Opinion ID: 2540396
Heading Depth: 2
Heading Rank: 2

Heading: Limited Duty of Loyalty

Text: The parties disagree as to whether a duty to use reasonable skill to procure requested insurance is the extent of the broker's duty. Emerson asserts that the broker also owes a duty of loyalty as part of its fiduciary duty while acting as the insured's agent. This follows, it argues, from the very nature of being an agent because it is a basic principle of the law of agency that an agent has a fiduciary duty to act loyally for the principal's benefit in all matters connected with the agency relationship. Restatement (Third) of Agency § 8.01 (2006); accord, Varity Corp. v. Howe, 516 U.S. 489, 506, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996) (agent owes principal duty of loyalty); Cascade Energy and Metals Corp. v. Banks, 896 F.2d 1557, 1577 (10th Cir.1990) (the fiduciary duty of loyalty and duty of care [are] inherent in any principal-agent relationship). In Scanwell v. Chan, 162 S.W.3d 477 (Mo. banc 2005), this Court cited the Restatement (Second) of Agency §§ 387, 393 (1958), in holding that under basic agency principles every employee owes his or her employer a duty of loyalty. Id. at 479. Scanwell said it was unclear whether that duty arose from a general fiduciary duty or whether it arose independently, but whichever was the case, the employee in that case would breach her duty of loyalty if she acted contrary to her principal's interest by soliciting clients and competing while still working for the employer. Id. at 479-81. Missouri courts have found that travel agents, Markland v. Travel Travel Southfield Inc., 810 S.W.2d 81, 84 (Mo. App.1991), real estate brokers, Adams v. Kerr, 655 S.W.2d 49, 53 (Mo.App.1983), and stockbrokers, State ex rel. Paine-Webber, Inc. v. Voorhees, 891 S.W.2d 126, 129-30 (Mo. banc 1995), [7] owe their clients a duty of loyalty. Am. Mortg. Inv. Co. v. Hardin-Stockton Corp., 671 S.W.2d 283 (Mo.App.1984), equated the duties of a real estate broker with those of an insurance broker in holding that the insured's failure to discover that the broker had failed to comply with its promised undertaking did not preclude recovery, stating it saw no reason to draw any distinction between the agency relationship of an insurance broker-insured and a real estate broker-customer. Id. at 289. So too, here, this Court finds that the principles that led this Court to find a duty of loyalty of employees, real estate brokers, travel agents and stockbrokers to their principals apply equally to insurance brokers because a duty of loyalty running from the agent to the principal is inherent in the nature of the principal-agent relationship. See Couch on Insurance, § 46:27 (3d. ed.2005) (stating [t]he agent of the insured owes to the insured the duty to act loyally). Indeed, although Zeff Dist. Co. v. Aetna Cas. & Surety Co., 389 S.W.2d 789 (Mo. 1965), does not use the term duty of loyalty, this Court did state that an insurance broker is under a duty to exercise good faith and reasonable diligence to procure the insurance on the best terms he can obtain. Id. at 795-96, quoting 44 C.J.S. Insurance § 172 (emphasis added). This is but another way of recognizing that a basic duty of loyalty runs between broker and insured.