Insurance agents make costly mistakes all the time, but even when those mistakes have catastrophic consequences, they may not justify an award of punitive damages in a lawsuit because such damages are only awarded in cases involving intentional misconduct or gross negligence. Punitive damages are not intended to make up for losses but to punish wrongful conduct.
In this post, we explain when punitive damages may be appropriate in a case involving malpractice by an insurance agent and how you can ensure that you receive full recovery even without punitive damages.
What is Insurance Agent Malpractice?
Insurance agent malpractice is a form of professional negligence that occurs when an insurance agent fails to exercise reasonable care in performing their job, and that failure to act responsibly causes financial harm to a client. Malpractice may involve errors while performing actions such as:
- Advising clients about policy options
- Explaining limitations and exclusions in coverage
- Processing insurance applications
- Securing coverage as requested by a client
- Renewing a policy
- Communicating issues with insurance companies
- Keeping information up-to-date
Insurance agents are expected to listen to their clients’ requests and match them with an appropriate policy. For instance, in hurricane-prone Florida, if a client purchasing property insurance asks for coverage for hurricanes and the insurance agent recommends a policy that excludes wind and hail coverage, that would leave the client unprotected in the case of a hurricane. Whether due to intentional misrepresentation or a careless mistake, it is malpractice.
Agents are expected to use reasonable care in performing their duties, and when their actions fall below the standards of a reasonably prudent professional, then they can be held liable for negligence.
What are Punitive Damages Compared to Other Types of Damages?
Most legal damages are designed to compensate you for harm done, but punitive damages are intended to punish and deter wrongful conduct. You can think of them as a fine issued in a criminal case, except that the money goes to the injured person rather than the government.
Besides punitive damages, a court can award various types of compensatory damages designed to make up for the different consequences of someone’s wrongful conduct. The compensatory damages are intended to make you “whole” after wrongful conduct, so there is no need for additional damages. Punitive damages are an extra form of damages, and that is one reason they are only awarded in unusual situations.
Why Is It So Difficult to Recover Punitive Damages?
Florida has high standards for determining when a court can award punitive damages. A mistake that resulted from sloppy practices is not enough to justify punitive damages. Even if a sloppy mistake caused someone to lose millions of dollars, the losses should be covered by compensatory damages without the need for added penalizing damages.
Instead, punitive damages are reserved for cases where someone acted intentionally or was so extremely irresponsible that their conduct is considered gross negligence.
What are Some Situations That Justify Punitive Damages for Agent Malpractice?
Intentionally committing actions that are harmful or irresponsible can provide grounds for punitive damages. For insurance agents, this might include:
- Forging signatures
- Telling a client that a policy provided coverage when the agent knows that coverage is not included
- Deliberately failing to provide full policy information with the intent to hide limitations
- Changing information on an insurance application
Examples of grossly negligent conduct that could warrant the award of punitive damages might include situations where an agent ignores repeated communications about a lapsed policy or reminders from a policyholder about a request for a change in coverage. Ordinary mistakes, such as failing to activate a policy, could turn into gross negligence if those mistakes are repeated or not corrected after notification has been given.
FAQs About Punitive Damages in Insurance Malpractice Cases
Will the judge award punitive damages automatically when an insurance agent has acted wrongfully?
No, punitive damages must be deliberately requested, and the attorney must make arguments to show why it is appropriate for these extraordinary damages to be awarded.
What compensation is available without punitive damages?
A client who has suffered losses because of the negligence of an insurance agent can receive substantial damages that fully compensate them for the harm even if punitive damages are not provided. A skilled insurance attorney could seek amounts to compensate for all the consequences of insurance malpractice such as:
- Insurance benefits that were expected but not provided
- Damage to property
- Additional costs that resulted from the lack of coverage
- Business interruption losses
- Other financial losses
If the malpractice resulted in actual physical harm, then additional damages may be available
What do you have to prove to get punitive damages?
Your attorney first needs to demonstrate that negligent, reckless, or intentional conduct justifies an award of compensatory damages. Then it is necessary to present factual evidence demonstrating that conduct was intentional or why it should be considered grossly negligent.
When should you consult an attorney about insurance malpractice?
There are several red flags that indicate that an insurance agent may be liable for malpractice, so it is a good idea to consult an attorney if:
- The insurer denied a claim stating there was no coverage
- Insurance documents appear to be altered or inaccurate
- Policy terms were misrepresented by the agent, and you find yourself without appropriate coverage at a time of loss
- You have evidence that you requested coverage and your agent failed to take steps to obtain it
- You paid premiums, but the insurance company has no record of your policy
An attorney can review the facts of your situation and explain whether you may have a legal claim for compensatory or punitive damages.
When an Insurance Agent Acts Irresponsibly, Ver Ploeg & Marino Works to Secure Recovery
Whether a mistake by an insurance agent is careless or intentional, they can still be held accountable for the losses that result. At Ver Ploeg & Marino, we are not always able to secure punitive damages for insurance agent malpractice, but we know how to fight effectively for full compensation for every aspect of a loss caused by the professional negligence of an insurance agent or broker. For a confidential consultation to discuss your legal rights and potential for damages, contact our team today.
