In order to hold a person liable for his/her acts or omissions, the thing complained of must violate a duty which the law recognizes. This is easily understandable in the case of a collision resulting from running a stop sign. The law imposes a duty of drivers to stop at stop signs. So, when a driver violates that duty by running a stop sign, he or she is liable for the damages caused. So, too, with insurance agents.
Nationally there is a concept known as the “professional judgment rule” which holds that an agent in the business of selling insurance must act in a manner befitting a reasonable and prudent agent. Accordingly, agents who do not utilize their skills in this way are subject to claims for damages. Unfortunately, our Texas Supreme Court has rejected the “professional judgment rule” for use Texas. Instead, in Texas, agents have a general duty to use reasonable care, skill and diligence in procuring insurance. It even includes the duty of an agent to “keep his clients fully informed so that they can remain safely insured.” This is according to the 1977, Beaumont Court of Appeals opinion, Trinity Universal Ins. Co. V. Burnette. In the Burnette case the court upheld a jury finding that an insurance agent was negligent in failing to “thoroughly acquaint himself” with his client’s needs and in failing to produce the coverage for risks or perils the client faced.
On 1992, the Texas Supreme Court was faced with deciding if an insurance agent was negligent for failing to explore other health insurance coverage options beyond one with a tricky termination and deferral clause. This was the opinion styled, May v. United Services Association of America. In this case, the May wound up without coverage after buying the policy that the agent recommended. The lawsuit claimed that the agent failed to investigate alternative policies which were easily obtainable. This was factually true – the agent did not investigate any of the several other possible policies and instead settled on the first one he found. Nevertheless, the Texas Supreme Court found that the agent did not “mislead” the May about the limits of the policy selected. The May case dramatically changed the fact of insurance law in Texas. In essence, it appears the the Court now requires there to be an actual misrepresentation in order for the Plaintiff to succeed. However, the court did leave open the possibility that the Mays might have succeeded if they had an explicit agreement with the agent regarding what terms they required in the policy that the agent obtained. Had the agent violated such an agreement, he might have been found liable.