In another post, we discussed the issues of insurability and material change in the context of the obligation of insurers to honor the policy. Now, we will discuss the role of the agent.
Insurance agents are professional advisers who have obligations to their clients. Most must and do carry errors and omissions liability insurance to cover claims made. What are these obligations when the health of the client changes after the date of the application and before the policy is issued and delivered?
Clients rely upon the life agent to give advice with respect to completion of the policy application. In many cases, the agent will complete the health questions in the application. The cautious agent will require that the client do so. Regardless, the client may well need advice from the agent as to what is meant by some of the health questions.
Clients may not know what is meant by some of the medical terms. Some questions may be so broad in nature that every client would have to answer yes. For example, who has not had some breathing problem on a sports field while still a teenager? Who has not had a headache? Are these symptoms of some enumerated medical diagnosis that must be reported? Why does this matter to the insurability of a 60-year old office worker?
If there is a change in the health of a client after the medical questionnaire is completed, how is the client to know whether that change is material or that the legislation requires disclosure of it? The policy becomes binding on delivery. There can be months that pass between the application and the delivery of the policy. When delivering the policy, the agent should ask about health changes between the application date and the delivery – before the client signs off.
If the agent does not warn about the impact of nondisclosure, the agent may be liable, should the nondisclosure allow the insurer to deny coverage at the time of claim.
Since the seminal 1977 Ontario Court of Appeal decision of Fine’s Flowers v. General Accident (discussed in other posts), insurance agents have known that they are liable to draw to the attention of the client all the important aspects of the coverage. This broad duty of care includes the obligation to tell the client what is important for the client to know to make informed decisions. This may include whether to disclose health changes. This is a proactive duty that places a great obligation on the agent.
The lessons from Fine’s Flowers are for agents to:
§ take great care to inform the applicant of the risks of an incomplete application.
§ assist the applicant to provide the most complete application possible.
§ make detailed notes of your advice; and
§ maintain your E & O insurance.
If your client requires timely and effective legal advice from the experienced lawyers at MBC Law Professional Corporation, we are professionals who are already on your side. Contact Harold Geller or John Hollander toll-free at 1-888-288-2033 ext. 234 or by email.