The Washington Courts have repeatedly held that insurance agents and brokers do not have any legal duty to recommend specific policy limits to an insured absent what is commonly referred to as a “special relationship.” Washington case law on this point is one of the few areas where the Washington Courts have been favorable to insurers and insurance agents.
Division I of the Washington State Court of Appeals has again applied this rule of law in Norris v. Farmers Insurance Company of Washington et al., No 76236-2-I (Wash. Ct. App. Division I, March 19, 2018). What is of particular importance is that the Norrisdecision addresses an insurer’s and agent’s legal duty in the context of automobile liability insurance. Specifically, this is the first time Division I of the Washington Appellate Courts has addressed this issue in regard to automobile insurance. Moreover, the Court rejected the argument that a duty exists because an insurer has an obligation to train and supervise its agents, as well as the argument that an insurer’s marketing materials created a legal duty.
In the Norris case, the insured carried a $100,000 automobile liability insurance policy. The insured ran into a pedestrian. The resulting claim arguably exceeded the policy limits. Farmers promptly tendered the policy limits to the insured. The insured, however, refused to accept the tender and instead filed a third-party Complaint in the underlying action against Farmers Insurance Company of Washington and the two Farmers agents who had been involved in placing the automobile insurance policy.
During the course of the ensuing litigation, the insureds admitted that they had never specifically discussed liability automobile insurance with their agents. There was also no evidence of any of the other elements which would potentially create a “special relationship” between the insureds and the agent. Regardless, the insureds argued that marketing materials that had been utilized by agents and Farmers created an implied duty. Moreover, it was argued that there was liability on Farmers as a result of Farmers’ alleged failure to supervise and train its agents.
The Court of Appeals rejected both arguments. The Court concluded that the question of a legal duty was a matter of law for the Court to determine. The Court did not accept the marketing theory as creating a legal duty. Likewise, the Court found there was no liability on the part of an insurer for allegedly failing to train or supervise independent contractor agents. In its ruling, the Court upheld the longest established Washington case law regarding the legal duties of the insurance agent or broker. An agent or broker does not have a legal duty to recommend specific automobile liability limits absent a special relationship. The Court also further distinguished the limited cases where the Courts have found that a special relationship exists. A link to the Norrisdecision is below.
This decision again establishes that insurers and insurance agents can be successful even in the state courts of Washington on specific legal questions. Lether & Associates has represented insurance agents and brokers, as well as insurers, in a number of cases involving claims of failure to advise insureds on limits or other coverage issues. In addition to representing Farmers in the successful Norris appeal, our firm also represented Farmers and the agent in Lipscomb v. Farmers Ins. Co. of Wash., 142 Wn. App. 20, 174 P.3d 1182 (2007), a decision which is referenced repeatedly by the Court in Norris. As a result, Lether & Associates has established the law in regard to agent and broker liability in the two controlling decisions in Division I of the Washington State Court of Appeals. As a follow up to our last publication – good facts make good law.
If you have any questions in regard to agent or broker claims, please feel free to contact our office.