The terms "professional" and "insurance professional" appear repeatedly in insurance literature, speeches, insurance agent websites, brochures, advertising, and marketing materials. One association of agents even includes the term "professional" in its name. Despite universality of the term, however, there seems to be little recognition of the legal validity or the implications of use (or misuse) of claims of professional status.
This commentary addresses two issues regarding professionalism and insurance producers: whether insurance producers fit within the traditional definition of "professional" and the implications of using the term for liability purposes.
Insurance Producers and the Professions
In ordinary discourse, "profession," according to the current version of the Oxford Dictionary, is "a paid occupation, especially one that involves prolonged training and a formal qualification." The American Heritage Dictionary says a profession is "an occupation or vocation requiring training in the liberal arts or the sciences and advanced study in a specialized field." Webster's New World Dictionary defines a profession as "a vocation or occupation requiring advanced education and training and involving intellectual skills, as medicine, law, theology, engineering, teaching, etc."
Often relying on these dictionary definitions while adding their own views, courts have shown a reluctance to include insurance agents within the list of professions. For example, a New York court compared insurance producers with lawyers, architects, doctors, engineers, and accountants on several dimensions. Mirroring some of the dictionary definitions, the court concluded that a profession is distinguishable by several qualities, including:
extensive formal learning and training, licensure and regulation indicating a qualification to practice, a code of conduct imposing standards beyond those accepted in the marketplace and a system of discipline for violation of those standards. Additionally, a professional relationship is one of trust and confidence, carrying with it a duty to counsel and advise clients.
While acknowledging that agents are licensed, undergo training, and have a common law duty to secure requested coverage, the opinion concluded that agent occupational preparation lacks the rigor of a genuine profession, and an agent generally does not have a continuing duty to advise, guide, or direct a client based on a special relationship of trust and confidence. Hence, "insurance producer" falls short of attaining the status of a profession. See Chase Sci. Research v. NIA Group, 96 N.Y.2d 20, 725 N.Y.S.2d 592, 749 N.E.2d 161 (2001).
In explaining limitations of drawing analogies between attorneys as professionals and insurance producers, the Arizona Supreme Court stated that, in client relationships, attorneys protect a broader set of interests, including the freedom to discuss highly private and sensitive personal information without fear of anyone else discovering it, including that which exposes a person to civil or criminal prosecution. The court also noted that insurance producers are generally not fiduciaries; instead of being judged by a set of professional standards, agents owe only a duty of reasonable care, skill, and diligence (Webb v. Gittlen, 217 Ariz. 363, 174 P.3d 275 (2008)).
California courts tend toward the Arizona view. In Kotler v. Hartford Fire Ins. Co., 83 Cal. App. 4th 1116, 100 Cal. Rptr. 2d 246 (2000), a California court concluded that the relationship between an attorney and a client is "a fiduciary one of the highest character, and attorneys have a duty of loyalty to their clients" including zealous advocacy for their interests, whereas an insurance producer only needs to use reasonable care in representing a client. The court further observed that insurance producers may act as dual agents in which they represent both buyer and seller at the same time, but dual representation is rare among lawyers.
In determining whether an insurance producer qualified as a professional under Florida law, the state's highest court held that "education is the common factor among all vocations which are considered professions" and defined a profession as:
a calling requiring as a minimum foundation under the laws of Florida, specialized knowledge and academic preparation amounting to at least a 4-year university level degree in the field of study specifically related to that calling.
In summary, this judicial model shows that courts tend to discount the professional standing of insurance producers because they do not go to college long enough, lack an enforceable code of conduct, do not have occupational standards that rise above those normally practiced in the marketplace, and lack a fiduciary relationship with the people and businesses they represent. The Florida court was bothered that the state had no requirement that agents be of good moral character but qualified its position on educational background by concluding that education alone is insufficient. True professionalism requires the entire package of professional credentials.
Implications of the Judicial Model on Professionalism of Insurance Producers
What are the implications of the judicial view of producer professionalism? First, for purposes of discussion, and assuming the accuracy and enforceability of the judicial view that producers are not professionals, one obvious implication is that producers who advertise themselves and their agencies as "professionals" are engaged in deceptive advertising. In short, they deceive others by claiming to possess special qualities, abilities, and relationships with the public that they do not have. This view requires that producers omit the habit of characterizing themselves as holding professional status and avoid use of terms commonly associated with professionals. For example, producers should avoid use of the term "client" because it implies that one is acting in a fiduciary capacity, while "customer" suggests a more arm's-length relationship. Accepting one's true status, as defined by courts, further demands a careful edit of many producer Web pages and other advertising materials.
Second, if a producer holds himself or herself out to be a professional, it is more than likely that he or she will be held to that standard in the marketplace. Further, a producer who claims to be a professional or makes other broad claims of expertise without including a definition as to what that role entails is likely to find anything he or she does to fall within the professional umbrella.
Third, one might question whether the judges who impose an ordinary care standard really understand the nature of the insurance industry and what industry leaders expect of a producer. To illustrate, industry literature portrays insurance producers as "professionals" and significantly raises the expectations as to what a producer is to know and do. To illustrate, the Accredited Advisor in Insurance designation curriculum of The Institutes in Malvern, Pennsylvania, not only portrays agents as risk managers for small businesses but also teaches agents about their duties to make inquiries of prospective insureds, follow various checklists to ascertain the risks prospects face, evaluate the risks, separate the risks that insurance can address from noninsurance means of managing risks, develop a plan for prospects, explain policy coverages, recommend various solutions for prospects, maintain a relationship with clients, and reassess client needs at renewal. Agents who sell life insurance may develop detailed financial plans for policyholders. In short, while producers may add considerable value to an insurance transaction, the amount of harm an ill-equipped agent can cause to a business, individual, family, government, association, attorney, doctor, home owner, or motor vehicle owner is enormous in today's economy, and this risk of harm will only grow in the future.
This "amount of harm" argument is similar to the dissenting opinion in Pierce:
Rather than look to the title of the person being sued, it is better to know to look to the act done. If the act is one which involves giving advice, using superior knowledge and training of a technical nature, or imparting instruction and recommendations in the learned arts, then the act is one of a professional.
This dissenting view invites us to reexamine our basis of liability in insurance sales and marketing practices.
Thus, a substantial element of the insurance community has a different vision of producers than that recognized in the judicial model. Many of us, therefore, face a confusing duality: although producers handle many highly technical, complex matters equaling or exceeding the levels of expertise gained in a 4-year academic program, when disputes reach a court, a judge may view an agent as one engaged in an occupational pursuit just slightly above that of a short-order cook. Even the "special relationship" requirement for holding agents to a higher standard is predicated on the course of dealing between agent and buyer, not training, expertise, and professionalism. Continuation of this judicially imposed standard of care cheapens the role and status of insurance producers. Perhaps the time has arrived to reexamine contemporary concepts of professional, or, in the least, raise the floor so the standards against which all producers are measured will more closely reflect the amount of risk they represent to the public.
The implications of transitioning from the status of a person held to a standard of ordinary care to that of a fiduciary as professional are staggering. Acting in the best interest of a client could mean sending prospects to another producer because a particular agency does not have what a client needs; it could mean that the alternatives with the best commissions or other rewards are never sold because of unsuitability; and it could produce significant conflict between insurers and producers if the producer always insists on doing what is best for the client. This topic will be addressed in a future commentary.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.