When I entered the insurance industry 47 years ago, my mentors impressed on me the importance of documenting my actions as a representative of my employer. I learned that every task I perform must be recorded or it may as well have not been done.
Document every action, whether for a client or your company. Similarly, it is imperative to log all communication between the agent and the insured in the insured's file. Even if only one in every thousand policy sales results in a dispute, the effort is worth the exercise.
The importance of accurate and detailed record keeping by an insurance agent and broker was made clear by the opinion of a New York state appellate court presented in Hans Richard Lehneis, Jr., v. Kathleen Neill, etc., et al.
On July 7, 2004, the wife of plaintiff Lehneis was in a motor vehicle accident that gave rise to a personal injury action against the plaintiff, which resulted in an $800,000 settlement that Lehneis paid. At the time of the accident, Lehneis only had automobile liability insurance coverage of $100,000 per claimant.
Lehneis sued certified financial planner Kathleen Neill and Bay Harbour Insurance Agency, who served as the plaintiff's insurance brokers since 1985. Lehneis alleged that the defendants negligently, and in breach of contract, failed to secure umbrella insurance on his behalf, which he had requested, or to inform him that he could have acquired umbrella insurance from a different broker. Neill and Bay Harbour separately moved for summary judgment dismissing the complaint insofar as asserted against them. The Supreme Court granted their motions.
New York appellate courts are noted for the brevity of their opinions, and the Lehneis case is no exception.
The appellate court was faced with Lehneis' claim that his insurance brokers failed to advise him to obtain an umbrella liability policy or tell him where he could buy one. The appellate court resolved the dispute because the agent and broker defendants maintained good, clear and definitive records by the communications between the broker defendant and the plaintiff insured.
Faced with an appeal by the plaintiff, the appellate court was called upon to determine whether there was any issue of fact that would require a decision by the jury. If not, the summary judgment entered by the trial court, which granted the separate motions of the defendant Kathleen Neill and the defendant Bay Harbour Insurance Agency, should be affirmed. If the appellate court disagreed with Lehneis, his suit against the agent and broker would be dismissed and he would recover nothing.
In this case, the appellate court concluded that the defendants demonstrated their prima facie entitlement to judgment as a matter of law. They did so by submitting evidence that they informed the plaintiff that they could not provide him with the umbrella insurance policy that he requested. The defendants also demonstrated that there was no special relationship between the parties.
Insurance brokers are often targets for litigation when an insured must use his own funds to pay a judgment or settlement.
Bay Harbour obtained a summary judgment in its favor because it documented files and proved to the court that it was unable to obtain an umbrella policy for the plaintiff and demonstrated that there was no special relationship between the parties.
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