What Are An Insurance Agent’s Responsibilities To The Insured?

A recent caller to the IIAG Free Legal Service Program that I operate (1-800-IIAG-911) raised this question in the context of determining the value of buildings that are to be covered by a property and casualty insurance policy.  In particular, the caller wanted to know if it was his responsibility as the insurance agent to determine the value of such buildings.  The answer to this question, as well as to any similar question regarding the duty owed by an insurance agent to the insured, will depend on the nature of the relationship between the agent and the insured in question.  The nature of that relationship is established by what the agent by words, conduct, or both leads a reasonable insured to believe the agent will or can do for the insured.

As a general rule, an insurance agent is considered to be the agent of the insurance company, authorized by it to deal with potential insureds about obtaining insurance policies issued by the company.  As such, an insurance agent owes a primary duty to the company and has no duty to the insured.  However, almost 40 years ago, the Georgia Supreme Court recognized that an insurance agent could also become the agent of the insured by agreeing to perform a service for the insured that was not included within the services it was expected to perform on behalf of the insurance company.  In that case, the agent agreed not only to obtain a particular type of insurance coverage for the insured, he also agreed to examine the annual financial statements of the insured to make sure that the coverage was sufficient.   

By agreeing to make such a determination for the insured, the agent created a duty to perform that service in a non-negligent manner.  Thus, the answer to the question posed by my caller is that he had no duty to determine the value of the buildings that were to be covered by an insurance policy, but he could create such a duty by agreeing to make that determination, instead of asking the insured to tell him or her what amount of insurance coverage they wanted and obtaining a policy in that amount.

It is easy to see how an insurance agent in the course of normal business activity can “cross over the line”, so to speak, and create a duty to an insured that did not otherwise exist.  The appellate courts of Georgia have ruled on many cases involving lawsuits filed by insureds against their insurance agents who made promises about what they would or could do and then did not do so to the satisfaction of the insured.  So be wary of what you tell an insured you will or can do for them, because whatever you say you will or can do, you will then have to do in a non-negligent manner.  Just one more reason to always document all your communications with an insured.  You never know when something you said or did will come back to haunt you.