When you’re looking to manage risk with an insurance policy, whether for an automobile, home, or other property, you have options regarding where to shop. You can use an insurance agent or broker, or you can purchase directly from an insurance company. There’s a common misperception, though, that the terms “insurance agent” and “insurance broker” are interchangeable—they are not. Brokers and agents have different legal duties, which can have an impact on your ability to recover damages should some type of malpractice or negligence occurs.
The legal terms “agent” and “broker” have distinct meanings that impact who can be liable for wrongdoing involving an insurance policy. A person acting as an “agent” is a representative of a specific insurance company and acts on behalf of the insurer. Actions of the agent are considered binding on the insurance company. Additionally, any wrongful acts by the agent, including negligence, can be held against the insurance company. It’s not uncommon, with insurance agent malpractice, for courts to “rewrite” a policy to include coverage that the insured reasonably believed was being provided based on statements by the agent.
A “broker” represents a number of insurance companies but is held to act on behalf of the policyholder or insured. If there are allegations of wrongdoing by a broker, the insurance companies represented do not typically have legal responsibility.
