Optional Insurance Benefits and the Duty to Give Advice

The foremost question in most customers’ minds when buying car insurance is “how much will it cost?” Of course, that is an important question, but it is not the only important question.

The standard auto policy now provides for only $3,500 for medical treatment for what are considered “minor” injuries, and only $50,000.00 (down from $100,000.00) for all other injuries that are not catastrophic. In some cases, this money can be used up in just a year or 2.

There are a number of other changes made to the basic automobile insurance policy since September, 2010, that have significantly reduced the benefits available to accident victims, including some benefits which have been removed from the basic package altogether (unless the injuries are catastrophic).

Optional benefits that increase the amounts available for medical treatment and attendant care, and that provide for housekeeping and home maintenance as well as care giving are available, but many consumers are not even told about these options when buying insurance.

The courts have held that it is reasonable and appropriate to impose upon insurance agents and brokers a duty not only to convey information, but also to provide advice. In order to pursue a claim against an insurance agent or broker for insufficient insurance, a plaintiff must show two things: that the broker failed to properly offer optional benefits and that the insured would have purchased the optional benefits had they been properly offered.

The duty of the agent or broker to properly explain available insurance benefits will vary from case to case, but must include a clear explanation of the benefits and a consideration of the client’s particular circumstances. The explanation must be meaningful and more than a mere mention.

The lesson to consumers is to consider more than just the price of automobile insurance. Tell the broker your situation. Ask questions to ensure that the auto policy you are buying is right for you and your family. The lesson for insurance agents and brokers is that merely mentioning optional benefits without explaining them may leave you liable if your customer is without sufficient coverage following an accident. It is for the broker or agent to be sure that the client understands the coverage that they are turning down and its application to their life circumstances.

Joel Dick is an associate at HSH and his practice includes professional negligence cases and cases against insurance agents and brokers for failing to give proper advice to their clients.

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