Illinois Supreme Court Provides Definition Of ‘Insurance Producer’

The Illinois Supreme Court recently held that a statute defining a standard of care for “insurance producers” in placing coverage applies to both insurance brokers and insurer-employed agents.

The insurance applicants in Skaperdas v. Country Casualty Insurance Co., 2015 IL 117021 (March 19), were represented by Frederick & Hagle of Urbana.

Stanley E. Freeman P.C. of Champaign and Quinn, Johnston, Henderson & Pretorius Chtd. of Peoria represented Country Casualty Insurance Co. and agent Tom Lessaris, respectively.

Steven Skaperdas and his fiancee, Valerie Day, asked Lessaris to amend Skaperdas’ Country Casualty automobile policy to include Day. The subsequent policy, however, identified only Skaperdas as a named insured but also identified the driver as “female, 30-64.”

Following issuance, Day’s son, Jonathan Jackson, was struck by a vehicle while riding his bicycle. The driver’s insurer paid its limit, but the amount didn’t cover medical expenses. Skaperdas and Day then sought underinsured motorist coverage through the Country Casualty policy. The claim was denied on the ground that the policy named neither Day nor her son.

Skaperdas and Day sued both Country Casualty and Lessaris. They alleged that Lessaris breached his duty to exercise ordinary care and skill in procuring the coverage in violation of Section 2-2201 of the Code of Civil Procedure. They also claimed that Country Mutual was liable on a respondeat superior theory. (Counts 3 and 4 were not involved in this appeal.)

Section 2-2201(a) requires that “insurance producers” exercise ordinary care and skill in renewing, procuring and placing coverage for an insured or applicant. Section 2-2201(b) limits when an insurance producer may be sued for breach of fiduciary duty. Section 2-2201(d) indicates that the statute does not otherwise limit or release an insurance producer from liability for negligence in placing insurance.

Lessaris and Country Mutual moved to dismiss the first two counts, contending that the statute did not apply to Lessaris because he was a Country Mutual agent, not an insurance producer. The trial court agreed but allowed an immediate appeal under Supreme Court Rule 304(a).

The appellate court reversed, finding that the Lessaris was a producer under the statute. The defendants then petitioned for leave to appeal, which was allowed.

Ambiguous Term

In an opinion by Justice Thomas L. Kilbride, the Supreme Court affirmed. He began with case law that distinguished between an insurance broker and an agent or “captive agent.”

A broker, he said, is one who solicits insurance business under no employment by any insurer and who places insurance with a company selected by the insured or by the broker himself or herself. An agent, on the other hand, is one who Kilbride said has “a fixed and permanent relation to the companies he represents and who has certain duties and allegiances to such companies.”

Kilbride noted that the court had never addressed whether one or both could be classified as an “insurance producer.” He observed, however, that Black’s Law Dictionary refers to both as “producers.”

The defendants cited cases defining “insurance producer” as an “insurance broker,” but Kilbride said neither those nor other cases found that insurance agents could not be deemed “producers.”

The defendants also argued that parts of Section 2-2201 would be meaningless if captive agents were included within the definition. They reasoned that certain subsections referred to the producer’s fiduciary relationship with the insured, and brokers were the only ones who owed such fiduciary responsibilities. Kilbride disagreed, saying that just because the statute limited a broker’s fiduciary liability did not mean agents could not be producers.

He further noted that the duty of ordinary care set forth in Section 2-2201(a) was not based on a fiduciary relationship but was one that could be applied to any insurance salesperson. He acknowledged, however, that the term “insurance producer” was undefined in the statute and that because it could apply to brokers, agents or both, the term was ambiguous.

Extrinsic Aids

Kilbride thus found justification for turning to extrinsic aids for assistance. One he found helpful was Section 500-10 of the Insurance Code, which defines “insurance producer” as a person licensed to sell insurance and thus is broad enough to encompass brokers and agents.

Kilbride also looked at the Section 2-2201 legislative history. He found it spotty but suggested it might be construed as intending a broad definition of a producer.

The defendants argued that the common law has not recognized a duty owed by a captive insurance agent to an insured. They contended that under typical rules of statutory construction, Section 2-2201, therefore, should not be construed as changing the common law because it does not do so expressly.

Kilbride disagreed, observing that at least some case law recognizes that a captive agent owes a duty to insureds under certain circumstances.

The defendants further contended that captive agents should not have responsibilities to insureds because such responsibilities would interfere with their obligations to their insurer-employers. Kilbride again disagreed, saying that Section 2-2201 does not require an agent to obtain the best possible coverage for a customer but only exercise ordinary care and skill in obtaining the coverage.

Ultimately, Kilbride said, the best definition of “insurance producer” was the statutory definition in Section 500-10 of the Insurance Code.

The term in Section 2-2201 therefore would be construed to apply to anyone licensed to sell insurance and include both brokers and agents. He concluded that the plaintiffs’ complaint stated a cause of action based on that section.

Key Point

The statutory duty of acting with ordinary care and skill in procuring coverage, as set forth in Section 2-2201, applies to both insurance brokers and agents.