Duty Of An Insurance Agent In Texas

Whether your agent is in Grand Prairie, Arlington, Mansfield, Richardson, Plano, Fort Worth, or anywhere else in Texas, he has duties he owes to his insurance clients. So, what are an agents duties?
For starters, insurance agents do not have a general duty to obtain coverage nor to make sure any coverage you get is adequate. On the other hand, courts have found insurers liable for affirmative misrepresentations, and an insurance agent who undertakes to procure insurance for another owes a duty to a client to use reasonable diligence in attempting to place the requested insurance and to inform the client promptly if unable to do so. This is discussed in the 1992, Texas Supreme Court case, May v. United Services Association of America.
What if the notice of expiration on an insurance policy is sent to the agent rather than to the policy holder it was intended for? Then the agent is responsible for forwarding that information. This was the issue in Kitching v. Zamora and Horn v. Hedgecoke Insurance Agency.
In the May case above, the court suggested an agent could be found negligent if an explicit agreement or course of conduct showed the agent undertook to determine the customer’s insurance needs and counseled the customer as to how they could be met.
Contrast May with McCall v. Marshall, a Supreme Court case that said, even a seven year relationship was not enough to create such a special relationship where, even though the insured sought advice on the types of coverage available, the insured alone decided the total dollar amounts of insurance he wanted. Likewise, in Pickens v. Texas Farm Bureau Insurance Company, the Amarillo Court of Appeals, said in 1992, the agent was not liable for failing to suggest higher liability limits. The facts in the Pickens case definitly favored the insurance agent.
In addition to the case of special relationships, the May case also suggests that an agent may be held liable for his negligence in obtaining an adequate policy where the adequacy of the policy can be “assessed by some objective measure.” For this proposition, the May court cited McAlvain v. General Insurance Co. of America. In McAlvain, an agent was held liable after the customer requested sufficient insurance to cover his business, including inventory, fully, and furnished to the agent an appraisal showing that the inventory was worth $45,000, and the agent procured a policy with a $30,000 limit.
The May court also suggests that an agent may be held liable to the extent that the customer puts him on notice of reliance on his expertise to compare and contrast various policies. Exactly what precise information is necessary to put the agent on notice, however, remains unclear.
In 1977, the Beaumont Court of Appeals, recognized a duty by the agent to keep the insured informed, when the court stated:
A local agent … owes his clients the greatest possible duty. He is the one the insured looks to and relies upon. Most people do not know what company they are insured with. The insured looks to the agent he deals with to get the coverage he seeks, with a sound company who can and will properly and promptly pay claims when they are due. It is his duty to keep his clients fully informed so that they can remain safely insured at all time.
Certainly, when a person is dealing with an independent agent who writes insurance for any number of companies, this ruling would be important to note. However, maybe it is less relevant when the agent only represents one company, such as a State Farm agent, or a Farmers agent.

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