Insurance Agents & Failure to Procure Coverage in Washington
An insurance producer can become responsible when the producer undertakes to obtain particular insurance but fails to procure what was requested. Washington law draws a different line, however, when the complaint is simply that an agent should have recommended more insurance. A broader duty to advise ordinarily requires a recognized special relationship.
Washington regulates the people who sell, solicit and negotiate insurance
Washington uses the statutory term insurance producer. RCW 48.17.010 defines an insurance producer as a person required to be licensed to sell, solicit or negotiate insurance.
“Negotiate” includes directly advising a purchaser or prospective purchaser about substantive benefits, terms or conditions of a particular insurance contract when the person also sells or obtains insurance.
Place the contract
Exchange an insurance contract for money or its equivalent on behalf of an insurer.
Seek the application
Ask or urge a person to apply for a particular kind of insurance from a particular insurer.
Advise on terms
Discuss substantive benefits, coverage terms or conditions of a particular proposed insurance contract.
A producer who undertakes to obtain specific insurance must use reasonable care
Washington distinguishes between failing to obtain specifically requested insurance and merely failing to recommend additional insurance that the customer never requested.
The insured alleged that she requested $300,000 of liability insurance but the agent obtained only $100,000. The Court of Appeals recognized the agent's potential liability for negligent performance of the duty undertaken to obtain the requested insurance.
Examples can include a producer undertaking to obtain:
- a stated liability limit;
- UIM at a specified limit;
- PIP;
- commercial auto coverage;
- hired or nonowned automobile coverage;
- an umbrella or excess policy;
- a particular vehicle endorsement;
- additional-insured protection; or
- another specifically requested coverage.
An agent ordinarily does not have a general duty to recommend enough insurance for every possible loss
Washington courts reject the proposition that an ordinary insurance producer automatically becomes the customer's continuing risk-management adviser.
Holds that, absent a special relationship, an insurance agent did not have a duty to recommend higher automobile liability limits simply because the insured's existing coverage later proved inadequate.
Reaffirms that an agent ordinarily has no obligation to recommend liability limits greater than those selected by the insured unless a special relationship creates a broader advisory duty.
A special relationship can create a broader duty to advise
Washington recognizes limited circumstances in which the producer-customer relationship goes beyond an ordinary insurance transaction.
1. the producer holds himself or herself out as an insurance specialist and receives compensation for consultation and advice apart from ordinary premiums; or
2. there is a long-standing relationship, meaningful interaction concerning coverage, and detrimental reliance by the insured on the producer's expertise.
Applies Washington's special-relationship test and emphasizes that a lengthy customer relationship alone is insufficient. There must be meaningful interaction concerning the adequacy of coverage and reliance on the producer's expertise.
Reaffirms that neither an insurer nor its agents ordinarily have a duty to review or counsel an insured about the adequacy of coverage unless a recognized special relationship exists.
The central factual question is often: what did the customer actually ask the agent to obtain?
A procurement dispute should be reconstructed from contemporaneous documents.
| Evidence | What it may establish |
|---|---|
| Application | Requested coverage, vehicles, drivers, limits and representations. |
| Quote | Coverage proposed before the insurance was purchased. |
| Email or text | Specific requests for limits, endorsements or policy changes. |
| Renewal correspondence | Requests to increase or maintain coverage at renewal. |
| Producer notes | Discussions concerning the customer's requested insurance. |
| Declarations page | Insurance actually issued and limits actually placed. |
| Binder | Temporary insurance purportedly placed before formal policy issuance. |
| Premium records | What coverage was charged and whether payment was received. |
A binder can establish temporary coverage before the policy is issued
Washington recognizes temporary insurance binders under chapter 48.18 RCW.
RCW 48.18.220 provides that when a producer or other authorized representative receives premium money while purporting to bind coverage, the receipt must state:
- that it is a binder;
- a brief description of the coverage bound; and
- the identity of the insurer in which coverage is bound.
RCW 48.18.230 provides that a binder temporarily binds insurance pending issuance of the policy and generally cannot remain effective beyond issuance of the policy or 90 days from its effective date, whichever is earlier, absent authorized extension.
Producer misconduct can involve more than failure to procure
Washington's producer-licensing statutes authorize regulatory action for specified conduct involving dishonesty or misrepresentation.
RCW 48.17.530 permits discipline for conduct including:
- violating insurance laws or commissioner rules;
- obtaining a license by fraud or misrepresentation;
- misappropriating money or property received in insurance business;
- intentionally misrepresenting terms of an actual or proposed insurance contract;
- insurance unfair trade practices or fraud;
- fraudulent, coercive or dishonest practices;
- demonstrated incompetence or untrustworthiness; and
- forging another person's name on an insurance application or transaction document.
An insurer-appointed agent and an independent producer may occupy different roles
RCW 48.17.160 provides that an insurance producer may not act as the agent of an insurer unless appointed by that insurer.
A producer who is not acting as an insurer's agent does not necessarily require an appointment from that insurer merely to hold a producer license.
Explains that an insurance broker is generally treated as the insured's agent, while whether the broker also acts for an insurer depends on the facts, authorization and activity involved.
Failure to procure requires proof that the missing insurance would have covered the loss
Producer negligence requires more than showing that insurance was not obtained.
The claimant generally must establish:
- a duty relating to the requested insurance;
- breach of that duty;
- legally cognizable damages; and
- a causal connection between the breach and those damages.
States the familiar duty, breach, damages and proximate-cause elements for negligence claims against an insurance agent.
Establishes the important causation rule that when negligent failure to procure insurance is alleged, the claimant must show that the requested insurance, if obtained, would have covered the loss at issue.
The missing coverage must match the loss
A producer cannot ordinarily be held responsible for a loss that the requested insurance would not have covered.
Applies the causation rule where liability insurance had allegedly not been procured. The claimant sought damages involving first-party property loss that the requested liability policy would not have covered, defeating the necessary causal connection.
Loss of a settlement opportunity can make insufficient limits consequential
The insured allegedly requested $300,000 in liability insurance but received only $100,000. The underlying claimant would have settled for the requested $300,000 limit. The case illustrates how failure to procure requested limits can create real excess exposure and affect settlement.
The insured should also verify what was actually issued
Washington generally does not impose a broad producer duty to continually reassess coverage, but consumers should still compare the policy delivered with the insurance they requested.
When a new or renewed policy arrives, check:
- named insured;
- drivers;
- listed vehicles;
- liability limits;
- UIM limits;
- PIP status;
- deductibles;
- business-use endorsements;
- umbrella or excess status;
- excluded-driver endorsements; and
- other requested changes.
Washington OIC regulates insurance producers
The Washington Office of the Insurance Commissioner licenses and monitors producers and agencies and investigates complaints involving insurance companies and insurance professionals.
Regulatory issues can include:
- unlicensed insurance activity;
- misrepresentation;
- improper handling of premiums;
- forged applications or transaction documents;
- dishonest or fraudulent conduct;
- licensing violations; and
- other violations of Washington insurance law.
Citizen workflow for suspected failure to procure insurance
Bottom line
Washington distinguishes failure to procure requested insurance from failure to advise a customer to purchase more insurance. A producer who undertakes to obtain specified coverage can be responsible for negligent performance of that undertaking. But an ordinary producer generally does not have a continuing obligation to determine that the customer has enough liability insurance for every possible loss. A broader advisory duty ordinarily requires a recognized special relationship. Preserve the application, quote, emails, producer notes, binder, premium records and policy actually issued, then determine exactly what insurance was requested, what the producer undertook to obtain, whether the missing policy would have covered the loss, and what damages resulted from its absence.