Insured-Agent Relationship Examined by Arizona Supreme Court
In 2000, the Berliants bought a liquor store. They purchased a business and umbrella liability policy from Victoria Gittlen, a licensed insurance agent. In 2001, beer was sold to a minor who drove his car into a cement barrier, killing his passenger. The passenger's father (Webb) filed a wrongful death claim against the Berliants. The Berliants tendered the claim to their insurance company, which refused to defend because there was no liquor liability coverage on the policy. The Berliants stipulated to the entry of a $3 million judgment; Webb agreed not to execute on the judgment and, in exchange, the Berliants assigned to Webb their rights to sue both their insurer and their insurance agent and her employers. Webb then sued Gittlen, alleging negligence and breach of fiduciary duty, for failing to advise the Berliants that they could purchase liquor liability coverage. The trial court dismissed these claims.
Upon appeal, the Arizona Supreme Court reversed the decision and found that cases prohibiting assignment of certain malpractice claims, such as those against attorneys, do so because of “uniquely personal“ relationships that give rise to a “fiduciary relation of the very highest character.“ So, the question before the court was whether the relationship between an insured and his insurance agent met this test.
The court found that the relationship between an insurance agent and client, while certainly important, differs from that between an attorney and client in several critical respects.
1.Insurance agents generally are not fiduciaries, but instead owe only a duty of “reasonable care, skill, and diligence“ in dealing with clients.
2.Duties of reasonable care similar to insurance agents' arise in many other contexts that do not give rise to non-assignability, such as auditor-client, and even in some cases that give rise to fiduciary relationships, such as trustee-beneficiary.
3.Attorney-client confidentiality protects broader interests than does insurance agent-client confidentiality. It protects the public interest in accessible legal advice by allowing people to consult their attorneys without fear of retribution.
By contrast, insurance agent-client confidentiality appears to protect only the client's privacy, an interest that has fewer societal ramifications than do the interests protected by the attorney-client relationship. Attorneys are bound by stricter confidentiality duties than are insurance agents. Attorneys may disclose information only to prevent client crimes. Insurance agents, by contrast, are statutorily allowed to disclose client information in seventeen different circumstances, including when an affiliate seeks the information for marketing purposes.
In its decision, the court also disagreed with the argument that allowing assignment would flood courts with unwarranted litigation. “We think this unlikely. Although allowing assignment may lead to an increase in the number of professional negligence claims that are actually pursued, this is not necessarily a bad result. Insofar as the claims are meritorious, they will serve the goals of affording compensation for the clients who are victims of professional negligence. In short, the policy concerns identified by Gittlen do not support a rule generally barring the assignment of professional negligence claims against insurance agents.“
This case is Webb v. Gittlen, 2008 WL 104322 ( Ariz. ).