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U.S. Fifth Circuit rejects heightened duty standard in insurance agents professional liability claim

The US Fifth Circuit issued an opinion earlier today in the case that Coleman Adler filed against Marsh, his insurance carrier, and the wholesale broker. That case was dismissed by District Judge Carl Barbier and Adler’s attorneys appealed the decision. The US Fifth Circuit affirmed the district court’s ruling.

More importantly, the Fifth Circuit finally clarified (which is to say, overruled) its 1990 decision in Offshore Prod. Contractors, a case that has caused significant concern for insurance agents in E&O cases for a number of years. The Fifth Circuit opinion issued today says that Offshore “does not stand for the broad and murky proposition that a client’s ‘close relationship’ with an insurance agent or broker creates a ‘heightened duty’ to anticipate the client’s insurance needs or recommend specific coverage.” Rather, the Court said, Offshore “does not support the notion that [insurance agents] may assume a ‘heightened duty’ to recommend specific coverage to their clients. If there were any doubt about that, Isidore Newman laid it to rest.”

The ruling changes the landscape for professional liability claims against insurance agents dramatically because it clarifies that there is only one standard of care at issue in those cases. The Court clearly says that it is the insured’s obligation to request the type of insurance coverage requested and the amount of coverage needed. An insurance agent’s obligation is solely to procure the specific insurance coverage that its client requests.

For more information, please contact any of the attorneys involved in the case.


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