Hurricane Florence – Errors and Omissions Claims Against Insurance Agents and Companies
In the wake of the catastrophic flooding caused by Hurricane Florence, many people have questions about whether they have claims against their insurance companies or agents for various problems related to their flood or wind insurance coverage. A common claim made against a customer’s insurance agent is an Errors and Omissions claim. An Errors and Omissions claim, or an E&O claim, is a claim against a customer’s insurance agent or company alleging that the agent performed inadequate work or negligent actions which lead to the customer not being properly insured for damage to their home or property.
This presents the question – when has an insurance agent breached the duty that he owes to his customers such that he will be liable to them for an E&O claim? Generally, an insurance agent’s duty to his customers requires him to exercise the degree of competence possessed by a reasonable ordinary insurance agent. If the insurance agent breaches this duty, the agent may be liable to the customer for the benefits that the promised insurance would have provided if the promised coverage had been procured.
Typical E&O claims against insurance agents include: (1) failure to procure coverage, (2) failure to adequately explain policy provisions, (3) failure to adequately identify exposures, (4) failure to recommend a coverage, (5) inaccurate or incomplete information, and (6) failure to provide timely notice of a claim to a carrier.
The insurance agent’s duty owed to his customers does not generally require him to recommend certain coverage that is not requested by his customer absent special circumstances. For example, in one case that was litigated before the North Carolina Supreme Court, the plaintiff insurance customer contended that the flood risk at his new business location was so obvious that his insurance agent should have recommended flood insurance even if it was not requested. The NC Supreme Court rejected this contention, holding that the agent’s obligation was limited to what the customer had requested.
However, other North Carolina cases have held that insurance agents do have a duty to recommend additional coverage because of a special fiduciary relationship that exists between the insurance agent and his customer.
There also may be an implied undertaking to procure insurance or advise as to what insurance a customer should get if the circumstances would lead a reasonable customer to believe that advice and recommendations would be provided without request. Some examples of what might lead a customer to reasonably believe that advice and recommendations would be provided without request include: (1) Regularly taking care of a customer’s needs without advance consultation; (2) recommending some types of coverage not requested by the customer without informing the customer that the agent has not done a full risk analysis and that there might be other types of insurance needed; (3) representing that the agent has special expertise in recommending or procuring insurance for the customer’s type of business; and (4) having a practice of reminding customers when they have received notices of premium nonpayment so that the customer comes to believe that he can rely on the agent to remind him of past due bills rather than paying attention to the bills received directly from the carrier.
Every E&O claim will be different, so it is important for insurance customers to consult an experienced insurance attorney to see if they have a viable Errors and Omissions claim against there insurance company or agent for losses sustained in the wake of Hurricane Florence.