The Insured VS. The Agent: Who Is to Blame for a Lack of Coverage?

For an insurance adjuster, this can be a daily experience. A loss occurs and the insured’s clam is denied due to a lack of coverage. When this happens, a dispute almost always arises between the insured, the carrier, and often the insurance agent. In the ensuing blame game, fingers are pointed, tempers flare, and lawsuits are often filed. Discovering after the fact that there is no coverage in place can be infuriating to anyone. This is especially frustrating when the insured is relying on a commercial policy that contains a specific exclusion for their claim.

When an insured discovers that coverage was never in place for the work being performed at the time of a loss, the insurance agent will most likely be blamed for that gap in coverage. At the same time, the agent may allege that s/he was never informed by the insured that the particular type of work performed is specifically excluded. Alternatively, the agent may assert that the insured was informed that a specific type of work was excluded. At which point, the insured will respond that s/he would have never purchased the policy if that information had been shared. In this last instance, the agent will point to the duty of an insured to read and be familiar with the contents of their insurance policy. And round and round it goes.

A common scenario in this finger-pointing scheme is one where the insured alleges, despite the fact that s/he failed to read the insurance policy, that the agent said or did something that led them to believe they would be covered. In other words, the insured will allege that the agent made misrepresentations concerning coverage. An interesting issue is where allegations of agent misrepresentation intersect with an insured’s duty to read their policy.

The law in Texas has long been that an insured has a duty to read their policy and is charged with the knowledge of its contents. At the same time, however, courts have held that an insured’s failure to read and be familiar with the terms of their policy may not fully preclude a subsequent claim. The words used by an agent in explaining coverage to an insured are crucial because they may ultimately be weighed against the insured’s failure to read their policy. Depending on how these factors are balanced, an agent’s representations may impact the insured’s right to recover.

Where an agent makes broad representations, such as that a policy provides “full coverage”, the courts have held that this type of vague representation, made alone, constitutes merely an opinion and does not amount to an actionable misrepresentation. This type of representation by an agent does not overcome the insured’s duty to read and be familiar with their policy. In this instance, an insured will be bound by the language in the policy, including any applicable exclusions.

On the other hand, when an agent makes specific affirmative misrepresentations, such as representing coverage is in place for explicit conditions when it is not, these types of representations become actionable. This more specific form of misrepresentation by an agent may overcome the insured’s duty to read the policy, and in the end an insured may be extended coverage or recover damages for an otherwise excluded loss.

At Thomas M. Fountain & Associates, PLLC, we routinely assist our insurers in evaluating this type of claim and may be able to assist in the event such an allegation or claim comes to you.

The law firm of Thomas M Fountain & Associates, P. C. is an AV Preeminent rated law firm located in The Woodlands, Texas which is in the greater Houston metropolitan area. Thomas M Fountain has 35 years of experience upon which the firm’s clients draw when necessary. The firm prides itself on being proactive rather than reactive. 

For more information see our Website at or call (281) 296-6500. 

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Thomas M Fountain & Assoc., PC

Thomas M Fountain & Associates PLLC