Many businesses and individuals consider their insurance agent a trusted advisor who will proactively ensure adequate coverage. But when an insurance claim is denied or doesn’t result in the expected payout, policyholders may be surprised to learn that Michigan law does not impose a general legal duty on insurance agents to advise clients on the adequacy or suitability of coverage.

In most situations, insurance agents are only responsible for securing the specific coverage requested by the client. They can be held liable for inadequate or inaccurate coverage recommendations only in limited and specific circumstances.

The General Rule: No Duty to Advise

Under longstanding Michigan law, insurance agents and brokers are generally considered facilitators of coverage, not legal or financial advisors. As outlined by the Michigan Supreme Court in Harts v. Farmers Insurance Exchange, 461 Mich. 1 (1999), an agent’s primary legal obligation is to obtain the insurance coverage requested by the client. They are not required to assess whether the coverage is appropriate for the client’s situation or to suggest additional protections.

The Exception: Special Relationships

There are exceptions to this rule. A heightened legal duty may apply if a “special relationship” exists between the agent and the insured. Whether such a relationship has been established is typically a question of fact for a jury.

Michigan courts have identified several nonexclusive factors that may support the existence of a special relationship. In Harts, the court outlined that an agent’s duty may expand in situations such as:

1. The agent misrepresents the nature or extent of the coverage offered or provided.
2. An ambiguous request is made that requires clarification.
3. An inquiry is made that may require advice, and the agent, though not obligated, gives inaccurate advice.
4. The agent assumes an additional duty through express agreement or a specific promise to the insured.

When a special relationship is found, the agent has a duty to advise and may be held legally responsible for failing to fulfill that duty. See, for example, Zaremba Equipment, Inc. v. Harco National Insurance Co., 280 Mich. App. 16, 28 (2008). However, the burden falls on the insured to prove that such a relationship existed.

Practical Tips for Policyholders

Although most insurance agents strive to provide excellent service and guidance, it’s important for policyholders to understand the legal framework and take steps to protect themselves. Here are a few practical tips:

1. Be specific. If you need assurance that your policy meets particular needs, ask your agent or broker directly and get confirmation in writing. The more specific your request, the more likely the agent’s response will carry legal significance.
2. Keep good records. Document conversations and correspondence, especially when coverage recommendations or assessments are involved.
3. Review your policy. Even if a special relationship exists, policyholders still have a duty to review and understand their policy. Courts have held that an unreasonable failure to read the policy can weaken or defeat a claim for negligent advice.

Ultimately, Michigan courts are reluctant to impose liability on insurance professionals beyond their traditional role. While many clients naturally view their agent as an advisor, the law may not always treat them that way.

To strengthen your position and ensure clarity in your insurance arrangements, be proactive: ask questions, get answers in writing, and review your policy carefully. These steps can help demonstrate that your agent acted in an advisory capacity, if needed.