Opinion ID: 2623334
Heading Depth: 1
Heading Rank: 4

Heading: Determining Whether Last Frontier Had a Common-law Duty to Advise Depends upon the Resolution of Contested Issues of Material Fact.

Text: Last Frontier argues that the rule in most jurisdictions is that insurance agents have no duty to recommend higher limits for liability or UM/UIM coverage in the absence of special circumstances. [2] Peter argues that Alaska cases establish that agents generally have a duty to advise their clients of appropriate coverage and that this includes a duty to advise of appropriate liability and UM/UIM limits. [3] Although we agree with Last Frontier that insurance agents have no duty to advise in the absence of special circumstances, we conclude that Donita Peter's affidavit raises genuine issues of material fact as to whether special circumstances existed. This court has previously held that an insurance agent owes a duty to the insured to exercise reasonable care, skill, and diligence in procuring insurance. [4] Insurance agents have a well-established common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so. [5] Because the prospective insured typically knows the extent of her personal assets and her ability to pay better than the insurance agent, however, it is generally the responsibility of the insured to advise the agent of the insurance that she actually wants, including policy limits. [6] Ordinarily, then, an insurance agent fulfills her duty to the insured by providing requested coverage, and has no duty to advise a client to obtain different or additional coverage. [7] The Court of Appeals of New York recently summarized some of the policy reasons underlying the rule that insurance agents have no duty to advise customers to obtain additional coverage: Insurance agents or brokers are not personal financial counselors and risk managers, approaching guarantor status.... Insureds are in a better position to know their personal assets and abilities to protect themselves more so than general insurance agents or brokers, unless the latter are informed and asked to advise and act.... Furthermore, permitting insureds to add such parties to the liability chain might well open flood gates to even more complicated and undesirable litigation.[ [8] ] An additional but related reason is that imposing a duty to advise could afford insureds the opportunity to insure after the loss by merely asserting they would have bought the additional coverage had it been offered. [9] This would amount to retroactive insurance, a concept that turns the entire theory of insurance on its ear. [10] Still another reason pertaining to liability and bodily injury insurance is that the question of adequacy of coverage is necessarily a matter of opinion. Neither an insurance agent nor anyone else has the ability to accurately forecast the upper limit of any damage award in a negligence action against the insured by a third party. [11] The absence of any correct answer as to what insurance limits are appropriate is especially true with respect to UM/UIM coverage. As with all insurance, the amount of UM/UIM coverage is a trade off between cost and risk, but risk is in part subjective and dependent on other available resources that may mitigate the consequences of personal injury, such as medical and disability insurance. Finally, an undesirable consequence of imposing such a duty would be that agents would defensively tend to advise their customers to buy the highest, most comprehensive and expensive coverages rather than more modest packages that most people of similar means would find suitable. This could result in a mis-allocation of personal resources of individual insureds. Despite the strong arguments in its favor, however, exceptions to the general no-duty rule may arise if a special relationship exists between the insured and the insurance agent. If the insurance agent misrepresents the nature of the coverage being offered or provided, for example, the insured may justifiably rely on the agent's representations in choosing the policy. [12] In addition, an insurance agent may voluntarily assume the responsibility for selecting the appropriate insurance policy for the insured. [13] Moreover, because an insurance agent does have a duty to provide (or attempt to provide) requested coverage, the agent may be liable to the insured if the agent fails to respond appropriately to a request or inquiry for or about a particular type or extent of coverage. [14] Finally, an insurance agent may have a duty to clarify an ambiguous request before providing coverage. [15] As the trial court granted summary judgment in favor of Last Frontier, we are required to credit that view of the facts most favorable to Peter. Donita alleges that she requested full coverage, was handed a policy without being informed that she had the ability to choose different levels of coverage, and was in fact unaware that she could choose different levels of coverage. Standing alone, a request for full coverage is not a request for a specific type of coverage. [16] Karen Boone, who sold Donita her policy, affies that she was not surprised by Donita's choice[ ] of 50/100 coverage, the statutory minimum, as Donita had also chosen minimum coverage for her most recent insurance policy, which had ultimately been canceled for non-payment. But we decline to hold, as a matter of law, that a prior choice of the statutory minimum levels of coverage, combined with a history of payment difficulties, removes all ambiguity from a request for full coverage. Boone's decision to offer only a single level of UM/UIM coverage thus cannot be viewed as simply responsive to Donita's request for full coverage. [17] Instead, by failing to inform Donita that she had other options for UM/UIM coverage, Boone either implicitly recommended 50/100 coverage by offering only that option [18] or, at a minimum, failed to clarify Donita's ambiguous request for full coverage. [19] Of course, the facts that underlie the transaction between Donita and Last Frontier are disputed, and Boone affies that she did inform Donita that she could choose higher levels of UM/UIM coverage. What actually occurred is a question of fact for resolution at trial. If the facts are resolved favorably to the Peters, however, then the special relationship exception to the no-duty rule will have been established. If this exception is established then, by definition, Last Frontier had a duty to advise Donita as to appropriate levels of coverage. We believe that subsumed within this duty would be a duty to advise of available levels of coverage. Given the personal and subjective nature of UIM coverage and the doubts that we have expressed as to whether there is such a thing as an appropriate level for UIM coverage, advice as to available limits may be more useful than advice as to appropriate limits. While the latter may be almost entirely a matter of personal choice, it is important to have information on available limits so that the choice ultimately made by the insured is an informed one. Under the particular facts of this case, in order to determine whether a special relationship creating a duty to advise existed, the question of whether Last Frontier informed Donita of optional available levels of coverage must be resolved. If a special relationship is found to exist, the trier of fact must address whether Last Frontier's advice, whether implicit or explicit, was reasonable, or whether Last Frontier should instead have recommended higher levels of UM/UIM insurance. [20] Questions of whether any breach of duty caused harm and, if so, the extent of harm would also remain for resolution. A remand is necessary so that these issues can be resolved.