Section 2-2201 of the Code of Civil Procedure provides that “[a]n insurance producer . . . shall exercise ordinary care and skill in renewing, procuring, binding, or placing the coverage requested by the insured or proposed insured.” (735 ILCS 5/2-2201).
For many years, Illinois insurance law has distinguished between insurance “brokers” – independent actors who act as a middleman between the insured and the insurer to procure insurance – and “agents” – who sell the insurance of a particular company exclusively. Insurance “brokers” owe their insureds a fiduciary duty. Insurance “agents” don’t. So who’s an insurance “producer” within the meaning of Section 2-2201? That’s the question posed by Skaperdas v. Country Casualty Insurance Company, which the Illinois Supreme Court handed down in the final days of the March term. Our detailed summary of the facts and underlying court decisions in Skaperdas is here. Our report on the oral argument is here.
The underlying insurer issued an automobile insurance policy to the plaintiff. Plaintiff’s fiancée was involved in an accident while driving one of his vehicles. The insurer agreed to cover the loss on the condition that the plaintiff would add his fiancée as an additional insured. Although the plaintiff apparently met with his captive insurance agent, the change wasn’t made – the driver was identified as “female” on the new policy, but the plaintiff’s fiancée wasn’t an additional insured.
Not long after, the fiancee’s minor son was injured in an accident. When the driver’s policy didn’t fully cover the son’s damages, the plaintiff filed a claim for underinsured motorist coverage. The insurer denied the claim on the grounds that neither the fiancée nor her son was a named insured. The plaintiff sued the insurer and his agent for negligence, reformation of contract, a declaration of insurance coverage and respondeat superior. The Circuit Court granted the defendants’ motion to dismiss the negligence and respondeat claims, but the Appellate Court reversed.
In a unanimous opinion by Justice Kilbride, the Supreme Court affirmed. The Court turned first to Black’s Law Dictionary, concluding that an “insurance producer” could be plausibly understood as both an agent and a broker. The defendants argued that defining an “insurance producer” as meaning either an agent or a broker rendered the later provisions of the statute regarding fiduciary claims surplusage, but the Court disagreed, concluding that the statute effectively limited fiduciary claims regardless of whether captive agents were defined as “insurance producers.”
The Court placed considerable weight on the definition of “insurance producer” found in the Insurance Code: “a person required to be licensed under the laws of this State to sell, solicit, or negotiate insurance.” (215 ILCS 5/500-10.) Even though Section 5/500-10 wasn’t adopted until five years after the statute at issue, the Court concluded that the legislature’s decision not to differentiate between “brokers” and “agents” in defining “insurance producer” should be given “substantial weight.” Nobody suggested that there was a difference between brokers and agents in the legislative debate either.
Ultimately, the Court held that Section 2-201 imposed a limited duty on insurance agents as well as brokers. An agent was not required to find the best possible coverage for his or her insured – even if that coverage was with another company – the Court said. If need be, the agent could fulfill his or her duty by telling the insured to seek coverage elsewhere. Nor was a non-specific request to “make sure I’m covered” sufficient to trigger the defendant’s duty of care. But reading Section 5/500-10 together with Section 2-201, the Court concluded that when faced with a specific request for coverage, even a captive insurance agent had a duty of due care in connection with the request. Therefore, the Court affirmed the Appellate Court’s reversal with respect to the agent. The Court also affirmed the court’s reversal with respect to the insurer, holding that respondeat superior was sufficient to potentially find the insurer liable.
Image courtesy of Flickr by Chris Yarzab (no changes).
