Insurance agents and brokers are required only to providethe insurance ordered, with an exception: if the agent creates afiduciary relationship and promises to acquire insurance that theagent proves is needed rather than what is ordered.

The prudent agent or broker will cover the relationship bypresenting the coverage to the insured with a letter stating thatthe policy enclosed is the coverage the insured ordered.

On Aug. 29, 2011, plaintiffs Darnell and Kathleen Green filed suit in Louisianastate court against Ronald C. Guidry (Guidry), Allstate Fire& Casualty Ins. Co. (Allstate), the National Flood InsuranceProgram (NFIP), and XYZ Insurance Co. (XYZ), Guidry's hypotheticalerrors and omissions insurer, claiming damages for breach offiduciary duty, fraud, negligence, detrimental reliance, payment ofa thing not owed, and violation of the Louisiana Unfair TradePractices Act (LUTPA).

On Sept. 30, 2011, Allstate removed the suit to federal court.On Oct. 11, 2012, the court entered a 60-day conditional order ofdismissal as to the plaintiffs' claims against Allstate, after theparties reached a settlement. The only claims remaining for thetrial court are plaintiffs' claims against Guidry, plaintiffs'Allstate agent, which are subject to the motion for summaryjudgment.

Related: Read Zalma's previous column “StatehouseTrumps Court.”

The Greens claim they own two residences, one in Terrytown, La.(“the Fielding Street property”), and one in Gretna, La. (“theMonroe Street property”), which they acquired in 1991 and 2006,respectively.

After acquiring the properties, the plaintiffs allege that theypurchased flood insurance on the properties through Guidry, theirAllstate agent. They assert that Allstate would write the floodpolicies, which were actually NFIP policies, collect the premiumsfor the policies from the plaintiffs, and reimburse the NFIP.Plaintiffs allege that during the underwriting process, Guidry hadactual and constructive knowledge of the correct flood zone forplaintiffs' properties. The plaintiffs claimed the agent allegedlyknowingly mis-zoned the plaintiffs' properties, which resulted inthe issuance of flood policies with substantially higher annualpremiums than what plaintiffs allege they should have paid andhigher commissions to Guidry.

The plaintiffs assert that the defendants collected the higherpremiums from the dates of the acquisition of the properties, 1991and 2006, respectively, until plaintiffs filed suit in state courton Aug. 29, 2011, after allegedly learning in June 2011 that aneighbor's flood zone determination resulted in a much lower annualflood premium than plaintiffs were being charged. The Greens claimthat after learning about the discrepancy, they contacted thedefendants who immediately acknowledged that plaintiffs' propertieshad been erroneously mis-zoned.
They also claim that Guidry owed the plaintiffs a fiduciary duty inconnection with the placement and maintenance of the floodinsurance coverage, and, that to the extent the insurance premiumsfor the residences were overcharged, Guidry breached his legalduties to plaintiffs in the non-exclusive ways:

• Failing to know the different types, terms, and conditions ofinsurance policies available
• Failing to use reasonable diligence in obtaining insurance thata customer requests
• Failing and neglecting to exercise the degree of care expectedof a prudent insurance broker or agent, thereby causing the allegedoverpayment.

The Greens further allege that Guidry breached a duty owed tothe plaintiffs by failing to inform them that they were eligiblefor a preferred risk policy (PRP) through the NFIP, which couldprovide them with maximum policy limits for less than their currentpremium payments.

In addition to their fraud and breach of fiduciary duty claims,the plaintiffs also assert claims against Guidry for detrimentalreliance and payment of a thing not owed. They assert that theyreasonably relied on Guidry's expertise and recommendations, thatthey assumed the policies on the residences were accurate andreasonable, and that the alleged overpayments of premiumsconstitute payment of a thing not owed under Louisiana law.

Summary judgment is appropriate when the pleadings, thediscovery and disclosure materials on file, and any affidavits showthat there is no genuine issue as to any material fact and that themovant is entitled to judgment as a matter of law.

In Louisiana, an agent has no duty to spontaneously identify aclient's needs and advise him as to whether he is underinsured orcarries the correct type of coverage.
Under Louisiana law, fraud is defined as a misrepresentation orsuppression of the truth made with the intention either to obtainan unjust advantage for one party or to cause a loss orinconvenience to the other. Thus, to recover on their fraud claimagainst Guidry, the plaintiffs must prove that Guidry made anaffirmative misrepresentation or remained silent when he had a dutyto speak or disclose information.

Related: Read another Zalma column “GivingNotice.”

Although plaintiffs allege that Guidry knowingly mis-zoned theirproperties to obtain higher premiums and commissions, the Greensconceded in their depositions that they have no evidence thatGuidry mis-zoned their property.

Because Guidry had no duty to disclose to plaintiffs that theywere eligible for a PRP, his failure to make the disclosure isinsufficient to give rise to a claim for fraud. Thus, the courtfinds that Guidry is entitled to judgment as a matter of law on theplaintiffs' fraud claim in light of the plaintiffs' failure toproduce any evidence that Guidry made an affirmativemisrepresentation or suppressed the truth.

Louisiana Unfair Trade Practices Act

LUTPA provides in pertinent part that unfair methods ofcompetition and unfair or deceptive acts or practices in theconduct of any trade or commerce were declared unlawful.

Here, the uncontested evidence shows that Guidry actedconsistent with his duties as an insurance agent. Kathleen Green,the only party who interacted with Guidry in reference to the floodpolicies, testified that when she initially procured the floodpolicies for both properties, Guidry obtained the specific amountof insurance as she requested. Kathleen Green also testified thatwhenever she requested increases in coverage for the subjectproperty or changes to her policy, Guidry made those changes asrequested.

Negligence and Breach of Fiduciary Duty

An insurance agent who undertakes to procure insurance foranother owes an obligation to his client to use reasonablediligence in attempting to place the insurance requested and tonotify the client promptly if he has failed to obtain the requestedinsurance. The client may recover from the agent the loss hesustains as a result of the agent's failure to procure the desiredcoverage if the actions of the agent warranted an assumption by theclient that he was properly insured in the amount of the desiredcoverage. The insurance agent owes a duty of “reasonable diligence”to his customer that is fulfilled when the agent procures therequested insurance.

Related: Read the column No Harm, No Foul” by BarryZalma.

The duty of reasonable diligence has not been expanded toinclude the obligation to advise whether the client has procuredthe correct amount or type of insurance coverage. It is theinsured's responsibility to request the type of insurance coverage,and the amount of coverage needed.

The plaintiffs were charged with knowledge of the existence ofthe PRP. It was their duty to request a PRP if they wanted one.Kathleen Green testified that she did not recall any discussionswith Guidry regarding a PRP before she called requesting a refundin June 2011. Plaintiffs have pointed to no evidence that they everinquired about a PRP prior to calling and asking for a refund.Plaintiffs have not pointed to any evidence in the record thatGuidry failed to procure the type and amount of coverage KathleenGreen requested throughout the duration of the businessrelationship. Assuming that Guidry failed to offer plaintiffs aPRP, which Guidry disputes, he had no duty to do so, and thus thatalleged failure, as a matter of law, does not give rise to a claimfor negligence or breach of fiduciary duty.

Even though Kathleen Green increased the coverage under herpolicies at various renewals, the plaintiffs' alleged damages—thehigher premiums—were bound to continue at renewal regardless of thecoverage changes. It was unnecessary for Guidry to change the typeof flood policy the Plaintiffs carried to increase the coverage ontheir properties.

Hindsight proved the plaintiffs erred in asking their agent toprovide different coverage. But their attempt to make an insuranceagent or broker a fiduciary properly failed before this federalcourt.