Author: Bill Wilson
Are insurance agents "professionals"? Is an insurance agent considered as skilled in his or her discipline as a doctor, lawyer, architect, engineer, etc.? Professionals are held to a higher standard of care and how you hold yourself out to the general public can determine the nature and extent of your liability.
"At a recent seminar, the comment was made that insurance agents are NOT professionals! I think there is a statute that debunks this position, but can’t find it. Can you point me in the right direction?"
If you believe the polls, the public does not particularly view agents as professionals...until claim time and then they try to convince a judge or jury that they are professionals because that creates a higher standard of care.
It also depends on how the agent has held himself or herself out to the general public. When I did E&O seminars regularly, I had an overhead/slide with Yellow Page clippings and I'd peruse the ads in the town where I was teaching. Often agents held themselves out to be "experts" in condo insurance or say, "We specialize in contractors." That creates an expectation in the minds of insureds or prospects that the agent or agency possesses some specialized knowledge and experience that can be used in an attempt to hold them to a higher standard of care.
If these advertising claims are true, then they're obviously good from a business standpoint. However, there's little doubt that they're bad from an E&O perspective. While this doesn't address the issue of "professionalism" per se, this is one component of what constitutes a "professional" and professional conduct. As to what specifically constitutes a "professional," here are some criteria from Ron Horn from an old CPCU text:
7 CHARACTERISTICS OF A PROFESSION
1. Commitment to high ethical standards
2. Prevailing attitude of altruism
3. Mandatory educational preparation
4. Mandatory continuing education
5. Formal association or society available
6. Independence to make decisions
7. Public recognition as a profession
Source: On Professions, Professionals, and Professional Ethics by Ronald C. Horn
Let's briefly take a look at each criterion.
Commitment to high ethical standards
This depends on the individual. The IIABA has a Code of Ethics, as does the CPCU Society and some other industry organizations. The CPCU Society has an entire set of canons that govern acceptable conduct of persons holding the CPCU designation. Of course, these are voluntary organizations and not all agents are members of an organization that has a code of ethics.
Prevailing attitude of altruism
In general, I think most agents DO place their insured's needs before their own. But, like any industry, this is probably more a function of individual character than an industry-wide mentality.
Mandatory educational preparation
Most states have some sort of mandatory prelicensing education requirement, though the classroom component may amount to only a few days. The question is, how does the extent of this educational requirement compare to that required of people that are in indisputable positions as "professionals." Do most state prelicensing requirements approach the education required to become a doctor or lawyer? Not hardly. However, for someone seeking designations such as CPCU, the educational commitment becomes much greater.
Mandatory continuing education
Most states now have mandatory CE, though it may not be as extensive or intensive as that required of, for example, a CPA.
Formal association or society available
Yes, there are a number of trade associations and professional societies available, ranging from IIABA to NAIW to CPCU and many others.
Independence to make decisions
Again, this depends on the licensed agent. In many, if not most cases, the agent has a significant latitude in making decisions on behalf of clients.
Public recognition as a profession
This could be the criterion that is the poorest fit for insurance agents given that many polls have shown that "insurance agents" are not generally held in high professional regard, although if you ask a consumer what they think of their personal insurance agent, they are likely to rate them highly. However, we might arguably concede that "insurance" is not viewed, careerwise, in the same light as medicine or law.
Another consideration is, how have the courts viewed the issue of insurance agents as professionals? Well, the jury is still out (no pun intended), given a diversity of opinion. As mentioned above, plaintiffs in an E&O lawsuit often attempt to show the agent as a "professional" in order to create a higher standard of care. It can also affect the ability to sue given that a number of states have a different statute of limitations for malpractice actions vs. contract or tort actions. In the former, it is a disadvantage for the agent to be a profession, but in the latter it can be an advantage given the usually shorter statutes of limitations for professional malpractice vs. contract law or tort claims.
In general, many courts have not accepted the premise that an insurance agent is a professional except where certain special circumstances or relationships exist.
For example, in Chase Scientific Research, Inc. v. NIA Group, Inc. (New York Court of Appeals, 2001), the court ruled that the agent/broker was NOT a "professional" with respect to a law governing the statute of limitations that applies to suits involving nonmedical malpractice. At issue was what “malpractice” means in the governing statute and, given that malpractice is professional misfeasance toward one's client, who is a “professional” within the law? Keep in mind that this decision hinges, in part, on this specific law and legislative intent, as the court opines:
Defining "professional" is a task engaging many courts, for many purposes (see, Michael J. Polelle, Who's on First, and What's a Professional?, 33 USF L Rev 205 [1999]). While the term has myriad applications in law — as, for example, in insurance policy exclusions, and peer negligence standards — we underscore that our definition is limited to the context presented: CPLR 214 (6). Moreover, our objective, as always in matters of statutory interpretation, is to effectuate the will of the Legislature. Here, that task is complicated by the fact that, in CPLR 214 (6), "malpractice" is undefined and "professional" unmentioned.
"Professional” is a term in wide usage, commonly understood to have several meanings. For example, it denotes a measure of quality, as in professional dry cleaners; a distinction from trade or business people, and from amateur status, as in professional golfers; a lifework as opposed to pastime, as in professional musicians. Often there are study, licensure and continuing skills requirements, as for barbers, electricians and real estate brokers. Thus, neither common parlance nor licensure can determine the meaning of "professional," for surely the Legislature did not have such a vast, amorphous category of service providers in mind when it amended CPLR 214 (6).
The term “professional” is also commonly understood to refer to the learned professions, exemplified by law and medicine, which have particular relevance to the history of CPLR 214 6). The two- and three-year malpractice statutes of limitation, after all, began with doctors, enlarged soon after to encompass attorneys and accountants. In 1996, when CPLR 214 (6) was before the Legislature for amendment, the report of the New York State Bar Association referred specifically to those categories in speaking of professional malpractice: “an architect, engineer, lawyer or accountant” (Legis Rep No 76-B of NY State Bar Assn, Bill Jacket, L 1996, ch 623, at 13-14).
The qualities shared by such groups guide us in defining the term “professional.” In particular, those qualities include extensive formal learning and training, licensure and regulation indicating a qualification to practice, a code of conduct imposing standards beyond those accepted in the marketplace and a system of discipline for violation of those standards. Additionally, a professional relationship is one of trust and confidence, carrying with it a duty to counsel and advise clients.
Note that the licensing and regulation of insurance agents appears to meet virtually all of the requirements in the last paragraph above except that the formal education component is significantly less than that required for a doctor, architect, engineer, lawyer, accountant, or more traditionally accepted "professional." The court goes on to say:
Applying these criteria, we conclude that insurance agents and brokers are not within the ambit of CPLR 214 (6). While agents and brokers must be licensed, they are not required to engage in extensive specialized education and training; rather, a person who has been regularly employed by an insurance company, agent or broker for at least one year during the three years preceding the date of license application may qualify to be a broker.
Nor are insurance agents and brokers bound by a standard of conduct for which discipline might be imposed (see, e.g., 22 NYCRR 603 [attorney discipline]; Education Law §§ 6509, 6510, 6511 [professional misconduct, proceedings and discipline for accountants, architects, engineers and others, but not insurance agents or brokers]). Moreover, as this Court recently made clear, an insurance agent has a common-law duty to obtain requested coverage, but generally not a continuing duty to advise, guide or direct a client based on a special relationship of trust and confidence (Murphy v Kuhn, supra, 90 NY2d, at 273). To be sure, insurance agents and brokers are held to high standards of education and qualification (see, e.g., Insurance Law §§ 2103, 2104), but these criteria are simply not as rigorous as those embraced by what we conclude are the professionals within CPLR 214 6).
While I'd disagree with the disciplinary comments above, the court is accurate in it's assessment otherwise, particularly the fact that the educational requirements of becoming a licensed insurance agent are not as rigorous as those of more highly regarded professions.
In an analysis of this court's decision, Cornell asks the following questions:
Does the Court definition of "professional" create the intended bright-line rule? How much weight is to be given to each of the listed factors? Is "learned study" the defining factor? What role should licensure play? What role should the existence of a regulatory code of conduct and a system of discipline play? If the Court's definition of "professional" does not create a standard in the courts, but instead creates an area of litigation, will members of fields not specifically mentioned have less guidance in their out-of-court activities?
Many states have professional malpractice statutes of limitations similar to C.P.L.R. § 214(6). Overwhelmingly, state legislatures have been reluctant to define "professional" when writing malpractice legislation. But see R.I. Gen. Laws § 9-1-14.1 (2) (2000). Consequently, state courts have been left to define the category, relying upon their own criteria to determine who is a "professional" for the purposes of malpractice statutes of limitations.
Most courts rely upon a single requirement to determine whether an occupation is a profession. Florida uses a "bright-line" test with an education requirement. See Garden v. Frier, 602 So. 2d 1273, 1275 (Fla. 1992) (requiring all within an occupation to have a four-year specialized college degree to qualify as a professional). Some courts have turned to the dictionary for a definition, which often stresses the educational training of professionals. See Tylle v. Zoucha, 412 N.W.2d 438, 440 (Neb. 1987); see also Kuntz v. Muehler, 603 N.W.2d 43, 47 (N.D. 1999). Other states have focused upon the nature of the professional-client relationship. See Light v. Roney, No. CA 951414, 1995 WL 1280766, at *3 (Mass. Supp. 1995).
A minority of courts have base their definitions upon the historical evolution of professions, which dates back to medieval guilds. Such definitions refer to multiple factors including extensive education or training requirements, state license requirements, a professional code of conduct, and a mechanism to sanction those who violate that code. Kentucky courts give credence to this definition, although they have not expressly applied this test. See Plaza Bottle Shop v. Al Torstrick Ins. Agency, 712 S.W.2d 349, 351 (Ky. Ct. App. 1986) (holding that insurance agents are not professionals because they lack professional education requirements).
Similar conclusions were reached by the Florida Court of Appeals in Panther Air Boat Corporation v. MacMillan-Buchanan & Kelly Insurance Agency, 520 So. 2d 601 (1987) and by the Florida Supreme Court in Pierce v. AALL Insurance Incorporated, 531 So. 2d 84 (1988). So, as indicated above, the question of whether insurance agents, from the singular standpoint of licensure, are "professionals" depends on state case law, though such is typically not the case outside of special circumstances or situations.
Jim Mahurin provides additional commentary on this subject:
I have long thought Mr. Horn was trying to soften the definition of professional. Let me offer a definition and some suggestions.
Mirrian-Webster definition of PROFESSIONAL:
1. a. of, relating to, or characteristic of a profession;
1. b. engaged in one of the learned professions;
1. c. characterized by or conforming to the technical or ethical standards of a profession;
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2. a. participating for gain or livelihood in an activity or field of endeavor often engaged in by amateurs (sports);
2. b. engaged in by persons receiving financial return (football);
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3. following a line of conduct as though it were a profession
4. one that engages in a pursuit or activity professionally.
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PROFESSION:
4. a. a calling requiring specialized knowledge and often long and intensive academic preparation;
4. b. a principal calling, vocation, or employment
4. c. the whole body of persons engaged in a calling
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PROFESSIONALISM
1. the conduct, aims or qualities that characterize or mark a profession or a professional person.
2. the following of a profession (as athletics) for gain or livelihood.
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COMMENT
Other definitions refer to a process of exclusion, i.e., educational requirements and/or examinations. My son will soon complete a PhD in nuclear physics. He will be a professional. My daughter is a certified pharmacy technician. She describes herself as a technician.
Let me suggest reference to the academic requirements imposed on accountants, engineers, speech pathology, and behavioral science fields. This group doesn't require completion of professional schools and is easier to equate to insurance. These four professional programs involve a minimum of a four year degree and a bear of an examination. Most engineering programs are five years, accounting is adding a fifth year requirement, speech pathology generally requires a masters for autonomy, and behavioral science has long required a masters degree for autonomous practice.
Separately, we should include a reference to the academic level and credit hours accorded CPCU by the American Council on Education. The CPCU curriculum is accorded 35 upper division undergraduate credit hours and/or 16 graduate credit hours. With CPCU, someone can obtain a Masters in Insurance Management from Boston University by taking 8 classes. That is strong recognition of the curriculum. The educational requirements for CPCU compare favorably to academic preparation for CPA exams. (I have a lot of accounting.)
I have read a ton of agent depositions. The quality of performance by an agent with a degree in business and CPCU is extraordinary. The plaintiff attorney's demeanor toward these men and women is very different, particularly after they learn about the content of the course curriculum.
More importantly, CPCU's are involved in fewer cases compared to the volume of business. They are much, much easier to defend when they are sued. [We all make mistakes, but I think the frequency is much, much lower.]
Separately, consider other Institute courses qualified for upper division undergraduate credit (all of them) and graduate (ARM, AU, ALCM, IR, APA, ARe, AFSB, Risk Management for Public Entities).
I think it is imperative for CPCU and the Institute to be defined based on external recognition of curriculum quality. The American Council on Education recognition is a big deal. They evaluate texts, curriculum and examinations for regular colleges.
It is equally important to communicate to the agent community that professional curriculum is available AND the economic value of the programs. Insurance buyers are seeking knowledgeable men and women to whom they can entrust their accounts. I simply can't emphasize the latter strong enough. I moved an account approaching $300,000 to a CPCU recently. The board of a non-profit passed a corporate resolution requiring their insurance representative to be a CPCU. Their account is $500,000 per year. I see this regularly. Insurance buyers want people who at least know the words.