When Insurance Fails: Holding Agents Legally Accountable

Almost every state requires people to maintain insurance coverage on their vehicles. New Hampshire is the one exception to the rule, and even that state requires anyone without insurance to prove that they’re financially capable of covering the cost of any harm or property damage they cause while driving. With all that being the case, an estimated 215 million Americans currently have active car insurance policies. Collectively, policyholders pay more than $360 billion per year for their premiums in good faith that their coverage providers won’t let them down when the time comes to file a claim. 

Unfortunately, around 15 percent of insurance claims are denied. Millions of people also ultimately receive settlements that fall well short of their needs. That leaves quite a few policyholders in the lurch. It also leaves many wondering about the legal responsibility of an insurance agent when it comes to issuing policies and whether agents can be held accountable if clients’ policies fail to meet their needs. 

What Are Insurance Agents’ Responsibilities?

First, let’s address insurance agents’ responsibilities when working with clients. Agents must take reasonable care to find coverage that meets clients’ needs and requests. They’re also required to inform clients of any problems they may have in getting the coverage they ask for. For example, if a client wants a type of coverage that just doesn’t exist, isn’t eligible for specific types of coverage, or requests coverage an insurance provider isn’t currently offering, an agent must tell the client about those issues or limitations.

Agents are also responsible for explaining to clients what their policies cover and what they don’t. That being said, there are limits to what insurance agents can be held accountable for. They have no legal obligation to tell clients how much coverage they need. Though they offer guidance and explain different types of coverage, it’s up to clients to decide how much coverage is best for them. An exception here would be if the insurance agent is serving as a client’s professional advisor. 

When Can Insurance Agents Be Held Legally Accountable?

When insurance agents fall short of their legal responsibilities, they can be held accountable for their actions. The coverage providers they’re working for can be held responsible as well. There are certain situations in which policyholders can pursue legal action against their insurance agents and providers. 

For one, if an agent sold a client a policy that clearly didn’t meet their needs and expectations, legal action is warranted. Secondly, if an agent failed to include a specific type of coverage in a client’s policy, they can be held accountable. For instance, if a person asked for hurricane coverage for their home but the agent didn’t add it to the policy, the agent, and potentially the coverage provider, can be held liable for the shortcomings.

When agents intentionally mislead clients about what their policies cover, they can be held liable for their dishonesty. If an agent doesn’t thoroughly explain policy limitations and exclusions, they’ve failed to live up to their legal responsibilities. In any of those cases, clients can seek compensation for the damages and losses they suffered as a result. 

Making Things Right When Insurance Falls Short

When people’s insurance coverage falls short of their needs and expectations, their agents can be held accountable in certain situations. Policyholders can seek compensation for losses that result from agents’ negligence. Of course, the key to success is proving that the agent was negligent and didn’t meet their legal obligations. Attorneys can help make that happen to ensure those who suffer the consequences get the compensation they’re entitled to.