Arizona Governor Signs Law to Close Agent Malpractice Loophole

Arizona’s governor has signed a bill to fix a loophole that exposes agents who write auto policies to malpractice suits.

The bill was written in response to an Arizona Supreme Court ruling in July 2015 favoring an Arizona woman got into an automobile crash with another driver who was uninsured and sued her insurance agent for allegedly failing to inform her about uninsured motorists coverage despite her having signed a waver.

At the time of the Supreme Court ruling, an agent’s association expressed concern the decision would expose agents who write auto policies to malpractice lawsuits if they are accused of failing to inform their customers about uninsured and underinsured motorists coverage – even with a signed waiver acknowledging the customer is rejecting UM and UIM coverage.

The Supreme Court decision stated that the waiver provides a “safe harbor” for carriers, but not for agents, who owe a duty of care to their clients.

The signing of House Bill 2129 by Gov. Doug Ducey last week seemingly closes that loophole.

Language in the bill states: “An insurance producer that uses such a form in offering uninsured motorist coverage and confirming the selection of limits or rejection of coverage by a named insured or applicant satisfies the insurance producer’s standard of care in offering and explaining the nature and applicability of uninsured motorist coverage. A named insured’s selection of limits or rejection of uninsured motorist coverage on a form approved by the director constitutes the final expression of the named insured’s decision to purchase or reject uninsured motorist coverage.”

The Independent Insurance Agents & Brokers of Arizona Inc. was part of an industry coalition that helped author and pass the bill. The group has maintained that the original law was intended to provide that the existence of a signed form was written evidence that the applicant was given the option but elected to reject the maximum coverages.

The case before the Supreme Court was Wilks V. Manobianco.