Duties Owed by Unbiased Brokers versus Captive Brokers

At CLG we’ve had a big variety of claims over the past yr the place insurance coverage brokers have didn’t fastidiously evaluation their buyer’s insurance coverage wants and provides correct recommendation as to what kind or how a lot protection to buy or whether or not the protection limits are ample. When a hearth or different casualty happens or when a legal responsibility declare is made towards the insured, and the insurance coverage firm denies the declare or pays solely a fraction, right here’s what you could know.

Key Variations

Colloquially, an individual who sells insurance coverage could interchangeably known as an “agent” or a “dealer.” Nonetheless, there are two distinct classes of pros who present insurance coverage merchandise, and the variations could also be legally important for his or her purchasers. First, an “agent” or “captive agent” works completely for one insurance coverage firm and is paid by that firm. An instance of a captive agent is a State Farm or Allstate insurance coverage agent. In contrast, the phrases “dealer” or “unbiased agent” consult with professionals approved to symbolize a number of insurers.

Each professionals act as intermediaries between insurance coverage patrons and sellers, however whereas an agent represents an insurance coverage firm, a dealer legally represents you, the insurance coverage purchaser. This implies brokers have a fiduciary obligation to pick out insurance coverage merchandise that shield the monetary curiosity of the consumer, no matter what insurance coverage firm provides it. In distinction, a captive agent has contractual agreements with insurance coverage firms which specify the insurance policies they’ll promote.

Legal responsibility Points

As a result of each unbiased and captive brokers are each thought of “producers” below ORS 744.078(4), each could also be held liable to the insurer in conditions the place the dealer breaches an settlement to acquire insurance coverage, doesn’t observe the insured social gathering’s directions, or misrepresents key phrases of the coverage.

Nonetheless, if an insured social gathering faces inadequate insurance coverage protection, the choices for restoration will rely on whether or not it procured the coverage by way of a captive agent or an unbiased dealer.

The Restricted Legal responsibility of Captive Brokers

An insured could not deliver a negligence motion towards a “captive agent.” Oregon courts base this rule on the truth that insured events have “no motive to anticipate” that the agent would work on their financial behalf.  Any obligation owed by the agent is to the insurance coverage firm alone.

When an Unbiased Dealer Could Be Responsible for Negligence

In distinction, an insured could deliver a negligence motion towards an unbiased insurance coverage agent who works for a number of insurers. The Oregon Courtroom of Appeals has decided that an agent could also be topic to legal responsibility for negligence in a variety of circumstances, together with:

  • If the agent breaches its obligation to elucidate the extent during which the insurance coverage coverage really supplied the protection that was requested.
  • If the unbiased agent fails to advise the potential insured relating to the totally different coverages and insurance policies that had been out there.
  • If an agent had obligation to warn the insured in regards to the important distinctions between the choice insurance coverage insurance policies into consideration, but failed to take action.


Lawsuits for insufficient insurance coverage protection—whether or not towards an insurer, captive agent, or unbiased agent—search to get better the quantity that the insured would have obtained from the insurer if the agent had acted correctly. The insured can be entitled to get better consequential damages, together with misplaced income ensuing from an insured’s lack of ability to renew enterprise operations following a loss. See Joseph Forest Merchandise, Inc. v. Pratt, 278 Or 477, 564 P2d 1027 (1977).

Notably, below ORS 742.061, a plaintiff’s solely proper to legal professional charges is towards the insurance coverage provider. There isn’t any proper to legal professional’s charges towards an insurance coverage agent alone.

For those who or your small business has been inadequately insured by a void, faulty, or inadequate coverage, an legal professional might help you establish potential routes to restoration.

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