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Case Study – Standard of Care

Level of Expected Service

The owners of a new dealership that specialized in painting spray-on linings in pick-up trucks called an agent to help them obtain “whatever coverage was needed to operate the business” because they knew nothing about insurance matters. The agent replied that she was very familiar with the parent company’s dealerships and programs, and “was the expert on the products necessary to satisfy the company’s insurance needs.” The agent also noted that she had worked with an insurer to develop a unique insurance package that was used with other dealerships throughout the country. The agent then sent one of the owners a blank application, which he partially filled out and returned to the agent, who selected the insurance coverages.

Three years later, an employee was severely injured on the job. When the company filed a claim, the insurer denied it, stating that the company’s commercial general liability policy did not cover workers’ compensation cases. The injured employee then sued the company and the owners, and was awarded $11 million in damages.

The company and owners responded by suing the agent and her agency. The court found that the agent “obviously acted as more than an ordinary agent” and held herself out as having expertise with respect to the insurance needs of the company’s dealership. The owners justifiably relied on her alleged expertise and suffered damages when she failed to secure the appropriate coverage. The court ultimately held that the agent was negligent “as she failed to use the skill and care that a reasonably careful insurance professional would have used” by not advising the owners that they needed workers’ compensation coverage, which was mandatory in their state.


Agents who assume additional duties by holding themselves out as having expertise in the insurance being sought may be liable to the insured for losses that occur as a breach of that special duty. Agents must therefore understand that clients will place greater trust in their advice when they’re perceived as experts. Agents then have an even greater responsibility and ethical duty to ensure that those expectations are met.

Williams v. Hilb, Rogal & Hobbs Ins. Servs. of Calif., 177 Cal. App. 4th 624 (2009).

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