Over the past couple of days, that’s a phrase I’ve heard several times, and its an issue that raises an interesting question —  Are insurance agents potentially liable for the flood damage suffered by Tennessee residents across the state?  I think the answer is yes.  

This is really a more complicated question than one might think, but one thing is for sure in Tennessee and that is an insurance agent has a duty to his client, the insured, to make sure that he or she is appropriately insured.  In fact, the very reason people use insurance agents is to gain the benefit of having someone on their side who is inside the industry, knows the language, and to advise them as to what additional coverages that might be necessary.  

One common recurring theme is the scenario in which the agent never mentions flood insurance at all.  There was no reference at all to the fact that flood damage is excluded from general residential and commercial policies, no mention of the fact that flood damage is available at an additional cost, and no advice at all concerning the uninsured flood risk.   I believe this scenario can create liability for the agent for the otherwise uninsured flood loss.  

My read on Tennessee agent liability law is that it is much more favorable than many of our sister states.  There are several cases that provide some sound principles for trial courts to follow in the circumstances that face us.  For example, the Tennessee Court of Appeals has expressly held that an insurance agent cannot unilaterally make a decision as to whether or not a consumer needs certain coverage, but rather the agent has a duty, as a matter of law, to educate the client and give him or her the option of obtaining the additional coverage.  This is a sound principle that resonates with common sense.  People rely on their agents to help them understand complicated insurance policies that 95% of the population doesn’t even read, much less understand.  If there is a gap in their coverage, they rely on their agent to advise them of that fact.  If an agent fulfills that obligation, then the consumer can make an informed decision about whether to take on the additional premiums.  

I would encourage anyone who was shocked to learn that they don’t have insurance coverage for flood damage to contact a qualified attorney.  My firm, Gilbert Russell McWherter PLC, is offering free consultations to those who believe they may have a claim.  Even if you don’t, we’re happy to field calls from all affected citizens and to offer practical advice on getting past these incredibly difficult times.