When faced with claims againstagents and brokers for failing to properly advise their clients,courts have generally found that agents and brokers are not “riskmanagers” and are not responsible for advising their clients topurchase specific types or amounts of coverage—absent “specialcircumstances.”

But when such “special circumstances” can be found to exist isfar from clearly defined—and can seemingly sneak up on you at amoment’s notice. A cautionary example can be found in the 2010 caseof Langwith v. American National General Ins. Co.

Dennis and Ben Langwith, father and son, sued American NationalGeneral Insurance Co. and American National Property and CasualtyCo. (collectively, “American National”), as well as their agent,Janet Fitzgerald, a self-employed captive agent for AmericanNational, following a coverage dispute in connection with a caraccident.

Dennis and his wife Susan had purchased most of their insurancethrough Fitzgerald. Among the coverage they had was an Auto policywith limits of $250,000 and an Umbrella policy with a $3,000,000limit. These policies also covered the Langwiths’ two children,including Ben.

In December 2003, Ben’s driver’s license was suspended. Thisprompted American National to cancel his coverage under the Autopolicy. American National was also going to cancel the Umbrellapolicy but held off from doing so when Dennis and Susan signed aform agreeing to a driver exclusion for Ben. This exclusionprecluded coverage for any insured for any loss sustained while thevehicle was being operated by Ben.

After Ben’s driver’s license was reinstated, Susan met withFitzgerald and asked, “What could we do about Ben?” By this, Susansaid she meant “how can we cover him? How can we provide liabilitycoverage that protects him and all of us?”

After flippantly replying, “Get him a bike,” Fitzgerald told herthat they could get a High Risk policy for Ben with limits of$250,000, and Susan agreed to do so. Susan and Fitzgerald did notdiscuss the Umbrella coverage, and while Susan and Dennis assumedthe Umbrella policy would again cover Ben’s driving once hislicense was reinstated, it did not.

In July 2006, Ben was in an accident while driving a ChevroletSuburban titled in Dennis’ name. A passenger in the vehicle wasseverely injured and sued both Ben (for his alleged negligentoperation of the vehicle) and Dennis under the Iowa owner-liabilitystatute. American National acknowledged coverage for the claimsunder the Auto policy but denied coverage under the Umbrellapolicy.

Bringing suit against American National and Fitzgerald, Ben andDennis argued, among other things, that Fitzgerald had breached aduty of care to them by failing to disclose that the driverexclusion in the Umbrella policy continued after Ben’s license wasreinstated.

Fitzgerald and American National sought and obtained dismissalof the claims against them on the grounds that informing theLangwiths that the driver exclusion continued on the Umbrellapolicy was outside the scope of Fitzgerald’s duties as an insuranceagent.

On appeal, the Iowa Supreme Court reversed the decision on thisissue. In so doing, the court held: “[A] fact finder could concludefrom Susan’s inquiry regarding ‘what [they] could do about Ben’that she was seeking Fitzgerald’s ‘professional guidance’ regarding‘liability coverage that [would protect] him and [the Langwiths],’as Susan testified.”

Further, the court held that “[a] fact-finder could alsoconclude that Fitzgerald understood or should have understood thenature of this request and that she responded by finding anAutomobile Liability policy to insure Ben.

“Accordingly,” the court concluded, “a fact-finder could findthat the parties had an implied agreement that Fitzgerald wouldadvise the Langwiths with respect to the liability coverage thatcould or should be put in place to protect Ben and his parents,including Umbrella Liability coverage.”

What does this mean for the average agent or broker? In short,the duty to advise is an area of insurance agent and brokererrors-and-omissions law that is fraught with peril for producerstoday. Producers need to be listening closely for anything thatmight constitute a request for professional advice—and carefullyconsider their response.

Furthermore, the insurance agent or broker must be particularlyattuned to the “implicit” question that may be hidden behind theone actually asked.