Agents E&O Standard of Care Project
Florida Survey
To gain a deeper understanding of the differing agent
duties and standard of care by state, the Big “I” Profes-
sional Liability Program and Swiss Re Corporate Solu-
tions surveyed their panel counsel attorneys. Each
attorney was asked to draft a brief synopsis outlining
the agents’ standard of care in their state. They were
also asked to identify and include a short summary of
the landmark cases. In addition, many of the summa-
ries include sample case studies emphasizing how
legal duties and issues with standard of care effected
the outcome. Finally, recent trends in errors in the
state may also be included.
This risk management information is a value-added
service of the Big “I” Professional Liability Program
and Swiss Re Corporate Solutions. For more risk man-
agement information and tools visit
www.iiaba.net/EOHappens. On the specific topic of
agents’ standard of care check out this article from the
Hassett Law firm, our E&O seminar module, and this
risk management webinar.
Disclaimer: This document is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re
shall not be held responsible in any way for, and speciϔically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the
information contained or referenced in this document. The information contained or referenced in this document is not intended to constitute and should not be
considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice. The views expressed in this document
do not necessarily represent the views of the Swiss Re Group ("Swiss Re") and/or its subsidiaries and/or management and/or shareholders.
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Florida Insurance
Agent Standard of
Care
By: Lawrence P. Ingram, Esq., Jessica
Kirkwood Alley, Esq. and Scott L. Terry, Esq.
April 2014
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Florida Insurance Agent Standard of Care
A Florida insurance agent has the following standard of care: An insurance agent
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owes a duty 1) to use
reasonable skill and care to procure insurance that the insured specifically requests or to timely notify the insured
if such coverage is unavailable, 2) when providing insurance-related advice, to do so in a non-negligent manner,
3) to obtain insurance coverage which is clearly warranted by the insured’s expressed needs, and 4) as a
fiduciary, to inform and explain the coverage secured at the insured’s direction and to make no unilateral
changes without advising the insured. In addition, a recent decision from a federal court has articulated a duty
to advise where the agent and insured share a “special relationship.” An insurance agent may also owe a
standard of care to the insurer to act within the scope of authority granted by the insurer.
I. LANDMARK DECISIONS: THE STANDARD OF CARE TO THE INSURED
Seascape of Hickory v. Associated Insurance Services
The court in Seascape of Hickory Point Condo. Ass’n, Inc., Phase III v. Associated Ins. Serv., Inc., 443 So. 2d 488
(1984) first expanded the duty of an insurance agent beyond the “order-taker” standard.
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The insured
condominium had for years purchased all of its insurance through an agency that marketed itself as, “providing
professional insurance planning.” On several occasions, the insured asked the agency for seawall coverage and,
on each occasion, was told that seawall coverage was not available. Later, the uninsured seawall was destroyed
in a storm. After the loss, the insured learned that seawall coverage was widely available. The insured sued the
agency alleging that, but for the agency’s negligent advice, it would have had coverage. Relying on decisions
from other jurisdictions, the appellate court held that under certain circumstances an agent may have a duty to
volunteer advice. The court found that the relationship between the agency and the insured was “not
materially different from that which exists when an injured person seeks advice from a lawyer with respect to
whether or not he has a cause of action for damages”, holding that the insured sufficiently alleged a relationship
that created a duty to use reasonable care in rendering insurance advice.
Seascape fundamentally expanded the Florida agent’s standard of care by creating a duty to render accurate
advice. Seascape held that the scope of the agent’s duty would be dependent upon the relationship between the
parties. While the court did not elaborate specific criteria for the requisite relationship to exist, it emphasized
the long-standing relationship with the agent and the agent’s marketing of “professional” services.
Warehouse Foods, Inc. v. Corporate Risk Management Services, Inc.
The court in Warehouse Foods, Inc. v. Corporate Risk Management Services, Inc., 530 So. 2d 442 (Fla. 1st DCA
1988) held that an agent may be liable for a negligent failure to obtain coverage which is specifically requested
or clearly warranted by the insured’s expressed needs. The insured alleged that it had relied upon the agent’s
expertise and that the agent had advised that it was “fully covered … and did not need any other coverage.”
Nonetheless, the insured suffered uncovered damages from a power failure during a hurricane because the
policy only provided coverage in conjunction with physical damage to buildings, which did not occur. In
finding a duty, the court noted that the insured had expressed a desire to be “fully insured” and specifically
asked about acts of God, and the agent repeatedly advised that the insurance contained all the coverages they
needed, which representation the insured relied upon. Expanding on Seascape, the court held that when an
insured reasonably relies upon an agent’s claimed expertise and advice, liability may be based upon the agent’s
negligent failure to properly advise the insured. The Warehouse Foods decision created, under certain
circumstances, a duty to procure coverage “clearly warranted by the insured’s expressed needs.”
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Although there are distinctions under Florida law between an insurance agent and an insurance broker, this article will use the
term “agent” universally. This article will also use the term “insured” universally to include “client.”
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Under the “order taker” standard, an agent was only liable to an insured if the agent failed to procure insurance specifically
requested by the insured or failed to notify the insured that such insurance was unavailable. Cat ‘N Fiddle, Inc. v. Century Ins. Co.,
200 So. 2d 208, 210-211 (Fla. 3d 1967).
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Adams v. Aetna Casualty & Surety
The court in Adams v. Aetna Cas. & Sur. Co., 574 So. 2d 1142 (Fla. 1st DCA 1991) further expanded the
insurance agent’s duties to include the duty to recommend limits. The agent procured a motor vehicle policy.
The insured was involved in an accident with an underinsured driver and made a UM claim; however, the
policy’s UM limits were significantly lower than the bodily injury limits. The insured sued the agent alleging
the agent should have advised of the availability and advisability of higher UM limits.
The agent’s defense relied on four signed UM selection/rejection forms which arguably established a knowing
selection of lower UM limits.
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The court disagreed, holding that the forms did not prove that the insured
understood the scope and purpose of UM coverage. The court held that, even if the insured were found to
have intentionally selected the lower limits, the agent could still potentially be liable for failing to advise of the
appropriate limits and the need for the coverage. The court’s expansive holding states: “This general duty
requires the agent to exercise due care in correctly advising the insured of the existence and availability of
particular insurance, including the availability and desirability of obtaining higher limits, depending on the scope
of the agent’s undertaking.”
As in Seascape and Warehouse Foods, the Adams court did not articulate a test or set of criteria that would elevate
the agent’s standard of care to include a duty to advise of particular insurance and the desirability of higher
limits.
Wachovia Ins. Services v. Toomey
In Wachovia Ins. Services, Inc. v. Toomey, 994 So. 2d 980 (Fla. 2008), the Florida Supreme Court held that an
insurance agent has fiduciary duties to the insured. While the primary issue in Wachovia was whether the claims
against the agent were properly assigned, the court nonetheless discussed the duties an agent owes the insured.
The court noted that the relationship between an insurance agent and its insured is similar to that of an attorney
and a client (although less personal), holding that insurance agents will often have both a fiduciary duty to their
insured and a common law duty to properly procure requested insurance coverage. The fiduciary duty imposes
an obligation on the agent to inform and explain the coverage it has secured at the insured’s direction and, in
the event the agent makes unilateral changes to coverage, the agent is obligated to advise the insured of those
changes. The court concluded that while the fiduciary and common law duties sometime overlap, they are two
distinct causes of action and are not necessarily co-extensive.
Tiara Condominium Ass’n v. Marsh
The United States District Court for the Southern District of Florida in the case of Tiara Condominium Ass’n v.
Marsh, USA, Inc., --- F. Supp. 2d ----, 2014 WL 109140, in January 2014, held for the first time that a Florida
insurance agent could have an affirmative duty to advise of the types and amounts of insurance “reasonably and
prudently needed to meet the insured’s complete needs”. No court applying Florida law had previously imposed a
specific duty to advise nor provided a list of the factual criteria which might establish the “special relationship”
(though the “special relationship” standard had previously been articulated in numerous other jurisdictions).
Under Tiara, if there is a “special relationship,” then the agent may have an affirmative duty to recommend the
amounts and types of insurance reasonably necessary to protect the insured’s interests.
_________________________
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Subsequent to Adams, the Florida legislature amended Fla. Stat. 627.727 such that now, if an insured executes a UM/UIM
selection form, it creates a conclusive presumption that the selection was knowing and informed. See Mitleider v. Brier Grieves
Agency, Inc., 53 So. 3d 410 (Fla. 4
th
DCA 2011). Fla. Stat. 627.727 only applies to UM/UIM coverage; therefore, Adams has not
been overruled except as to UM coverage.
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In 2004, an agent procured a windstorm policy for an ocean front condominium with a limit of almost $50
million. When several severe storms caused over $100 million in damages, the insured condominium filed suit
against the agent asserting claims for breach of fiduciary duty and negligence. The agent argued that it was
simply acting on the insured’s orders when it procured the windstorm policy and could not be liable because it
had no duty to advise regarding prudent policy limits. Importantly, it was undisputed that the agent relied upon
the insured’s appraisal when recommending limits of coverage.
The court addressed what it described as a “novel question” of Florida law: When an insurance agent shares a
“special relationship” with its insured, is the agent subject to an extra-contractual enhanced duty of care to
advise its insured about the amount of coverage prudently needed to meet its complete insurance needs? The
court answered the question affirmatively. Noting that there was not any Florida case on point, the Tiara court
looked to a “well-developed” law from other jurisdictions, which finds a duty to advise regarding proper limits
can arise if the agent and insured have a “special relationship.” The court found that a “special relationship”
that gives rise to an enhanced duty to advise can arise under a number of non-exclusive factual scenarios
including:
1) Where the agent assumes the responsibility of selecting the appropriate insurance policy for the insured
(by express agreement or promise);
2) Where the agent holds itself out as having an expertise in a given field and the insured relies upon that
expertise;
3) Where the agent exercises broad discretion over the insurance needs;
4) Where the agent is intimately involved in the insured’s business affairs or regularly gives the insured
advice or assistance in maintaining proper coverage;
5) Where there is a substantial length and depth to the relationship;
6) Where the agent volunteers information about the insured’s needs; and
7) Where the agent is paid additional compensation for advisory services.
Even before Tiara it was clear that Florida law imposed a duty to advise an insured under certain factual
circumstances. The Tiara decision arguably expands the duty incrementally by declaring a duty to advise where
there is a “special relationship”. Tiara also, for the first time in Florida, provides a non-exclusive list of criteria a
fact-finder might consider in determining whether a “special relationship” exists. It remains an open question
whether the state courts of Florida will now adopt and follow Tiara.
II. STANDARD OF CARE TO AN INSURER
A Florida agent also owes a duty to the insurer. Crawford v. DiMicco, 216 So. 2d 769 (Fla. 4th DCA 1968). If
an insurer suffers a loss as a result of the agent’s negligence, the agent must indemnify the insurer for the full
amount of those damages. An agent’s obligation to indemnify an insurer typically arises where the agent
exceeds the scope of the authority granted by the insurer. For example, in Crawford, an insurer authorized an
agent to bind insurance on boats if the value was under $5,000 and the boat was less than 3 years old.
Notwithstanding this limitation, the agent bound a policy on a boat that met neither criteria. The boat
subsequently sank and a jury determined that coverage existed despite the carrier’s denial. Although the jury
returned a verdict in favor of the agent, on appeal the court held that if an agent binds a contract of insurance
without authorization, the agent must fully indemnify the insurer for the loss.
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An insurer does not, however, have an unlimited right to indemnification. Instead, Florida courts note that the
agent is only liable for that portion of the damages caused by the agent’s unauthorized act. American Chambers
Life Ins. Co. v. Power, 690 So. 2d 683 (Fla. 4th DCA 1997).
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4
In addition to arising from the principal agent relationship, a duty to indemnify also commonly arises from a contractual
agreement between the agent and insurer.
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The insurer remains liable for any additional damages caused by its own actions. Id. (although agent had duty
to indemnify, insurer remained liable for its own bad faith conduct); see also Bankers Ins. Co. v. American Team
Managers, Inc., 2012 WL 2179117 (M.D. Fla.).
IV. CONCLUSION
Whether the Florida state courts will adopt Tiara’s “special relationship” test remains an open question, but this
seems likely given historical trends. Nevertheless, Florida agents are no longer protected by the “order taker”
standard, e.g. the agent was merely complying with the insured’s specific request for coverage. Agents need to
understand that they can create a “special relationship” by holding themselves out as “professionals” through
marketing efforts, websites and other social media, by routinely providing insurance advice, by collecting
additional fees for risk management services and even (innocently) by enjoying a long-term relationship with their
insured. Those agents in a “special relationship” will likely be found to have an enhanced duty to advise their
insureds regarding the availability and desirability of particular insurance coverage and the appropriate limits necessary
to protect the insured. Such agents should protect themselves by maintaining clear documentation of the insurance
offered and the insured’s rejection of the same. Agents must also consistently follow through on their promise of
professional care by refusing to delegate responsibility and remaining engaged in the marketing efforts and personally
communicating with clients at each renewal.
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III. CASE STUDIES
Case Study #1
a. Line of Coverage Involved: Commercial Property.
b. Position of the Person in the Agency Involved: Agent (220 License).
c. Personal or Commercial Lines: Commercial Lines.
d. Type of Coverage Involved: Commercial Property.
e. Procedural or Knowledge-Based Error: Agent allegedly failed to recommend “adequate” property
limits for a commercial building.
f. Claimant Allegation: Negligent Procurement.
g. Settlement or Trial: Dismissal on dispositive motion in favor of agency.
h. Description of Alleged Error: After a commercial building was destroyed by fire, the agency was sued for
the difference between the “true” value of the building and the amount of coverage actually procured by the
agency.
i. Tip to Avoid the Claim: Agents should clearly communicate to the insured that they will not assist in
valuing the property for the purposes of insurance coverage amounts and advise the insured of the
availability of additional coverage.
j. Summary of the Case: After a commercial building was destroyed in a fire, the owners sued their agency
claiming the coverage procured was inadequate to replace the building. Evidence developed in discovery
demonstrated that the decision regarding the amount of coverage was made by the insured and not based on
a recommendation from the agent. The Court granted judgment in favor of the agency based on a lack of
duty to procure adequate coverage. This case was decided before the recent decision in Tiara suggested that
there might be a broader duty on the part of an agency to recommend limits if there was a “special
relationship” between the agency and the insured. If the court had followed Tiara, it is likely that a trial
would have been required to determine whether a “special relationship” sufficient to trigger an enhanced
duty existed.
Case Study # 2
a. Line of Coverage Involved: Professional Liability.
b. Position of the Person in the Agency Involved: Agent (220 License).
c. Personal or Commercial Lines: Commercial Lines.
d. Type of Coverage Involved: Professional Liability.
e. Procedural or Knowledge-Based Error: Agent allegedly failed to accurately explain the application for
professional liability policy such that insured’s misrepresentations resulted in coverage denial.
f. Claimant Allegation: Alleged negligence and breach of fiduciary duty.
g. Settlement or Trial: Dismissal on dispositive motion in favor of the agency.
h. Description of Alleged Error: Insured claimed that the agency failed to accurately explain the application
and alleged it was the agency’s fault that the carrier denied coverage for application misrepresentation.
i. Tip to Avoid the Claim: The agency had a well-documented file that contained a signed copy of the
application and other documentation that established the insured’s involvement in and approval of the
submitted application.
j. Summary of the Case: The insured professional failed to accurately respond to several questions on an
application for professional liability insurance and failed to disclose the existence of a possible claim for
malpractice. When suit was subsequently filed, the carrier denied coverage due to these misstatements on
the application. The insured professional sued the agency claiming the agency’s negligence caused the
denial. The agency obtained an abatement pending resolution of the coverage action and thereafter a
dismissal because the Court in the coverage suit determined it was the insured’s fault for failing to disclose
the potential claim on the application.
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Case Study # 3
a. Line of Coverage Involved: Automobile Liability.
b. Position of the Person in the Agency Involved: Agent (220 License).
c. Personal or Commercial Lines: Commercial Lines.
d. Type of Coverage Involved: Uninsured/Underinsured Motorist (UM/UIM).
e. Procedural or Knowledge-Based Error: Agent allegedly failed to procure stacked UM/UIM coverage
for a newly acquired personal motorcycle.
f. Claimant Allegation: Negligent procurement and breach of fiduciary duty.
g. Settlement or Trial: Settlement.
h. Description of Alleged Error: Insured’s widow alleged that the agency failed to procure stacked
UM/UIM coverage for a personal motorcycle on the insured’s commercial automobile policy.
i. Tip to Avoid the Claim: Agents should follow up with clients at each renewal in writing to determine if
new vehicles were purchased and to confirm existing coverages.
j. Summary of the Case: The agency procured personal and auto insurance for the insured for many years.
The insured’s motorcycles were placed on a different policy from his other vehicles for cost savings. The
auto policy renewed automatically from the carrier and over the years the insured disclosed additional
motorcycles to the auto carrier without informing the agent. When the insured was killed in a motorcycle
accident with a UM driver, the widow sued for negligence claiming the agency failed to list the motorcycle
on the auto policy and to obtain stacked benefits. A lack of documentation combined with the threat of
significant damages led to a settlement of this suit.
Case Study # 4
a. Line of Coverage Involved: Commercial Property and Casualty.
b. Position of the Person in the Agency Involved: Agent (220 and 440 Licenses).
c. Personal or Commercial Lines: Commercial Lines.
d. Type of Coverage Involved: Liability.
e. Procedural or Knowledge Based Error: Agent allegedly failed to obtain insurance necessary to protect
the insured from liability.
f. Claimant Allegation: Negligent procurement, fraud, and breach of fiduciary duty.
g. Settlement or Trial: Settlement.
h. Description of Alleged Error: Agent allegedly failed to advise insured regarding the availability of
coverage necessary to protect the insured’s interests that the agent should have known was necessary due to
Certificates of Insurance issued in connection with the policy.
i. Tip to Avoid New Claim: Carefully review all Certificates of Insurance issued to ensure accuracy and to
ensure they are consistent with the policy coverage.
j. Summary of the Case: The agent procured coverage for a commercial client who incorrectly described
his line of business. The insured settled with the injured party and assigned his claims against the agent. The
assignee sued alleging that that the agent failed to advise of appropriate coverage when the agent should have
known such coverage was necessary because of several Certificates of Insurance issued potentially gave the
agent notice that the coverage procured was incomplete. The case ultimately settled, in part because of
questions about the Certificates of Insurance and in part, because the underlying facts were tragic and trial
would have been a considerable risk.
CONTACT:
Mr. Lawrence P. Ingram is head of the Professional Liability practice group in the Phelps Dunbar Tampa office.
Should you have any questions pertaining to the content of this article, please direct them to Mr. Ingram at
lawrence.ingram@phelps.com or (813) 472-7555, to Ms. Jessica Kirkwood Alley at jessi[email protected] or (813)
