A Michigan insurance coverage agent has an obligation to acquire insurance coverage protection requested by an insured. Usually, until a particular relationship exists between a policyholder and the agent, a Michigan insurance coverage agent has no responsibility to advise concerning the adequacy of insurance coverage protection.

A not too long ago determined Michigan case mentioned these insurance coverage agent duties within the mild of the next info:¹

Juliana Reineke (Julie Reineke) and her husband, Leland Matthew Reineke (Matt Reineke), are the principal brokers for 5 Waters. In 2017, Matt Reineke labored with defendant Mark Bone, an impartial insurance coverage agent employed by Bailey Company Inc, to acquire a business insurance coverage coverage for 5 Waters. Bone testified that Matt Reineke requested insurance coverage for his enterprise. He didn’t recall the precise language of the request. So as to decide enough protection quantities, he visited 5 Waters’ facility and walked by it with Matt Reineke. Based on Matt Reineke, he decided the worth of the tools and offered that info to Bone. The protection limits have been decided utilizing substitute worth. Like Bone, Matt Reineke didn’t testify as to any particular language that he used when requesting insurance coverage for 5 Waters. Following the on-site assembly, Bone procured a business insurance coverage coverage for 5 Waters that had substitute protection for 5 Waters’ tools within the quantities decided by Matt Reineke.

5 Waters’ business insurance coverage coverage was renewed in 2018, 2019, and 2020. Annually they obtained correspondence inviting them to schedule a assessment of 5 Waters’ coverage with defendants. They didn’t achieve this. Furthermore, they didn’t totally learn the coverage procured for 5 Waters by Bailey Company.

After the 2020 flooding, Matt Reineke contacted Bone. It was at the moment that he discovered from Bone that 5 Waters didn’t have flood insurance coverage. He acknowledged that he was ‘utterly shocked’ as a result of he thought that the enterprise was coated. He later learn his coverage, nevertheless, and it clearly offered that damages brought on by flooding, together with flooding injury occurring as the results of a dam failure, was expressly excluded from the coverage. 5 Waters filed a declare with their insurance coverage firm, however, as a result of the injury brought on by the flood was excluded from its protection, the declare was denied.

…5 Waters introduced a declare in opposition to defendants, alleging negligence in opposition to them arising from its lack of insurance coverage protection for flood injury to its Midland enterprise property.

In its evaluation, the courtroom famous that:

An insurance coverage agent, nevertheless, could owe an obligation to advise if ‘an occasion happens that alters the character of the connection between the agent and the insured.’  In Harts, our Supreme Court docket described 4 occasions that give rise to a ‘particular relationship’ between the insurance coverage agent and the insured such that there’s a responsibility to advise on the a part of the agent: (1) the agent misrepresents the character or extent of the protection supplied or offered, (2) an ambiguous request is made that requires a clarification, (3) an inquiry is made which will require recommendation and the agent, although he needn’t, provides recommendation that’s inaccurate, or (4) the agent assumes an extra responsibility by both categorical settlement with or promise to the insured.

The courtroom additional defined that this rule is similar no matter whether or not the licensed agent is a captive or impartial agent:

Additional, the [Harts] Court docket mentioned MCL 500.2116 and the way it treats captive brokers the identical as impartial brokers with regard to order-taking capabilities, in addition to MCL 500.1232, which restricts those that can provide recommendation about insurance coverage insurance policies to licensed insurance coverage counselors, except for ‘the customary recommendation supplied by a licensed insurance coverage agent.’ .. Therefore, the Court docket in Harts concluded, a licensed insurance coverage agent could give ‘customary recommendation,’ however shouldn’t be underneath any responsibility to take action….Moreover, we be aware [that] nothing within the Court docket’s opinion in Harts particularly indicated that the Court docket solely supposed to deal with captive brokers, somewhat than impartial brokers, with regard to the responsibility at difficulty. And, though plaintiffs cite circumstances equivalent to [Genesee Foods Servs, Inc v Meadowbrook, Inc, 279 Mich App 649; 760 NW2d 259 (2008)], for the concept impartial brokers owe a fiduciary responsibility to the insured, these circumstances don’t expressly point out an obligation to advise the insured concerning the adequacy of protection.²

The Michigan courtroom then dominated in favor of the insurance coverage agent, discovering:

As a result of there isn’t any particular relationship between defendants and 5 Waters, we conclude that defendants didn’t have an obligation to advise 5 Waters as to the adequacy of its protection.

5 Waters argues that—no matter what particular protection it requested—as an impartial insurance coverage agent Bone owed it a fiduciary obligation to acquire the broadest protection out there. In help 5 Waters directs this Court docket to Genesee Meals, 279 Mich App 649. That case, nevertheless, held that within the case of an impartial insurance coverage agent, the defendants ‘fiduciary responsibility of loyalty rested with [the insured], who may depend upon this responsibility of loyalty to make sure that defendants have been performing in [its] greatest pursuits each by way of discovering an insurer that might present them with essentially the most complete protection and in guaranteeing that the insurance coverage contract correctly addressed their wants.’…. Nothing in Genesee Meals signifies that the responsibility to offer the ‘most complete protection’ features a responsibility to offer insurance coverage protection that has not been requested by the insured or to offer the ‘broadest protection out there.’ On this case, 5 Waters by no means requested flood insurance coverage. And, as indicated above, defendants didn’t have an obligation to advise 5 Waters that its protection may be insufficient as the results of not acquiring flood insurance coverage.³

Insurance coverage agent negligence circumstances are complicated and infrequently depend upon the character of the connection between the events and what was stated between them. The higher the agent is requested to assessment and advise concerning the protection or the higher the agent guarantees to take action, the higher the publicity is to the agent to acquire or no less than advise about acquiring the protection.

For public adjusters providing a service to assessment a shopper’s or potential shopper’s coverage, what sort of publicity are you assuming? Is it even authorized to take action? Keep tuned for a weblog about that matter.

Thought For The Day   

Guarantees could get thee associates, however non-performance will flip them into enemies.

—Benjamin Franklin

¹ 5 Waters Prop. v. Bone, No. 366075, 2024 WL 748484 (Mich. App. Feb. 22, 2024).

² Id., at *4, (citing Janovski v. S J Ferrari Ins Company, Inc., No. 326457 [unpub. op.] (Mich. App. Might 24, 2016)).

³ 5 Waters, at *5.