Insurance agents and brokers are professionals whose actions in placing insurance require compliance with the industry’s standards of practice and skills.
In Aslam v. Higgins Insurance Associates Inc., Mohammad Aslam appealed a trial court order granting summary judgment in favor of Higgins Insurance Associates Inc. Aslam, the insured, alleged that Higgins was negligent when it failed to procure sufficient insurance coverage for his property, failed to warn him that he was underinsured and failed to explain the 80% co-insurance clause in the policy.
Aslam and his wife owned a multi-unit apartment building in Port Carbon, Pa., known as the Town Clock Apartments. On behalf of Higgins, insurance agent John Sink procured property insurance for Aslam through Old Guard Insurance Co., now known as Westfield Group, in excess of $1 million in coverage. Thereafter, due to excess claims, Old Guard refused to renew Aslam’s policy.
Sink informed Aslam that finding new coverage would be difficult, but he eventually did so through the Pennsylvania FAIR Plan. A Higgins representative filled out the FAIR Plan policy application and gave it Aslam to sign. The FAIR Plan policy had a $500,000 limit and an 80% co-insurance clause. The limit was half that requested by Aslam.
In September 2003, the apartment building sustained considerable roof damage during a windstorm. FAIR Plan hired McShea Associates as its adjuster, and McShea calculated the loss at $95,606. McShea also determined that Aslam’s coverage should have been closer to $1.5 million, and because of the policy’s low limit, Aslam was subject to a co-insurance penalty and received only $28,747.43 of the $95,606 loss. Additionally, the FAIR Plan policy did not provide coverage for loss of rental income.
Aslam filed a complaint against Higgins alleging breach of fiduciary duty, breach of good faith and fair dealing, breach of fiduciary duty in failing to inform them of risk, and negligence.
The trial court determined that in order to meet his burden of proof, Aslam needed to present expert testimony to establish an insurance broker’s standard of professional care and whether Sink, as an agent of Higgins, breached that standard.
Aslam failed to file an expert report. Higgins filed a motion for summary judgment, which the court granted. Aslam appealed.
In Pennsylvania and many other states, expert testimony is necessary to establish if a professional performed an act negligently.
The need for an expert, as a matter of law, depends on whether the alleged breach of duty involves too complex a legal issue so as to require explication by expert evidence.
The trial court determined that Higgins’ alleged duty to Aslam was not an elementary and non-technical transaction. The court found the issue raised questions of fact outside the normal range of the ordinary experience of a layperson because the FAIR Plan is an insurer of last resort created by statute to insure people who are almost uninsurable in the normal market and that the FAIR Plan provides only limited coverages.
An insurance broker (like Higgins) and agent (such as Sink) are viewed as possessing expertise in the insurance industry. The only way that Aslam could prove that Higgins or Sink breached the standard of practice and skills of an insurance broker required the testimony of an expert.
In this instance, Aslam’s failure to produce an expert report as to the standard of care under which Sink should have conducted himself and as to any deviation from that standard that may have occurred renders Aslam’s case inadequate, defective and incompetent as a matter of law.
Although the appellate court recognized that not all cases of negligence against insurance brokers or agents will require expert testimony on the broker’s duty of care, the trial court decision to require expert testimony in this case is not an abuse of discretion.