In a decision issued on March 19, 2015, the Illinois Supreme Court (the "Court") held that a captive insurance producer owes a duty to exercise ordinary care in procuring insurance on behalf of an insured. A copy of this opinion can be found here. This opinion is significant because in reaching this conclusion, the Illinois Supreme Court held that Section 2-2201 of the Illinois Insurance Placement Liability Act (the "Act") no longer recognized the insurance agent-broker dichotomy for purposes of determining whether a duty of care exists when read in context with the definition of an "insurance producer" under Section 500-10 of the Illinois Insurance Code ("Insurance Code"). The Court also articulated the nature of the duty owed under the Act.
In early 2006, Country Casualty Insurance Company ("Country Casualty"), through its agent, issued an automobile insurance company to Steven Skaperdas ("Skaperdas"). After Skaperdas's fiancée had an accident driving one of his vehicles, the insured had a conversation with his insurance agent and told the agent to add both his girlfriend and her son to the automobile policy. The agent prepared the policy but identified only Skaperdas as a named insured. Soon thereafter, the son was seriously injured in a bicycle accident. When the negligent driver turned out to be underinsured, Skaperdas and his fiancée sought benefits from the automobile policy. The claim was ultimately denied because Skaperdas's fiancée and her son were not named insureds. The agent filed a 2-619 motion to dismiss arguing that he did not owe the plaintiffs a duty of care in procuring the requested insurance coverage. Country Casualty filed its own 2-619 motion to dismiss based on respondeat superior, contending that it was not liable for the alleged negligence of its insurance agent because he did not owe plaintiffs a duty. The trial court granted the 2-619 motions to dismiss but the appellate court reversed with respect to the claims against both the agent and Country Casualty.
In affirming the appellate court, the Supreme Court rejected the argument that a captive insurance agent did not owe a duty of care to an insured. At the outset, the Court observed that the Section 2-2201 of the Act requires insurance producers to "exercise ordinary care and skill in renewing, procuring, binding, or placing the coverage requested by the insured or proposed insured." Moreover, the Court noted that this duty of ordinary care imposed by the Act was not based on a fiduciary relationship between an insurance producer and an insured but rather a duty to exercise ordinary care that may be applied to any insurance salesperson regardless of whether a fiduciary relationship existed.
The Court acknowledged that the Act did not define the term "insurance producer" and that Illinois case law distinguishes between an insurance agent and an insurance broker. However, the Court did not find any basis for holding that insurance agents cannot also be included within the ambit of the term "insurance producer" in the Act. The Court found additional support for this conclusion after considering Section 500-10 of the Insurance Code, which defines an "insurance producer" as a person required to be licensed under the laws of the State of Illinois to sell, solicit, or negotiate insurance. As a result, the Court affirmed the appellate court's decision. In so holding, however, the Court also explained that an insurance agent is not required to obtain the best possible coverage for a customer but must only exercise ordinary care and skill in obtaining the coverage requested by its insured or proposed insured, thereby providing further guidance regarding the duties owed under the Act.
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