I recently received this question from a homeowner who lost everything in Hurricane Ida flooding in Laplace.
Unfortunately, while the homeowner had structural coverage for flood, the agent did not recommend, procure, or get contents coverage for flood losses.
As with many things in law, the answer to this question is very fact-specific, but in most cases, the unfortunate answer will be that your insurance agent is not liable for such a failure.
Insurance Agent Liability in Louisiana
The Louisiana Supreme Court spoke on this issue back in 1973 (For those interested, see Karam v. St. Paul Fire & Marine Insurance, 281 So.2d 728). The court held that an insurance agent had a duty of reasonable diligence in attempting to place the insurance coverage requested and to notify the property owner if the insurance could not be placed. In that case, a homeowner requested $100,000 of coverage, but the agent mistakenly obtained only $10,000 of coverage. The court found the agent liable and responsible for the damages sustained (up to the amount of the requested coverage) because the agent failed to obtain what the client requested.
In the aftermath of Hurricanes Katrina and Rita, this was again a hotly litigated issue. Many property owners had relied on their insurance agent to recommend coverages for them over the years. The question in many of the cases following Katrina/Rita was whether the agent had a duty to recommend certain coverage – for example, flood coverage for someone in a non-flood zone, and if the agent was liable if they did not.
In 2010, the Louisiana Supreme Court again spoke on the issue (if you are interested, Isidore Newman School v. J. Everett Eaves, Inc., 42 So.3d 352) and more clearly defined an agent’s obligation to its client. In this case, the court stated:
An agent has a duty of “reasonable diligence” to advise the client, but this duty has not been expanded to include the obligation to advise whether the client has procured the correct amount or type of insurance coverage. It is the insured’s responsibility to request the type of insurance coverage, and the amount of coverage needed. It is not the agent’s obligation to spontaneously or affirmatively identify the scope or the amount of insurance coverage the client needs. It is also well settled that it is insured’s obligation to read the policy when received, since the insured is deemed to know the policy contents.
This makes it extremely difficult to prove that your agent is negligent for failing to get proper insurance coverage for you.
Is Your Insurance Agent Liable When A Loss Or Claim Isn’t Covered?
In many situations, where a property owner relied on their agent to recommend coverage and never specifically requested a certain type of coverage or amount of coverage, the claim will likely be dismissed.
However, if you requested your agent get you flood coverage and they did not, or you requested $100,000 coverage but only received $10,000, you may have a viable claim.
Hopefully, you will have written documents establishing these facts or some other proof to assist in your claim.
Also, whether you read the policy when received and asked questions or clarifications will be an issue in the case.
Of course, if you are in this situation, the specific facts of your case are very important to any determination of whether or not you have a valid claim, especially in light of the Louisiana Supreme Court rulings. You should seek out a knowledgeable insurance claim attorney to review your matter.