CA Agent Held Liable For Failing to Recommend WC

The California Court of Appeal has affirmed a lower court ruling that an insurance agent was negligent in failing to advise a client of the need for Workers Comp insurance when she produced other business insurance coverage for that client.

In Williams v. Hilb, Rogal & Hobbs Insurance Services of California, Inc., No. B203691 (Cal. Ct. App. 09/09/09), the court affirmed that the insurance agent failed to meet the duty owed to a car dealership by failing to advise them of the need for Workers Compensation coverage, even though the agent held herself out as having expertise in business insurance. A fire at the client's premises severely burned a worker, and the lack of Workers Compensation insurance then led to litigation.

The agent claimed she had recommended WC coverage to the client, but could produce no documentation to support this. More about this case can be found here.

This case illustrates several important points for insurance producers. Although the legal duty for insurance producers in most jurisdictions is not onerous, a number of factors can serve to increase the duty owed in particular circumstances. One of those factors is if the insurance agent holds himself or herself out as having particular expertise, or serves as an insurance advisor to a client.

This case also underlines the critical need for insurance producers to keep good records and documentation. In this case, the agency had a form for recording conversations with clients that contained no record of the agent advising the client to obtain WC insurance. Good record keeping and proper documentation of communications with clients can go a long way to helping insurance producers meet the duty they owe to clients and others. A lack of it can be costly.