In most, if not all states, there are specific duties and standards that insurance agents will be held to. Essentially, absent a "special relationship", an insurance agent has a duty to exercise reasonable skill and care in obtaining the insurance requested by the customer. The standard further states that an agentaEUR(TM)s duty is to act as a reasonable and prudent insurance agent in the same or similar community would act under the same or similar circumstances. This is often referred to as the reasonable standard doctrine. An insurance agent has no duty to procure insurance coverage not requested by the insured. A failure to use reasonable skill and care is negligence. Is it beginning to sound like an insurance agent is an order taker? Actually that is fairly accurate.
The standard made mention of coverages requested by the customer. This translates into a number of things to consider and tasks to undertake.
1) Insurance agents need to listen to the customer and what coverages they are requesting.What exactly do they want? Is it specific or vague such as "full" coverage - not sure that this policy exists. Either way - listen and listen carefully.
2) The customer discussion should be documented. This documentation should exist not only in the agency management system but also with some form of written communication back to the customer memorializing the discussion. The documentation should include a statement that "if this is not your understanding of the conversation, please contact me immediately".
3) As your agency receives proposals from your carriers, compare the coverages requested to what the carriers are willing to provide. This can happen with all type of carriers although especially with E&S business, the coverage differences (requested to provide) could be significant.
4) Bring to your customer's attention those coverage requests that you are not able to provide coverage for. Don't rely on the "read your policy" position as this has been thrown out in specific circumstances. This material should be clearly spelled out and brought to the customer's attention. Without this explanation, the client will take the position that they asked for aEURoexaEUR? and you got them a policy so they assumed the policy covered what they asked for.
5) Document - Document - Document. It really does make a difference.
This issue gets to the heart of a significant number of E&O claims especially involving producers.
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