Policyholders often rely on insurance brokers when purchasing insurance policies. It is well established in Ohio that policyholders, regardless of their use of brokers, have a duty to examine their insurance policies themselves and cannot rely on the broker’s representations. In some instances, however, a broker and policyholder relationship may change, which could affect the broker’s duty to the policyholder.
The broker, when working with a policyholder, is held to the ordinary standard of care which requires a broker to exercise the knowledge and skill reasonably expected of one engaged in the business of procuring insurance policies for a policyholder. Selling insurance is considered part of the ordinary business relationship between a broker and policyholder and does not create a fiduciary relationship which would require the broker to be held to a higher standard of care.
In Ohio, fiduciary relationships are found where “special confidence and trust is reposed in the integrity and fidelity of another and there is a resulting position of superiority or influence, acquired by virtue of this special trust.” Stone v. Davis, 66 Ohio St.2d 74, 78, 419 N.E.2d 1094 (1981). If a policyholder is seeking to impose a heightened standard of care due to the existence of a fiduciary relationship the policyholder must show that a special relationship existed with the broker.
A policyholder must show it had special trust or confidence placed in the broker—something out of the ordinary—and that the broker recognized this special relationship, trust, or confidence. The existence of a long-established relationship between a policyholder and a broker, even for more than 10 years, is insufficient to change the nature of the relationship.
While the length of the relationship alone is insufficient, at least one Ohio court has questioned whether policies that encourage brokers to develop long term relationships and to act in the policyholder’s best interest in order to gain their trust and confidence so the policyholder believes the broker is making the best decisions regarding the policyholder’s interest may rise to the level of creating this special relationship. See, Baughman v. State Farm Mut. Auto. Ins. Co., 9th Dist. Summit C.A. No. 22204, 2005-Ohio-6980.
Situations where a special relationship between a broker and policyholder exists and, as a result, the broker is held to a higher standard of duty often stems from a long relationship between a broker and policyholder where the broker is familiar with the policyholder’s needs and agrees to take on additional responsibilities, likely for a fee, as a result of this relationship.
A broker is a useful tool in procuring insurance coverage however, a policyholder must be cautious of relying too heavily on the broker without doing its own investigations. Furthermore, while you may believe that you have a special relationship with your broker that requires the broker to be held to a higher standard of duty, that may not be the case. While a special relationship can be formal or informal, by relying on informal agreements, the policyholder risks a court or jury interpreting the facts differently. If as a policyholder you are relying on your broker for more than the ordinary course of business protect yourself and make sure make sure your wishes are explicitly addressed.