Axiomatic rules of the insurance business:

1. No agent should ever sell insurance for which he or she is unlicensed
2. No agent should obtain insurance for a client from a non-admitted insurer without first advising the insured of the hazards of insuring with a non-admitted insurer
3. No agent should acquire insurance for a client with an insurer in financial difficulty
4. No agent should misrepresent coverages obtained or the quality of the insurers to the client.

Sometimes even when all rules are broken and a stupid mistake is made by an agent who acquires insurance for which he is not licensed, when the agent fails to explain to the insureds that the insurance he bought was with a financially unstable surplus line insurer, the agent does no harm. The insured, suing the agent, was still required to prove the actions of the agent caused the insured damage. In George E. Guidry and Dwight W. Andrus Insurance Inc v. Environmental Procedure, Inc. and Advanced Wirecloth Inc. No. 14-11-00090-CV (Tex.App. Dist.14 09/13/2012) the Texas Court of Appeal, on the second appeal from the parties, resolved the dispute on the basic elements of negligence.

Related: Read Zalma's previous article, “Strictly Business.”

Two companies sued the insurance agent and agency that procured their insurance from 1991 to 1994. The insured companies asserted that the agent sold them insurance in Texas from a non-admitted carrier. They also claimed the agency neither had a license or training to procure insurance from a non-admitted insurer. The companies alleged that one of their insurers became financially unstable, and that the agent's failure to disclose this lack of stability harmed them when the insurer initially did not contribute anything toward settling claims against them related to patent infringement and unfair competition.