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    Legal Concepts for Insurance Agent Ethics: How Agents Get Sued and Lose Their Licenses
    Legal Concepts for Insurance Agent Ethics: How Agents Get Sued and Lose Their Licenses
    Legal Concepts for Insurance Agent Ethics: How Agents Get Sued and Lose Their Licenses
    Ebook99 pages1 hour

    Legal Concepts for Insurance Agent Ethics: How Agents Get Sued and Lose Their Licenses

    By Dwight Kealy

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    About this ebook

    Most people think they are fairly ethical—or at least as ethical as others.
    In this book, attorney and insurance professional Dwight M. Kealy walks the reader through Contract Law, Tort Law, Criminal Law, and the Department of Insurance Code as a way to define ethical boundaries for insurance agent conduct. Sometimes the author writes as the attorney representing a client against an insurance agent. Sometimes the author writes as the attorney defending the insurance agent. Throughout the book, the author balances these opposing views to expose the relevant legal issues, and to encourage the conduct insurance professionals should follow to stay out of court and keep their insurance licenses.
    LanguageEnglish
    PublisherDwight M. Kealy
    Release dateDec 5, 2014
    ISBN9780578154800
    Legal Concepts for Insurance Agent Ethics: How Agents Get Sued and Lose Their Licenses

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      Book preview

      Legal Concepts for Insurance Agent Ethics - Dwight Kealy

      Legal Concepts for Insurance Agent Ethics: How Agents Get Sued and Lose Their Licenses

      Legal Concepts

      for Insurance Agent Ethics:

      How Agents Get Sued and Lose their Licenses

      Dwight M. Kealy

      Attorney at Law

      MA, JD, CIC

      Copyright

      First Edition

      Copyright © 2014 Dwight M. Kealy / Dwight Kealy and Associates, LLC.

      All rights reserved.

      ISBN: 978-0-578-15480-0

      This text is provided for educational purposes only.  The author will not provide legal or other professional advice unless agreed to in writing, in advance.  Insurance matters may be complicated and you need to discuss the specific facts of your cases with an appropriate advisor.

      The legal concepts outlined in this book contain general principles applicable throughout the United States.  However, since California is the most populous state and other states often look to California’s litigation trends, this book uses California’s Insurance Code as an example when looking at Department of Insurance regulations.

      This text uses the term insurance agent, insurance broker, and insurance professional interchangeably to mean an individual who has a license from a state authorizing the individual to transact insurance business.

      Dwight Kealy is an attorney and a licensed insurance producer who spent more than a decade in the commercial insurance industry where he was Chief Operating Officer/Vice President for one of California’s largest insurance agencies for contractors’ liability insurance. Dwight is a Certified Insurance Counselor and Faculty Member with the National Alliance for Insurance Education and Research where he teaches commercial casualty classes. Dwight is a member of the American Bar Association’s Forum on the Construction Industry and the American Bar Association’s Tort Trial and Insurance Practice Section. He lives in Southern California with his wife, two children and lab/great-dane dog.

      Introduction

      Do you think an insurance broker could sell a restaurant a liability policy that excludes bodily injury caused by food?  Do you think an insurance broker could sell a plumber a policy that excludes water damage caused by plumbing?  Even if the broker could sell these policies, do you think a broker should sell these policies?  Think about it.  A restaurant probably buys insurance to protect against lawsuits arising out of someone getting sick from eating the restaurant’s food.  A plumber probably buys insurance to protect against water damage arising out of the plumber’s work.  How would these businesses feel about having their main liability exposure excluded by their insurance policy?  To answer whether or not an agent could sell a policy, this book will explore legal concepts that could prevent a broker from selling a policy.  To answer whether or not a broker should sell a policy, this book will explore ethical questions concerning whether selling the policy is right or wrong.

      This book examines the line between what insurance brokers and agents can or should do by exploring the legal concepts surrounding insurance agent ethics.  I chose this approach because I did not want to write a book that just leaves readers with ethical questions.  I wanted to provide answers.  And, here is my first answer on ethics for insurance agents: 

      If an insurance agent goes to court and a judge or jury says the agent is guilty or liable, or if the department of insurance takes away the agent’s insurance license, I am going to go ahead and say that the agent behaved unethically.

      You may feel that this first, completely unsolicited answer is unfair. You may be right. I imagine that most insurance agents believe that they are an ethical insurance agent—or at least as ethical as that other insurance agent.  Fair or not, I think most agents would prefer to stay out of court and keep their licenses without having to go to court to argue that they behaved ethically. My goal in this book is to present the legal concepts that help define ethical boundaries so that agents can understand how to stay on the ethical side of these boundaries.  By appreciating the boundaries, hopefully agents can reduce the need to have to make arguments to stay out of court and keep their insurance licenses.

      One way to learn how to stay out of court is to understand how others end up in court.  If an angry client wants to sue his/her insurance broker, the client needs to be able to point to a law that the broker violated.  The client cannot get in front of a judge just because the client is angry.  In this book you will read about a number of different legal theories and learn that anger is not in any of their definitions.  If a client’s only complaint is that the client is angry at a broker, the court transcript might look like this:

      Judge- What is your complaint against your insurance broker?

      Client- Your Honor, I am just angry with the insurance broker.

      Judge- Case dismissed.

      The above dialogue should not ever even make it to the judge.  The courts only want to address issues that they can resolve, and correcting someone’s anger is largely a personal issue that is outside the court’s jurisdiction.  Therefore, in order for a client to sue an insurance broker, the client needs to point to a law recognized by the courts with a good faith belief that the broker violated that law.  The laws that we will use to define an agent’s ethical boundaries come from Contract Law, Tort Law, Criminal Law, and the Department of Insurance Code.

      Contract Law

      Angry clients often think that a good place to start suing an insurance broker is to sue using contract law.  In order to sue in contract law, there are some fundamental questions that must be addressed. 

      First, was there a contract?  If there is no contract, then contract law is not involved and you can argue that the case should be dismissed because there was no contract. 

      Second, if there is a contract, but no one breached the terms of the contract, then there is no reason to go to court.  People generally do not go to court to inform a judge that they are both satisfied with the contract that they made. 

      Finally, if there was a contract and someone broke one of

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