When faced with claims against agents and brokers for failing to properly advise their clients, courts have generally found that agents and brokers are not “risk managers” and are not responsible for advising their clients to purchase specific types or amounts of coverage—absent “special circumstances.”

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

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

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

In December 2003, Ben’s driver’s license was suspended. This prompted American National to cancel his coverage under the Auto policy. American National was also going to cancel the Umbrella policy but held off from doing so when Dennis and Susan signed a form agreeing to a driver exclusion for Ben. This exclusion precluded coverage for any insured for any loss sustained while the vehicle was being operated by Ben.

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

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

In July 2006, Ben was in an accident while driving a Chevrolet Suburban titled in Dennis’ name. A passenger in the vehicle was severely injured and sued both Ben (for his alleged negligent operation of the vehicle) and Dennis under the Iowa owner-liability statute. American National acknowledged coverage for the claims under the Auto policy but denied coverage under the Umbrella policy.

Bringing suit against American National and Fitzgerald, Ben and Dennis argued, among other things, that Fitzgerald had breached a duty of care to them by failing to disclose that the driver exclusion in the Umbrella policy continued after Ben’s license was reinstated.

Fitzgerald and American National sought and obtained dismissal of the claims against them on the grounds that informing the Langwiths that the driver exclusion continued on the Umbrella policy was outside the scope of Fitzgerald’s duties as an insurance agent.

On appeal, the Iowa Supreme Court reversed the decision on this issue. In so doing, the court held: “[A] fact finder could conclude from 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 also conclude that Fitzgerald understood or should have understood the nature of this request and that she responded by finding an Automobile Liability policy to insure Ben.

“Accordingly,” the court concluded, “a fact-finder could find that the parties had an implied agreement that Fitzgerald would advise the Langwiths with respect to the liability coverage that could 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 broker errors-and-omissions law that is fraught with peril for producers today. Producers need to be listening closely for anything that might constitute a request for professional advice—and carefully consider their response.

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

Special Reports /

&lsquo;What Can We Do About Ben?&rsquo; Examining the Duty to Advise

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‘What Can We Do About Ben?’ Examining the Duty to Advise