• Bob Siems

Agent-Broker Liability and Buying Insurance From the Web

In the last couple of years, more and more insurance gets bought and sold online. Traditional live agents are not a part of that process. So what happens when the website sells you the wrong insurance? Can you sue a website for malpractice?

This kind of thing can come up. Practically, I'm thinking a situation where you misunderstand the application in an understandable way that a broker would have caught. E.G. Layman buys insurance on a vacation home, the policy only covers primary residences, and the layman does not realize that. Layman buys car insurance, does not realize that it does not cover Uber, drives for Uber, crashes.

(There are also complaints that the websites do not do a good job of explaining the different products to consumers. E.G.: Agents disliking Google's new form of competition with them.)

Let's take for granted that whatever happened, there was legitimately no coverage because of the "agent". Ordinarily, I would expect the agent/broker to make sure the insured bought the right policy. While agents have no duty to give unsolicited advice, Sadler v. Loomis, they have a duty to give competent advice when asked. So if you go to a website offering to sell you insurance and wind up buying the wrong insurance because the website did not ask the right questions about what kind of coverage you needed, is that comparable?

E.G. You buy insurance from GEICO. (My associate just bought car insurance from GEICO. He doesn't remember seeing an Uber disclaimer on their website.) You buy it entirely online (which you can do.) As a result, they don't warn you about Uber. They then deny you coverage for an Uber-related crash. Malpractice?

My first impression: You could have called an agent and asked. And you have a duty to ask. No liability.

My second impression: That rule would put the burden of spotting coverage issues on the insureds. That's terrible social policy. While I might be able to figure out there was a coverage issue with Uber, I doubt the average Marylander can. In fact, I suspect the average Marylander has no idea what "coverage issues" are.

Third impression: That rule also creates a perverse incentive. Suppose an agent or insurer sells a policy that does not really cover anything because their website did not ask a lot of questions to find coverage issues. The insureds don't know enough to ask. Let's say nothing happens. The agent or insurer gets paid. But let's say something does happen. The insurer says sorry and returns the premiums. That system incentivizes them to carelessly write policies all willy-nilly regardless of whether the policies cover the person's risks. Worst case scenario for them, it's a wash.

The "better" rule would put the burden of spotting coverage issues on the insurer or insurance professional. First, that would protect unsophisticated insureds from websites selling cheap insurance and not asking about types of risks and coverage. Second, it would encourage the insurers and agents to build better websites.

Obviously, there's a limit to how far you can make agents go in asking questions. It would be unfair to make them go through every conceivable risk that a person could have. There are infinite risks and agents do not have infinite time. But it's a question of reasonable care. Making agents or websites ask about a concrete list of common coverage risks would make sense. E.G. Website does not mention business-use exclusion. Liability. Website does not mention that home insurance policy has clause requiring that it be the insured's only home. Liability. Website does not mention that homeowners policy has exclusion for anything related to pet tigers. No Liability.


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