Oh No, I’m Underinsured! Recovering Against Your Insurance Agent

Owners of homes, cabins, boats, and business often do not have a solid understanding of what kind of insurance coverage to buy or how high their policy limits should be.  Instead, they trust their insurance agent or broker to help them make those decisions and to provide professional guidance and expertise to recommend the right coverage and sell them the right policy.

Common “mistakes” impacting homeowners and business owners alike include policy limits that are too low because the insurance company undervalues the cost to rebuild. This then has a domino effect on the amount available for damaged contents and debris removal. Common business owner policy “mistakes” include failure to properly insure all of the business equipment or inventory and failure to provide coverage for lost business income or extra expenses including payroll and opening at an alternative location.

Unfortunately for some people, these mistakes have a high price tag when they find themselves seriously underinsured after a fire, tornado, storm, flood, or other type of destructive loss.  Being underinsured can result from (a) not having the right kind of coverage; (b) from policy limits that are too low; or (c) both.  Now, in addition to the damage from the actual event, owners are stuck with a bigger problem—how to come up with many of thousands of dollars out-of-pocket, rebuild for pennies on the dollar, or keep a business afloat that does not have all the protective safeguards that the right policy would have provided.

Minnesota law recognizes that people rely on their insurance agents and, under the right set of circumstances, allows people to recover against their agents for claims such as negligent misrepresentation when the policy coverages are not presented accurately or negligent procurement when the agent that does not get the right insurance coverage that the policyholder has requested.    Graff v. Robert M. Swendra Agency, Inc., 800 N.W.2d 112 (Minn. 2011).

The Minnesota courts have recognized for decades that an insurance agent is required to use the industry standard of skill and care that a “reasonably prudent” insurance agent would use in a similar situation.  Johnson v. Farmers & Merchs. State Bank of Balaton, 320 N.W.2d 892, 898 (Minn. 1982).   When the agent fails to do that, he can be responsible for the damages that result.  In the case of negligent procurement, the damaged party must show, typically through an expert: (1) the duty that the agent owed to the insured that required the exercise of reasonable skill, care, and diligence in procuring insurance; (2) a breach of (i.e., failure to perform) that duty; and (3) the amount of loss or damage sustained by the insured that was caused by the agent’s breach of his duty.

At Sauro & Bergstrom, we know insurance law and that includes the duties that agents owe to their customers.  If you have suffered a fire, storm, tornado, flood, or other type of loss and then discovered you were underinsured or not insured at all, you may have a claim against your insurance agent.  For a free consultation, call us today at (651) 389-9915 or submit an inquiry through our Home page.