The trial court granted the defendants' motion to strike, concluding that the revised complaint failed to state a cause of action for negligence because it did not allege fraud or any other inequitable conduct. Thereafter, on May 3, 2011, the court rendered judgment in favor of the defendants.

By granting the defendants' motion to strike, the trial court proposed that when a client is aware of the amount of insurance coverage being procured, the client must allege fraud or inequitable conduct to sustain a cause of action for negligence against an insurance agent or insurance company for the agent's failure to recommend sufficient insurance coverage to the client. The trial court stated: “'Where a party enters into an insurance contract, a party cannot allege that it was not aware what benefits it was receiving or reducing unless fraud or inequitable conduct [o]n the part of the other party is alleged. The plaintiff has not alleged fraud or inequitable conduct in her revised complaint. Even if it could be found that Ortiz was negligent in recommending such a low amount of coverage, mere negligence does not rise to the level of inequitable conduct.”

In the current case, Byrd's action is for negligence, specifically, the insurance agent's failure to inquire into or to advise the plaintiff properly of the sufficient amount of insurance coverage.

The Court of Appeals concluded that it was improper for the trial court to strike counts one and three of the revised complaint on the ground that those counts did not allege fraud or inequitable conduct.

Byrd also claimed that counts one and three of the revised complaint state legally sufficient claims for negligence, because those counts allege that Ortiz had a duty to exercise reasonable skill, care and diligence to ensure that Byrd had proper insurance coverage, that Ortiz breached that duty by not advising Byrd to obtain sufficient uninsured/underinsured motorist coverage and that Byrd sustained damages as a result of the breach. The defendants maintain that the revised complaint does not state legally cognizable claims for negligence because an insurance agent has no duty to advise an insured of the sufficiency of insurance coverage.

Related: Read another column by Barry Zalma “Who Reps Whom?”

The duty of care owed by an insurance agent to his or her client in Connecticut is that an insurance agent has the duty to exercise reasonable skill, care and diligence to see that his client has proper insurance coverage. Where the agent undertakes to procure a policy affording protection against a designated risk, the law imposes upon him an obligation to perform with reasonable care the duty he has assumed.

In Connecticut, selling insurance is a specialized field with specialized knowledge and experience. In Connecticut an agent has the duty to advise the client about the kind and extent of desired coverage and to choose the appropriate insurance for the client. The Court of Appeals found, as a matter of law, that the agent had a duty to explain underinsured/uninsured motorist coverage to Byrd, to explain the consequences of not having a sufficient amount of such coverage, to recommend the proper amount of coverage based on the plaintiff's individual circumstances and to attempt to procure that amount of coverage and offer it to the plaintiff.

Related: Read another Zalma column “Trust But Verify.”

Counts one and three of the revised complaint allege duty, breach of that duty, causation and actual injury. If provable, these facts would support causes of action for negligence against each defendant. As a result, the court improperly granted the motion to strike counts one and three of the revised complaint, reversed the judgment as to counts one and three of the revised complaint alleging negligence, and sent the case back to the trial court for trial. The court noted that Byrd's allegations that the agent advised her to purchase a policy with particular uninsured/underinsured motorist coverage limits and “continued to advise and allow the [p]laintiff to renew the . . . policy in the same amounts,” if proven, could suffice to establish that Ortiz, having undertaken to advise the plaintiff, assumed a duty to act with reasonable care in so doing.

Author Opinion

The Connecticut court has changed the rule in most jurisdictions to make a negligent act into a breach of a fiduciary responsibility, based upon the complaint that the agent advised the insured what to purchase and because the agent did not advise the Byrd how limited her recovery would be if she carried more limits. Because Byrd agreed to a uninsured motorist coverage equal to the liability coverage available to third parties she might harm, she may have a difficult time at trial proving that the agent breached the duty imposed by the court since he had no problem limiting what she would pay a person she injured.

The lesson every agent or broker selling auto insurance should learn from this case is to document the file to show that the policy limits obtained were selected by the insured, that the agent did not recommend a particular limit of liability, and that the agent explained to the insured the use of uninsured and underinsured motorist coverage. By specifying a particular limit for liability and uninsured motorist coverage, if true, the agent exposed himself to a suit for negligence when the insured finds, with hindsight, that the limits were inadequate.