A recent ruling from the Arizona Supreme Court may open insurance agents up to malpractice suits if they fail to inform their customers about uninsured and underinsured motorists coverage – even if agents direct clients to sign waivers acknowledging they are rejecting these auto policy endorsement.
The Supreme Court decision specifies that while waivers provide a “safe harbor” for carriers, they do not cover insurance agents who sell the policies. Instead, agents have a special duty of care that goes beyond obtaining client signatures on waiver forms.
“The issue…is whether compliance with [the waiver form] bars a negligence claim alleging the insurance agent failed to procure the UIM coverage requested by the insured,” the court wrote in its opinion. “We hold that it does not.”
The suit was brought by Lesley Wilks and her husband Paul Wilks against insurance agent John Manobianco. The Arizona woman had requested that Manobianco provide her with an auto policy similar to her previous policy.
Although Wilks’ previous policy included UIM coverage, Manobianco proposed – and Wilks purchased – a
State Farm policy that did not include the endorsement. Wilks signed a waiver form, filled out by Manobianco, acknowledging that she was rejecting the coverage. Two years after purchasing the policy, Wilks was rear-ended by an uninsured driver and
State Farm denied her claim.
In 2010, Wilks and her husband sued Manobianco for malpractice and negligence.
Although a superior court in the state dismissed the case, concluding the waiver form provided safe harbor for agents, the Wilkses and their lawyer appealed the case. The appeals court found the agent owed Wilks a duty of care and sent it back to superior court for trial.
The decision hinged on a key Arizona statute –
ARS 20-259.01(B) – which states that “every insurer writing automobile liability or motor vehicle liability policies” should offer the insured underinsured motorist coverage. The Supreme Court decided that the term “insurer” did not include agents, and that the statute does not bar common law malpractice claims based on failure to provide UIM coverage.
“Indeed, the statue [20-259.01] does not so much as mention insurance agents or any common law cause of action,” the court wrote.
Lanny Hair, executive vice president of the Independent Insurance Agents & Brokers of Arizona, said the ruling is concerning as it opens up a wave of potential lawsuits against agents – even some retroactive suits from policyholders who were awarded less in lawsuits involving accidents with uninsured or underinsured motorists.
“We’ve got all these claims that happened that are sleeping in these files,” Hair told industry reporters.
Agents may even start to decline writing policies to clients that don’t want UM or UIM coverage.
Hair said he believes the court misinterpreted the meaning of the state statute, and is hoping to prompt a legislative fix in the next state session.
