After Hurricane Ike, residents of Galeveston and Bolivar Islands discovered they did not have the insurance their agent had told them they purchased. To recover, a claim must be brought against the agent.
Causation – Negligence
In an action against an insurance agent or broker for failure to procure insurance coverage brought under a negligence theory the plaintiff must show that the defendant’s negligence was the cause of a loss which the plaintiff sustained as a consequence of being without suitable coverage. The means of establishing causation may vary according to the nature of the plaintiff’s breach and other circumstances of each case. In many cases, it will be necessary to show that the desired coverage was available and thus would have been obtained if the defendant had been exercising reasonable skill, care, and diligence to procure it.
Otherwise stated, an insurance agent’s or broker’s failure to obtain the coverage expected by the client may not be the cause of a loss sustained due to lack of coverage if the coverage in question would not have been issued by any insurer under any relevant circumstances. Establishing causation may also require proof that the person who requested coverage had an insurable interest in the subject matter of the desired insurance. Proof that the plaintiff sustained a loss, or that some other event occurred, so that, under the terms of the policy which the defendant was to have procured, the plaintiff would have been entitled to benefits if the policy had been in effect may also be necessary.
Although it is necessary to prove that the defendant’s negligence was a proximate cause of the plaintiff’s loss by showing that the loss was foreseeable, questions of foreseeability generally will not present substantial problems for the plaintiff in an action of this nature. This is because it usually will be obvious that a loss caused by a lack of insurance coverage is a foreseeable consequence of an insurance agent’s or broker’s failure to procure the coverage desired by a client, or to notify the client of the lack of coverage. See Trinity Universal Insurance Co v Burnette .
Causation – Property Insurance
However, more substantial issues may arise in actions for failure to procure property insurance or liability insurance. In order to establish that the plaintiff would have been entitled to benefits if a property or liability insurance had been procured, it will be necessary to show that the plaintiff sustained a compensable loss or injury. This will often involve a two-step procedure.
First, it will be necessary to present evidence of the fact that a loss or injury occurred. See, Stevens v Wafer . Second, it will be necessary to establish that the plaintiff’s loss or injury would have been compensable under the terms of the desired insurance policy by showing that the policy applies to and covers the loss or injury in question, and that any conditions upon which coverage was contingent had, or would have, been satisfied.