to acquire the broadest protection out there. In assist 5 Waters directs this Court docket to Genesee Meals, 279 Mich App 649. That case, nevertheless, held that within the case of an unbiased insurance coverage agent, the defendants ‘fiduciary responsibility of loyalty rested with [the insured], who may depend upon this responsibility of loyalty to make sure that defendants had been performing in [its] greatest pursuits each when it comes to discovering an insurer that might present them with probably the most complete protection and in guaranteeing that the insurance coverage contract correctly addressed their wants.’…. Nothing in Genesee Meals signifies that the responsibility to offer the ‘most complete protection’ features a responsibility to offer insurance coverage protection that has not been requested by the insured or to offer the ‘broadest protection out there.’ On this case, 5 Waters by no means requested flood insurance coverage. And, as indicated above, defendants didn’t have an obligation to advise 5 Waters that its protection may be insufficient as the results of not acquiring flood insurance coverage.3
Insurance coverage agent negligence circumstances are complicated and infrequently depend upon the character of the connection between the events and what was mentioned between them. The higher the agent is requested to evaluate and advise concerning the protection or the higher the agent guarantees to take action, the higher the publicity is to the agent to acquire or no less than advise about acquiring the protection.
For public adjusters providing a service to evaluate a consumer’s or potential consumer’s coverage, what sort of publicity are you assuming? Is it even authorized to take action? Keep tuned for a weblog about that matter.
Thought For The Day
Guarantees might get thee pals, however non-performance will flip them into enemies.
—Benjamin Franklin
1 5 Waters Prop. v. Bone, No. 366075, 2024 WL 748484 (Mich. App. Feb. 22, 2024).
2 Id., at *4, (citing Janovski v. S J Ferrari Ins Company, Inc., No. 326457 [unpub. op.] (Mich. App. Could 24, 2016)).
3 5 Waters, at *5.