Resolving an inherent conflict between insurance law and agency law, the California Court of Appeal held unequivocally that an insurance agent cannot be sued for breach of fiduciary duty. Although Workmen’s Auto Ins. Co. v. Guy Carpenter & Co., Inc., 194 Cal.App.4th 1468 (2011), involved an insurer’s claims against its authorized agent, the Court held that an insurance agent cannot be sued for breach of fiduciary duty, leaving little doubt that an insured similarly has no such claim against its insurance broker.
After discussing in detail case law on an insurance broker’s duties, the Court concluded that while an insurance broker is liable to a client in tort for intentional acts or failure to exercise reasonable care, the broker does not have a special duty of care to its client that rises to the level of a fiduciary duty. The Court noted that while a broker can be, in a technical sense, charged with certain fiduciary duties (such as receiving and holding premiums), the insurance broker does not have a fiduciary relationship with a client.
On the other hand, under general agency law, an agent must disclose to the principal every fact known to him and any fact the concealment of which would lead to injury to the principal. Agents are fiduciaries to their principals. Indeed, an agent has an obligation of “diligent and faithful service the same as that of a trustee.”
After Workmen’s, insurance agents and brokers can take comfort that they are not held to a heightened standard of care owed by fiduciaries. The decision draws a bright line - no breach of fiduciary duty claim lies against an insurance agent or broker. However, agents and brokers still must exercise ordinary due care under the circumstances and are subject to negligence and breach of contract claims.