What Conduct Constitutes a Breach of the Standard of Care?
Though an insurance policy is a contract that gives you the legal right to sue for breach of contract in certain circumstances, it’s also common for policyholders to seek compensation (damages) based on allegations of negligence by an insurance professional, often a broker. To prove negligence, you must convince a jury of the following:
- The defendant (person being sued) failed to act as a reasonable broker would under the circumstances;
- The failure to act reasonably caused you to suffer actual losses; and
- Your losses were reasonably foreseeable.
What Conduct Is Considered a Breach of the Duty to Act Reasonably?
The duties of insurance agents and brokers are typically set forth in state statutes and are similar in most jurisdictions:
- A broker may not misrepresent what your policy covers. For example, a broker cannot say you have flood insurance when there’s no such coverage.
- A broker must complete all the steps to put your policy in place. A broker is negligent if they take your payment but fails to secure the policy for you.
- A broker may not make untrue statements about material items in your policy application or otherwise secure a policy by falsifying information about you.
- A broker must inform the insurance provider when you notify the broker of a potential claim.
- A broker must give you advance notice that your policy is about to lapse or be cancelled for any reason.
- Your broker must advise you of any known challenges facing your insurance provider, such as bankruptcy or insolvency, that could affect your ability to recover benefits promised under your policy.