Left Out to Dry: When Can You Sue An Insurance Agent for Failure to Obtain Flood Insurance?
By Aaron Bender, Attorney
The latest statistics show that only 20% of Hurricane Harvey victims had flood insurance. After the remnants of the torrential downpours passed, the other 80% were likely left wondering: “I thought I had flood insurance” or “why did I not have flood insurance.” While flood insurance is required in certain designated floodplains, Houston alone has experienced three “500-year” floods within the past three years, flooding areas beyond those designated flood plains and damaging uninsured homes and businesses in the process.
Given the seemingly greater frequency in which these flooding events occur, it’s often easy to blame the insurance agent for failing to procure flood insurance. After all, as Texas courts have explained, the insurance agent owes their clients the greatest possible duty—as clients look to and rely upon their agents to get the coverage sought, with a sound company, who can and will properly and promptly pay claims when they are due.
But does an insurance agent’s failure to obtain a specific form of insurance give rise to legal causes of action against that agent? It ultimately depends on the specific facts of each case. In Texas, insurance agents owe a client a simple, yet great duty:
It is established in Texas, that an insurance agent who undertakes to procure insurance for another owes a duty to a client to use reasonable diligence in attempting to place the requested insurance and to inform the client promptly if unable to do so.
Despite this great duty that insurance agents owe their clients, those agents cannot be held liable for failing to obtain a specific type of insurance that they were never requested to obtain. For example, in Moore v. Whitney-Vaky Ins. Agency, a Texas court held that an insurance agent tasked with obtaining insurance for an apartment complex owner could not be held liable for failing to acquire insurance to cover an employment-related claim—when employment-related coverage was not discussed nor requested by the insured. It made no difference to the court that the apartment complex owner mistakenly believed that the insurance policy covered any and all liability. But rather, the insured—here, the apartment complex owner—bore the burden to read the insurance policy and the insurance agent had no duty to explain the type of coverage under the insurance policy.
So when can a client bring a lawsuit against an insurance agent for failure to obtain a specific type of insurance? The Supreme Court of Texas made clear that an insurance agent can be held liable if that agent induced a client to rely on their performance to procure insurance and the client reasonably assumed that they were insured against the risk that caused the loss. In other words, the crux of a claim against an agent focuses on the agent’s actions—more specifically, whether that agent made a misrepresentation of some sort about insurance coverage.
An insurance agent cannot represent that they will obtain a specific type of insurance and then fail to do so. In Burroughs v. Bunch, an insurance agent was held liable for fire damage to a client’s home after the insurance agent represented that he would procure a builder’s risk policy on the home but never notified the client that he failed to procure the policy. Similarly, an insurance agent cannot misrepresent to a client that they do not qualify for a specific type of insurance when, in fact, the client qualifies. In Nast v. State Farm Fire and Cas. Co., the Nasts properly filed a claim against their insurance agent of eighteen years after the agent told them that they weren’t eligible for flood insurance. When the Nasts asked their agent why their neighbors were eligible, and they weren’t, the insurance agent responded that those neighbors purchased fake insurance from a shyster. Ultimately, each case is very fact-specific but, as demonstrated above, a successful claim against an insurance agent requires a misrepresentation of some sort.
Another scenario that could give rise to a legal claim against an insurance agent is when a client already purchased a specific type of insurance and the insurance agent fails to keep the client informed about a looming expiration date. In Kitching v. Zamora, the Kitchings purchased flood insurance from their insurance agent and paid premiums on the policy for around five years. The agent received information from the insurance company intended for the Kitchings that the policy was set to expire but the agent failed to relay the message. About a month after the policy expired, the Kitchings sustained substantial damage from a flood. In this case, the agent was found liable, and the Supreme Court of Texas instructed that the insurance agent has a duty to notify clients about an insurance policy’s expiration date—especially when the agent receives information from the insurance company intended for the client. The decision, in this case, seemed to turn on the fact that the information received by the agent was intended for the customer, thus imposing a duty on the agent where one might not ordinarily exist.
Many victims in Hurricane Harvey’s wake were uninsured and left without an adequate remedy to help them through this difficult time. While insurance agent malpractice and negligence claims are extremely fact-specific, the above scenarios demonstrate that the option to litigate—and potentially receive an adequate remedy—does exist for some uninsured homeowners.
If you think you may have been a victim of an insurance agent’s misrepresentation and failure to procure an insurance policy, contact us today.
As attorneys representing home and business owners, we have seen the damage, devastation, and disruptions that hurricanes and storms can cause. We have represented thousands of clients against insurance companies that have tried to avoid and delay payment for legitimate losses our clients have incurred.
Do you have property damage related to Hurricane Harvey? We focus on representing the policyholder and making sure you are treated fairly. Contact us today to discuss your claim or if you have any questions. Please use our Free Case Evaluation Form below or call us at 713-714-0000.
 Roger Yu, Less than 20% Harvey victims have flood insurance as FEMA braces for tons of claims, USA Today, Aug. 30, 2017, available at https://www.usatoday.com/story/money/2017/08/29/insurance-woes-await-flood-victims-under-covered-houston-area/613239001/.
 Under the Flood Disaster Protection Act of 1973 and Flood Insurance Reform Act of 1994, the Federal Emergency Management Agency (FEMA) can force certain homeowners to purchase flood insurance for properties located in areas with special flood hazards.
 Christopher Ingraham, Houston is experiencing its third ‘500-year’ flood in 3 years. How is that possible?, Washington Post, Aug. 29, 2017, available at https://www.washingtonpost.com/news/wonk/wp/2017/08/29/houston-is-experiencing-its-third-500-year-flood-in-3-years-how-is-that-possible/?utm_term=.99ee9a740767
 Trinity Universal Ins. Co. v. Burnette, 560 S.W.2d 440, 442 (Tex. Civ. App.—Beaumont 1977, no writ).
 May v. United Serv. Ass’n of America, 844 S.W.2d 666 (Tex. 1992).
 Moore v. Whitney-Vaky Ins. Agency, 966 S.W.2d 690, 691–92 (Tex. App.—San Antonio, no writ).
 Id.; see also Heritage Manor v. Peterson, 677 S.W.2d 689 (Tex. Civ. App.—Fort Worth 1984, writ ref’d n.r.e).
 May v. United Servs., 844 S.W.2d 666, 669 (Tex. 1992).
 210 S.W.2d 211, 214 (Tex. Civ. App.—El Paso 1948, writ ref’d).
 82 S.W.3d 114, 124 (Tex. App.—San Antonio 2002, no pet.)
 695 S.W.2d 553, 553–54.