Special Relationships and Insurance Duty-To-Advise
Maryland does not have a lot of law about special relationships, but I just saw an out of state case go by with some useful elaboration on the subject on the DRI website (sub req.) so it seems like a good time to write about it.
Let's start with Maryland law. Maryland's basic rule is simple. Agents have no duty to give advice except in two circumstances. First, when a special relationship exists. Sadler v. Loomis, 139 Md.App. 374, 410, 776 A.2d 25 (2001); Second, when they volunteer to give advice, they must give it competantly. Cooper v. Berkshire Life Ins. Co., 148 Md. App. 41, 83, fn. 6, 810 A.2d 1045, 1069 fn. 6, (2002).
So what constitutes a special relationship? In Sadler, the Court of Special Appeals stated that:
A "special relationship" within the insurance industry is an important concept. A special relationship in the context of insurance requires more than the ordinary insurer-insured relationship. It may be shown when an insurance agent or broker holds himself or herself out as a highly skilled insurance expert, and the insured relies to his detriment on that expertise. A special relationship may also be demonstrated by a long term relationship of confidence, in which the agent or broker assumes the duty to render advice, or has been asked by the insured to provide advice, and the adviser is compensated accordingly, above and beyond the premiums customarily earned.
Sadler, 139 Md. App. at 410, 776 A.2d at 35-36. Sadler then elaborated by citing an Indiana case, Parker v. State Farm Mut. Auto. Ins. Co., 630 N.E.2d 567, 569-70 (Ind.Ct.App.1994). That provides some additional factors.
exercising broad discretion to service the insured's needs; counseling the insured concerning specialized insurance coverage; holding oneself out as a highly-skilled insurance expert, coupled with the insured's reliance upon the expertise; and receiving compensation, above the customary premium paid, for expert advice provided.
Id. That's pretty much it. Sadler was the most recent case last time I researched the question (approximately in 2013). Since the Court of Special Appeals publishes few of its opinions (see the Maryland Appellate Blog's post), it might be a long time before we get new binding law.
So, unless your case falls into something mentioned in Sadler, both sides should look for persuasive authority. And the obvious place to look is in Indiana, since that's where Parker came from.
And the Indiana Supreme Court just handed down another case on the subject: Indiana Restorative Dentistry, P.C. v The Laven Insurance Agency, Inc. and ProAssurance Indemnity Co., Inc., __ N.E.3d __, 2015 WL 1087199.
Indiana Restorative Dentistry is a blissfully short 12 page case. Dentist has fire insurance for thirty years, but cannot cover full loss when office burns down. Two theories: special relationship and implied-contract-to-procure-sufficient-coverage. Indiana Supreme Court holds there is a material dispute of fact about a special relationship applying the factors used in Parker based on a thirty year relationship, an annual qustionaire, and marketing materials. It also includes a few good paragraphs of Indiana's much better developed law on this subject.
So why care in Maryland? Because Maryland law is one case long and Indiana Restorative gets you a whole line of cases applying the same test. They might be persuasive authority, but considering Sadler relies on Indiana law, they're pretty persuasive.