Section 14.2 Nature of Relationship

• Library: Insurance Practice 2015

When a dispute arises between an insurer and an insured, the circumstances of the negotiation and formation of the contract can be important. See Robert H. Jerry et al., Understanding Series: Insurance Law § 35[a]:203 (Lexis-Nexis/Matthew Bender 3^rd ed. 2002). A third-party agent or third-party broker may be involved in procuring coverage. But many companies are increasingly relying on direct purchase through dedicated agents. The legal status of this intermediary is often crucial to the resolution of the dispute between the insurer and the insured. The general rule is that a “broker or agent who, with a view to compensation for his services, undertakes to procure insurance for another, and unjustifiably and through his fault or neglect fails to do so, will be held liable for any damage resulting therefrom.” 29 Am. Jur. 2D Insurance § 163 (2003). The Supreme Court of Missouri has adopted this standard. See Zeff

Distrib. Co. v. Aetna Cas. & Sur. Co., 389 S.W.2d 789 (Mo. 1965). Furthermore, an agent or broker who undertakes to procure insurance...