Insurance Agents and Brokers

I’m David Holub, an attorney focusing on personal injury law in northwest Indiana.

Welcome to Personal Injury Primer, where we break down the law into simple terms, provide legal tips, and discuss personal injury law topics.

In our last two episodes, we discussed insurance policy ambiguities and an insurance carrier’s duty to deal fairly and in good faith with an insured.

These two episodes presumed that a policy was purchased and that there was a dispute between the insured and the carrier.

In this episode, we discuss the sale of insurance.

The insurance business is confusing because the law recognizes two categories of agents.

One category is called a broker.

The other category is simply referred to as an agent.

A broker is a person who may represent several insurance companies at the same time.

Typically a broker is under the law considered to be an agent for the person seeking out insurance.

So if a broker helps someone seeking insurance fill out an application the broker is typically considered to be doing so on behalf of the one looking to buy coverage.

For the most part, an insurance company will not be held liable for the negligence of a broker. That’s because a broker is most of the time considered to be an agent for the person seeking insurance.

Since a broker who procures insurance for someone is considered an agent of the proposed insured, a broker must exercise reasonable care, skill, and good faith in the purchase to obtain the requested insurance coverage.

Where things really gets confusing is that under the law a person may be both an agent and a broker, and act in different capacities at different times, sometimes representing the applicant for insurance and other times acting for the insurance company.

Set aside for a moment the concept of broker (one who markets for several insurance carriers) and look at what we’ll call a captive agent.

Where an insurance company has a sales agent working solely on its behalf to sell insurance to a prospective insured, the prospective insured needs to be on high alert.

A captive company agent only must refrain from affirmative fraud.

The captive agent can’t lie to you or commit fraud. But they otherwise owe no duty at all to the prospective insured. This is a traditional buyer-beware scenario.

This means that a captive insurance agent has no duty to provide advice to the proposed insured.

Where things get confusing is if there is some intimate long-standing relationship between the captive agent and the prospective insured. This might come into play if the captive agent used to be acting as a broker for multiple insurance companies and then switched to become an exclusive agent for one carrier.

Or, if the captive agent holds himself out to be highly skilled, or they receive a special fee to provide expert advice.

I hope you found this information helpful. If you are a victim of someone’s carelessness, substandard medical care, product defect, work injury, or another personal injury, please call (219) 736-9700 with your questions. You can also learn more about us by visiting our website at DavidHolubLaw.com – while there, make sure you request a copy of our book “Fighting for Truth.”