The Michigan Court of Appeals recently revisited the issue of an insurance agent’s duty to an insured in procuring adequate insurance coverage. In Land Escape Outdoor Maintenance, LLC v Insurance Advisors, Inc, unpublished opinion per curiam of the Court of Appeals, issued August 13, 2015 (Docket No. 321859), the Court addressed a case in which an independent insurance agent procured business insurance coverage for a dump truck under a commercial automobile policy. After suffering an uninsured loss to its dump truck, the insured filed suit against the agent claiming that the agent misrepresented the coverage.
The Michigan Court of Appeals reversed the lower court’s decision and remanded the case for further proceedings to the trial court, which had dismissed the negligence claims.
As a general rule, agents have no duty to advise an insured regarding the adequacy of coverage. The reasoning is that an agent who works for the insurance company is an agent of the insurance company – not of the insured. The agent is simply an “order taker” for the insurer. The general rule, however, does not apply if a “special relationship” is created between the agent and the insured. When a special relationship is created, the agent has a legal duty to advise the insured regarding the adequacy of insurance coverage.
What creates a special relationship? This question was answered by the Michigan Supreme Court in Harts v Farmer Ins Exch, 461 Mich 1 (1999). The Harts Court stated that a special relationship exists if:
The moral of the story is that an insured needs to ask the agent relevant questions when purchasing insurance and then properly document the agent’s responses.
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