Illinois Supreme Court: Captive insurance agents have limited fiduciary duty to clients

Illinois Supreme Court Holds Captive Insurance Agents Owe Limited Tort Liability Duty to Clients. Image by The Appellate Strategist.

Illinois Supreme Court Holds Captive Insurance Agents Owe Limited Tort Liability Duty to Clients. Image by The Appellate Strategist.

The Illinois Supreme Court recently decided a case, considering “whether an insurance company’s agent has a duty to exercise ordinary care and skill in procuring the specific insurance coverage requested by his customer.” The appellate court’s judgment was affirmed by the Supreme Court that, “imposes a duty on an insurance agent to act with ordinary care under the circumstances,[i]” where a captive insurance agent did not effectively make the proper change to an insured policy by adding a named insured on a new policy.

After a traffic collision, an insured driver’s fiancée was not correctly named in a new policy at issue.

The facts in this case are straightforward. An insured man allowed his fiancée to drive one of his vehicles and she was involved in a collision. The insurance company offered to pay the claim for loss, on the condition that the man update his policy, effectively agreeing to a new policy, naming his fiancée as a covered driver. The man accepted the offer and made contact with his “captive insurance agent[ii],” to make the change. The agent did not effectively make the change, and all that occurred was the addition of a “female” on the new policy, but she was not specifically identified by name.[iii]

Meanwhile, believing that the fiancée was a properly named insured individual on the policy, fiancée’s son was involved in a collision, resulting in a claim against the new policy when the other driver’s insurance coverage limits were reached and did not cover the full claim for loss. The issue before the trial court was whether the agent owed his insured clients a fiduciary duty to properly obtain the coverage as requested and agreed.[iv]

The Illinois Code of Civil Procedure identifies the duties of care imposed on insurance producers.

Under Illinois law, “[a]n insurance producer…shall exercise ordinary care and skill in renewing, procuring, binding, or placing the coverage requested by the insured or proposed insured.[v]

The law treats insurance “agents” differently than it treats “brokers,” the third party sellers who connect individuals with the agents exclusively representing the insurance companies. Agents do not have the same fiduciary duties to individuals the same way brokers do. The question before the court centers on the meaning of “insurance producer” as written in the aforementioned law imposing a duty of ordinary care.

The Supreme Court opinion is that an “insurance producer” could be interpreted as meaning an agent or a broker. The Illinois Insurance Code defines an “insurance producer” as, “a person required to be licensed under the laws of this state to sell, solicit, or negotiate insurance.[vi]

This Court’s opinion imposes a limited duty on insurance agents as well as brokers.

The Illinois Supreme Court held that, “The allegations of plaintiffs’ complaint fit within the specific statutory language requiring insurance producers to “exercise ordinary care and skill in *** procuring *** the coverage requested by the insured.” 735 ILCS 5/2-2201 (a)(West 2010). Accordingly we conclude that section 2-2201 imposed a duty of ordinary care on Lessaris [the captive insurance agent] to procure the insurance coverage specifically requested by plaintiffs.[vii]” The case was remanded to the original circuit court for further proceedings on the plaintiffs’ claims for loss under the policy.

For more information or legal assistance and representation in matters involving insurance coverage and litigation, you are encouraged to contact Michael V. Favia & Associates.

The law firm of Michael V. Favia & Associates is a general civil practice firm dedicated to providing personalized service and high quality representation for clients. With offices conveniently located in the Chicago Loop, Northwest side and suburban meeting locations, you can schedule a discrete meeting with an attorney at your convenience and discretion. Feel free to “Like” the firm on Facebook and “Follow” the firm on Twitter and you will be kept in the loop about upcoming events and news in the firm’s practice areas including personal injury, medical malpractice, worker’s compensation, complex civil litigation and professional regulation and licensing.

[i] Supreme Court of The State of Illinois, Skaperdas v. Country Casualty Insurance Company, No. 2015 IL 117021, Opinion filed Mar. 19, 2015.

[ii] Definition: A Captive agent is one that represents only one company and effectively is under the control of that Company, e.g. State Farm, Allstate, Country Companies, Farmers Insurance Group, American Family and Shelter, to name a few. See http://www.chooseindependent.com/

[iii] The Appellate Strategist, Illinois Supreme Court Holds Captive Insurance Agents Owe Limited Tort Duty to Clients, by Kirk Jenkins, Apr. 2, 2015.

[iv] See HNii above.

[v] 735 ILCS 5/2-2201.

[vi] 215 ILCS 5/500-10.

[vii] See HNi above.

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