Axiomatic rules of the insurance business:
- No agent should ever sell insurance for which he or she is unlicensed
- No agent should obtain insurance for a client from a non-admitted insurer without first advising the insured of the hazards of insuring with a non-admitted insurer
- No agent should acquire insurance for a client with an insurer in financial difficulty
- No agent should misrepresent coverages obtained or the quality of the insurers to the client.
Sometimes even when all rules are broken and a stupid mistake is made by an agent who acquires insurance for which he is not licensed, when the agent fails to explain to the insureds that the insurance he bought was with a financially unstable surplus line insurer, the agent does no harm. The insured, suing the agent, was still required to prove the actions of the agent caused the insured damage. In George E. Guidry and Dwight W. Andrus Insurance Inc v. Environmental Procedure, Inc. and Advanced Wirecloth Inc. No. 14-11-00090-CV (Tex.App. Dist.14 09/13/2012) the Texas Court of Appeal, on the second appeal from the parties, resolved the dispute on the basic elements of negligence.
OMI was a Louisiana insurance company and was admitted to do business there, but Guidry sold the insureds the policies in Texas, and OMI was not admitted to do business in Texas. The insureds faulted Guidry not only for placing their umbrella coverage with a surplus-lines carrier, but in particular, for obtaining insurance from OMI.
When Guidry procured the insurance, OMI was eligible for admittance to the business of insurance in Texas and had a rating of “A-” in Best’s Insurance Reports, most commonly referred to at trial simply as Best’s.