RISKY BUSINESS

In 2010, respected attorney Myles Hassett, ESQ published a guide to understanding Standard of Care laws across the United States. More recently in 2021, Mr. Hassett and his colleagues have updated this guide and made it available at no cost for all Swiss Re policyholders. The guide cites that over 30 new decisions have impacted the laws in many states. These laws apply to both captive and independent insurance agents and brokers. As a Swiss Re approved auditor, I rely heavily on the information provided in this document to educate policyholders on their legal obligations and how their words and actions increase those obligations by creating “special relationships”.

Do your clients turn to you to advise them on their insurance needs? Of course they do! Your legal obligation in Wisconsin is to procure the coverage requested or advise on why it cannot be provided. In working with many of our wonderful agents, I have seen that you provide more than just this baseline requirement. In general, if you answer “yes” to any of the following, the court could find that a “special relationship” exists between you and the customer and, thus, your duty has been increased. • Have you agreed to act as an “advisor” to the customer? Many times, we review an agent’s website or public facing communications and find that the agent has referred to themselves as an “advisor” or “trusted advisor”. If this is the role you’ve chosen to play, its imperative to understand the legal duties that accompany this position. • Did the customer request your advice? Whether you’ve stated you’re an advisor or the customer specifically requests your advice, an increased duty exists in both situations. Ultimately, its important to have strong documentation to show the customer made a final decision based on the options you presented. • Have you accepted additional compensation for your services? Just as you would expect a higher level of service from a paid professional in your own home, an insured will expect additional care and consideration if they are paying fees (beyond the commission) for your services. • Is there a long-term relationship established with the customer? In Wisconsin, there are countless customers who have been with their agents for many years. Over the course of these years, the insured has become accustomed to the advice and recommendations of the agent. Do not take these customers for granted because you may be held at a higher standard of care due to the relationship that has been established. • Do you refer to an agent or the agency as “experts” or “specialists”? As an approved auditor, I regularly review an agency’s website, and this is one of the most common references that I find on a site. Many of our agents have extensive knowledge and may be a “specialist”. Be mindful of the additional duties this presents and be wary of referring to the ALL staff as experts or specialists – especially in a specific coverage type. • Have you accurately represented the coverage you’re providing? Many agencies provide coverage language either on their website or in written materials. Its important to review, update and make careful decisions about how you would like this information presented and interpreted. Providing updated materials produced by the carrier may mitigate the increased duty that comes with creating your own information.

The entire document “Insurance Producers’ Duty to Advise: A Nationwide Guide To the Law Governing Insurance Producers’ Obligations to Advise Their Customers” explains Standard of Care laws and how the courts are imposing a duty to advise. This document can be found on the E&O Happens website and is available at no cost to Swiss Re policyholders. While understanding the specific laws and interpretations in Wisconsin should come first and foremost, you may be held at a higher standard of care based on where you do business and the coverage provided to those insureds in other states. It isn’t completely black and white which standard of care laws will be considered, so understanding your duties and mitigating your risk through strong procedures and workflows should be at the forefront of all agency operations.

For an independent review of agency operations, website language or to consult on specific workflows please reach out to the experienced professionals at the Independent Insurance Agents of Wisconsin.