Insurance companies and insurance agents have no general duty to obtain coverage nor to make sure the coverage is adequate. On the other hand, courts have found insurance companies 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 numerous cases, including, the 1992, Texas Supreme Court opinion, May v. United Services Ass’n of America. Also, the 1999, 1st Court of Appeals opinion, Frazier v. Texas Farm Bureau Mutual Ins. Co.
An agent has a duty to keep the customer informed about the insurance policy’s expiration date when the agent receives information pertaining to expiration date that is intended for the customer. This was discussed in the 1985, Texas Supreme Court opinion, Horn v. Hedgecoke Ins. Agency.
Additionally, the court in May 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.
In addition to the case of special relationships, May also suggests that an agent may be liable for his negligence in obtaining an adequate policy where the adequacy of the policy can be “assessed by objective measure.”
The court in May suggests 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. The precise formulation necessary to put the agent on notice, however, remains unclear.
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 times.
An agent may also be liable for failing to obtain insurance sought by the insured. This is discussed as far back as a 1948, opinion from the El Paso Court of Appeals, styled, Burroughs v. Bunch. Also, a 1987, San Antonio Court of Appeals opinion styled, Rainey-Mapes v. Queen Charters, Inc., discusses this issue.