Monday, August 24, 2015

Does your community's relationship with your insurance agent qualify as a "special relationship"?

Does your board consider itself  "special" in the eyes of your insurance agent? Do you believe your agent has a duty to advise you whether or not the coverage you are purchasing and the limits you are seeking are sufficient?

You might be under the illusion that your agent owes you a greater duty than he or she really does unless your relationship meets a certain standard.

Your board may believe that your insurance agent has a duty to advise you, among other things, about the type of coverage you need and the amount of limits you should carry. However, in the absence of a "special relationship" and certain circumstances, you may be sorely disappointed to learn that your relationship with your insurance agent is merely "ordinary".

In an "ordinary" client-agent relationship, the agent typically has the following duties to his or her client:
  • to procure the insurance coverage requested by your board using a level of skill, care and diligence which is standard in the industry;
  • to inform your board if he or she cannot procure the coverage you have requested; and
  • to not mislead or misinform your board about your coverage.

    Courts are more likely to hold an insurance agent to a higher standard of care with special relationship clients, so it makes sense for your community to become one of those "special relationship" clients. So how do you do it?

-Seek out an agent who is recognized as an expert in the industry.

-Insist on a relationship with your agent that consists of more than just the purchase of a policy or policies. 

-Ask your insurance agent to serve as a professional adviser in terms of the coverage you are seeking and get him or her to confirm that role in writing. This role should also be filled by your association attorney. If you do not understand your insurance purchase, ask your agent to explain it to you, in writing.

-Demand extra time and resources from your agent particularly if you are paying him or her any compensation in addition to his or her commission.

-Have a long-term relationship with your agent.

If you would like more out of your relationship with your insurance agent than simply a sales transaction, you will need to demand it. By doing so, you may also be able to hold him or her responsible for any negligence in the unfortunate event you do not receive the proper advice.

1 comment:

  1. Donna,

    Great article. The same applies to Engineers, Architects, CPA's, and other providers of professional services. All too often we (engineers) are asked to provide a 'bid' or a 'quote' for services before the client even knows what they want.

    The bottom line is clear:

    We don't know the client's business financials, and we can't make business decisions for them.

    We have no authority to tell a client how to spend their money. Our function is offer options. It's up to the client to decide what is best for him.

    Contracting for professional services based on 'cheap' is exactly what you'll get.

    If you want more than that, then 'ask for it -- even go so far as to demand it.'

    My 2-cents worth based on 30 years of service to the community environment.

    Lew Midlam, PE, SI, SECB