After Hurricane Ike, residents of Galveston 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.
Defense – Coverage Not Obtainable
Sometimes, the defendant in an action against an insurance agent or broker for failure to procure insurance coverage will attempt to avoid liability by showing that the client’s failure to obtain the desired coverage was not caused by any wrongdoing on the defendant’s part because the desired coverage was not obtainable from any source. Where such a claim is made, the defendant generally will bear the burden of proving it as an affirmative defense. Stevens v Wafer. The burden of proof is said to be placed on the defendant because an insurance agent or broker is in a better position than the client or the intended beneficiary to determine the availability of insurance coverage.
It may also be possible to show absence of causation by evidence that the claim arose in circumstances which would have been excepted from coverage under the desired policy even if the policy had been procured. The defendant may bear the burden of proving that any exceptions to coverage under the desired policy would have applied. See Stevens v Wafer , (applying, by analogy, rule that plaintiff in action against insurer need only prove insurance and loss, and insurer has burden of proving that insured failed to comply with conditions of coverage).
Amount of Recovery
In many cases, proof of the amount a successful plaintiff is entitled to recover in an action against an insurance agent or broker for failure to procure insurance will present no particular difficulty because the plaintiff’s recovery will be based primarily on the amount of benefits the plaintiff would have received from the insurer if the coverage had been properly procured. Where property insurance is involved, the amount that would have been recoverable under the policy (and consequently the amount recoverable from the defendant) frequently will depend, within the limits of the policy, on other factors such as the value of the property lost by the person who desired coverage, or the extent of that person’s liability. Thus, it may be necessary for the plaintiff to present evidence of that amount.
Several possibilities may be open to the plaintiff who is attempting to establish the value of property and the amount which would have been recovered if a property insurance policy had been properly procured. As a general rule, the owner of property is a competent witness as to its value. See, Stinson v Cravens, Dargan & Co. However, in some circumstances it may be necessary or advisable to present the expert testimony of an appraiser.
Accordingly, it appears that Texas supports, and has rendered several decisions imposing liability upon insurance agents and brokers for failing to procure appropriate insurance per the insured’s instruction. General negligence principals will apply in imposing such liability, as Texas has determined that the agent owes the insured a general duty of reasonable care to place them with the requested insurance. The major hurdle the insured must overcome is the presumption that the insured has read and understands the policy given.