Can an Insurance Agent Be Responsible for Recommending Insufficient Legal Malpractice Insurance?
The general answer is no. In a case that came before the Massachusetts Appeals Court, the following seems to be the history of the case:
Malpractice in Underlying Case
Mr. Perreault’s wife died from cancer and he retained at attorney to determine if he had a case for wrongful death against the tobacco company. Although there was a sufficient medical report linking the death to the cigarettes, the attorney failed to advise Mr. Perreault to file suit and failed to explain why; he simply neglected the case.
Legal Malpractice Case
Mr. Perreault filed a lawsuit against his former attorney for legal malpractice. The lawsuit was resolved by settlement. Usually, once the funds are distributed the lawsuit is dismissed and that is the end of the matter. In this case, however, the defendant attorney assigned his legal rights against his insurance broker, AON, to Mr. Perreault. Mr. Perreault then filed suit claiming that the insurance broker failed to advise the attorney to purchase sufficient insurance. Mr. Perreault lost the case on a motion for summary judgment (Karen F. Green, Superior Court Judge), and he appealed. See Perreault v AIS, No. 17-P-1139. (August 2108)
Appeal Decision on Legal Malpractice Case
The Court of Appeals’ job is to look at the case “in the light most favorable to the nonmoving party” which in this case was the legal malpractice insurance company. The Court noted that generally an insurance agent is not required to evaluate the needs of the insured and provide coverage “adequate for the needs of the insured.” Next, the Court looked to see if there were any “special circumstances” which the attorney relied on. Those circumstances that the Court looked at were: 1. was the relationship between the attorney and the insurance agent (where here is was not prolonged and therefore not considered a special circumstance); 2. Was the insurance of complex nature (where here this was not a protracted request; no evaluation of needs was undertaken and no risk management was performed); or, 3. Was the insurance policy supposed to cover “prior acts” (while this was discussed in an email, AON did not promise such coverage and the attorney did not pay for it.) The Appeals Court agreed with the trial court judge.
Next, the Court looked to see if AON breached its contract with the attorney. While there is an argument that the email exchange between the attorney and AON did commit AON to a contract for prior acts, the Court found that there were insufficient facts. Again, the Appeals Court agreed with Judge Green’s decision in the Trial Court.
As a result of its findings, the Court found that there was no Consumer Protection Act, Chapter 93A violation by AON.
What is the Rule on Suing Insurance Agents for Selling Insufficient Insurance: What Can You Do?
The lesson seems to be that suing an insurance agent, or insurance company, for failing to recommend sufficient insurance is not generally a viable cause of action. When looking for an attorney, check the Board of Bar Overseers website to see if your attorney has malpractice insurance. The answer is usually a good indicator of the truth. Second, how much insurance? You can ask your attorney; you can even ask for a copy of the policy limits or declaration, DEC sheet.
We have this problem with clients in the legal malpractice realm as well as when they are victims of personal injury – the tortfeasor, or responsible party for the harm, has neglected to purchase sufficient negligence insurance. For victims of automobile negligence, you can purchase Underinsured coverage. The same rule applies, however: there is no cause of action against the insurance company or agent for failure to purchase sufficient Underinsured coverage.
In the legal malpractice cases, we often recommend not settling until the attorney comes up with his or her own monies to supplement the insufficient insurance coverage afforded.