Michigan Supreme Court; Docket No. 110683; Published
Opinion by Justice Taylor; (with Justices Cavanagh, Brickley, and Kelly Concurring)
Official Michigan Reporter Citation: 461 Mich 1; Link to Opinion
Insurance Agents (Duty to Insured)
In this Opinion by Justice Taylor, Justices Cavanagh, Brickley and Kelly concurring, the Supreme Court addressed the issue of whether a licensed insurance agent owes an affirmative duty to advise or counsel an insured about the adequacy or availability of coverage. In its ruling, the court modified the prior Court of Appeals decision of Bruner v League General Insurance Company, 164 Mich App 28 (1987), which held that an insurance agent generally did not have a duty to advise an insured about the adequacy of a policy's coverage, but that such a duty may arise where a special relationship exists between the agent and the insured. Although upholding the general rule that insurance agents have no such duty to advise their insureds regarding the adequacy of insurance coverage, the Supreme Court held this rule is subject to change when an event occurs that alters the nature of the relationship between the agent and the insured. The Supreme Court set forth four (4) specific circumstances where this general rule of no duty changes, as follows:
(1) "the agent misrepresents the nature or extent of the coverage offered or provided,
(2) an ambiguous request is made that requires a clarification,
(3) an inquiry is made that may require advice and the agent, though he need not, gives advice that is inaccurate, or
(4) the agent assumes an additional duty by either express agreement with or promised to the insured."
Plaintiff claimed in this case that the insurance agent involved was negligent in selling them an automobile insurance policy that was inadequate because it did not contain optional uninsured motorist coverage.
Plaintiff also claimed that Farmers Insurance was vicariously liable for the negligence of its agent. The claim arose from the 1993 motor vehicle accident in which Mrs. Harts was involved when her vehicle was struck by an uninsured vehicle. Mrs. Harts was injured and her 6-year old son was killed. The policy covering the vehicle operated by Mrs. Harts did not include optional uninsured motorist coverage.
The facts in this case demonstrated that the plaintiffs had not selected uninsured motorist coverage on the space provided on the application form for their automobile insurance. Further, the record reflected that some three (3) months before the accident, Farmers had notified plaintiffs about the availability of uninsured motorist coverage, and that plaintiffs should contact their agent if interested.
The trial court granted Farmers' motion for summary disposition in which it was contended that there was no special relationship between the plaintiffs and the agent as required by Bruner v League General Insurance Company, 164 Mich App 28 (1987) (Item No. 1063). Plaintiffs acknowledged on appeal that there was no such special relationship as required by Bruner in this case. However, plaintiffs contended that the Bruner requirement of a special relationship should be rejected, and they should be permitted to sue the agent for his negligence in failing to offer them any advice or counsel concerning uninsured motorist coverage.
The Supreme Court held that the existence of a duty is a question of law. Further, under the common law, there was no duty on the part of Farmers' agent to advise the plaintiffs. Under the common law, an insurance agent whose principal is the insurance company, owes no duty to advise a potential insured about any coverage. The court noted that there are statutory differences between insurance agents who are in essence mere "order takers," and those who are "insurance counselors." MCLA 500.1200, et seq. Where the agent functions as simply an order taker for the insurance company, there is no duty unless an event occurs that alters the nature of the relationship between the agent and the insured.
The Supreme Court set forth four (4) specific circumstances under which the nature of the relationship can be considered to have changed. Those circumstances include (1) the agent misrepresents the nature or extent of the coverage offered or provided, (2) an ambiguous request is made that requires a clarification, (3) an inquiry is made that may require advice and the agent, though he need not, gives advice that is inaccurate, or (4) the agent assumes an additional duty by either express agreement with or promise to the insured.
In an important footnote, the Supreme Court cited an example of an "ambiguous request for coverage that might in certain circumstances require clarification." Such a request, the court stated, "includes the request for 'full coverage.’”
The Supreme Court found that the facts that face this case did not give rise to a change in the relationship or the general “no duty" rule.
In his concurring opinion, Justice Cavanagh stated that he concurred in both the analysis and result of the majority opinion. However, he expressed opposition to the designation of insurance agents as “mere order takers." Noting the extensive statutory provisions governing the qualifications to become licensed insurance agents, Justice Cavanagh felt that the Legislature contemplated much more for the role of a licensed insurance agent than one who presents products and takes orders.