Attorneys beware: Insurance agents generally have no duty to ensure you have the professional liability insurance coverage you need

Attorney Simon Mann settled a legal malpractice claim brought against him for failure to file a wrongful death claim within the statute of limitations.  As part of his settlement he assigned to plaintiff Kenneth Perreault his rights against AON, the malpractice insurance broker that had sold to him or his firms three consecutive insurance policies.  At issue was whether there was a special relationship between Mann and AON, such that AON had a duty to make certain that Mann had adequate malpractice insurance to cover all of his work as an attorney. 

 

In Perreault v. AIS Affinity Ins. Agency of New England, Inc., 93 Mass, App. Ct. 673 (2018), the Massachusetts Appeals Court held that there was no such special relationship. 

 

Like almost all malpractice policies, the three policies sold by AON were claims made and reported policies that required that the alleged misconduct and resulting claim arise during the policy period. 

 

The earliest  policy was issued to a firm that Mann had worked for.  Mann had no involvement in purchasing the policy.

 

The second policy was issued to a firm in which Mann was a partner.  Mann was responsible for acquiring the coverage.  Mann claims that he relied exclusively on the advice of an AON employee, Burns, but Burns was not asked to provide risk management services or consultation with respect to the scope of coverage. 

 

The third policy was issued to a firm in which Mann was the sole partner.  Mann relied on Burns to purchase a new policy.  Although Mann had received a demand on the Perreault claim by this time, he did not disclose the Perreault claim on the application.  He told Burns that he needed coverage for all his past work since he became an attorney.  The policy that was issued did not have prior acts coverage.  The earlier two policies were canceled. 

 

When Perreault sued Mann, the insurer, Liberty, declined coverage under the second policy because it had been cancelled. It declined coverage under the third policy because that policy did not have prior acts coverage.  It agreed to provide a defense (but presumably not indemnity) under the first policy. 

 

The Massachusetts Appeals Court noted that there is no general duty of an insurance agent to ensure that insurance policies provide coverage that is adequate for the needs of the insured.  However, an agent may acquired a greater duty if special circumstances exist.  Among the factors creating such special circumstances are a prolonged business relationship; the complexity and comprehensiveness of the customer's coverages; the frequency of contact between the customer and agent with respect to insurance needs; and the extent to which the customer relies on the advice of the agent by reason of the complexity of the policies. 

 

The court held that no no such special circumstances existed between AON/Burns and Mann.  Their business relationship spanned only three years.  Mann's insurance needs were not complex.  His communications with Burns were perfunctory.  Burns was not asked to provide risk management services or consultation with respect to the scope of insurance.