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Statehouse Trumps Court

Iowa legislature changes law, overruling decision on agent duty

By Barry Zalma | Updated on January 31, 2013
Sometimes courts—trying to protect the consumer against insurance agents, brokers and insurers—change the law to favor the consumer without considering the law of unintended consequences, when helping one consumer can cause severe damage to all the consumers in the state. 

Because judicial and legislative branches of government are equal, the state legislature has the right and duty to enact a statute that reverses a harmful action. The Iowa state legislature did just that with regard to the duties of insurance agents to their clients.

In the U.S., insurance agents—whose sole source of income is a commission paid as a percentage of the premium paid by the insured—transact insurance with and on behalf of insurers. Agents do not generally hold themselves out as insurance specialists, consultants or counselors and do not receive compensation for consultation and advice apart from commissions paid by an insurer. The agent’s duty is to obtain the insurance that the insured asks. The agent is not required to suggest different coverages nor do they have a duty to provide coverages the agent believes the insured needs but is not requested. The Iowa Supreme Court attempted to change that duty.

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