Court Affirms Insurer, Agent Have Duty of Care But Not Fiduciary Duty in GEICO Case

A licensed insurance agent, and the insurer she represents, owe a duty of care to a customer to explain coverages but neither the agent nor the insurer has a fiduciary duty to an insured under Connecticut law.

U.S. District Judge Kari Dooley in Bridgeport cited prior rulings in siding with Jeffery Perry in his negligence claim against Government Employees Insurance Co. (GEICO) and its employee/agent for what he alleges was a failure to properly advise and provide him with adequate insurance coverages. However, the judge denied Perry’s claim of breach of fiduciary duty against the insurer, also citing Connecticut court history.

Perry, a long-time GEICO policyholder, was changing his car registration from New York to Connecticut and asked to consult with an agent on his coverages and policies. He sought advice on auto, uninsured/underinsured motorist, and umbrella/excess coverages.

The GEICO employee/agent, who was licensed in both New York and Connecticut, assured Perry that she had properly advised him concerning the suitably and adequacy of appropriate coverage, and in reliance on this discussion with the agent, Perry purchased the coverages she recommended.

However, Perry alleges that the insurance policies were inadequate because they provided limited uninsured/underinsured motorist coverage given his personal circumstances. He maintains that the agent failed to explain, identify, offer, or recommend adequate umbrella/excess insurance coverage that would provide him with additional uninsured/underinsured motorist coverage.

On June 7, 2020, Perry was in a car accident with an underinsured motorist and suffered serious injuries. As a result of the crash, Perry needs medical and hospital care, surgery, testing, physical therapy, occupational therapy, medication, daily assistance by an aide, and other treatment. According to Perry’s complaint, all of his available insurance, including the uninsured/underinsured coverage, has been exhausted and has been inadequate to compensate him for his injuries.

Perry brought a negligence and breach of fiduciary duty action against GEICO over the insurance advice he received from the GEICO employee/agent.

GEICO argued that the negligence claim should be dismissed because GEICO did not owe, and therefore could not breach, a duty to advise him as to the adequacy of his insurance coverage.

But the court sided with Perry that his negligence claim was viable, noting that Connecticut courts have recognized that an insurance agent does owe a client of duty of care to explain coverage (Byrd v. Ortiz, 136 Conn.App. 246 (2012).

“Where an agent undertakes to procure a policy affording protection against a designated risk, the law imposes upon her an obligation to perform with reasonable care the duty she has assumed,” the Byrd court noted. In Byrd the appellate court held that the plaintiff had alleged viable negligence claims against the agent as well as the insurer as being vicariously liable for the acts of its agent.

Judge Dooley observed that Perry’s allegations are remarkably similar to those in Byrd. Perry requested advice on his insurance coverage from GEICO and the employee/agent. Perry alleged that the agent failed to offer or recommend increased or excess coverage and that in reliance on her representations, he purchased coverage that was inadequate to compensate him for his injuries and losses after a serious car accident.

Under the holding of Byrd, GEICO owed Perry a “duty to explain his insurance coverage to him, to recommend the proper amount given his individual circumstances, and to offer that amount to him,” Judge Dooley wrote in denying GEICO’s motion to dismiss the negligence claim.

GEICO next argued that Perry was unable to establish he had a fiduciary relationship with GEICO because Connecticut law “treats the insurer/insured relationship as contractual and none of the allegations transform that contractual relationship into a fiduciary one.”

Perry contended that Connecticut courts do recognize a fiduciary relationship between an insurance agent and a client.

“Historically, Connecticut courts have held as a matter of law that the relationship between an insurer and an insured is commercial in nature,” the Judge Dooley wrote, again citing prior opinions. The judge noted that Perry cited no contrary authority suggesting that his relationship with GEICO “was anything more than a commercial transaction” and made no allegations of a “unique degree of trust and confidence between the plaintiff and the defendant akin to a fiduciary or special relationship.”

The court agreed with GEICO that the insurer did not owe Perry a fiduciary duty to recommend adequate insurance coverage.

“The allegation that the GEICO agent assured Perry that she had properly advised him on the suitability and adequacy of his coverages supports a claim of negligence, but it is not enough to transform Perry’s commercial relationship with GEICO into a fiduciary one,” the court concluded.

In a footnote the court acknowledged that the Connecticut Supreme Court once signaled a potential departure from this precedent, suggesting that “an insurer generally has a fiduciary relationship with its insured” but the high court has never spoken on the precise nature of the duty.

Perry had asked the court to allow him to amend his complaint to add the agent as an additional defendant on both the negligence and fiduciary claims. The court said the joinder of the agent as a defendant as to the negligence claim is proper. However, because the court dismissed the breach of fiduciary duty claim against GEICO, the court denied “as futile” Perry’s bid to join the agent as an additional defendant to this claim.