Iowa Supreme Court Rules That Life Insurance Agents Owe Duty Of Care To Beneficiaries

On July 6, 2012, the Iowa Supreme Court decided in Pitts v. Farm Bureau Life Insurance Company that life insurance agents owe a duty of reasonable care to not only the people who contact them for life insurance, but also those who are intended to be benefited by the life insurance policy.  This question arises when life insurance beneficiaries do not receive the proceeds of a life insurance policy because of negligence committed by the agent who helped the deceased obtain life insurance.  Pitts is the first time that Iowa has recognized that the intended beneficiaries of the life insurance policy have a claim against the life insurance agent for negligence that causes the beneficiary to lose the right to recover the life insurance proceeds under the policy.

In Pitts, the plaintiff claimed that when an insured intends for a particular person to be the beneficiary of a life insurance policy, and the insured expresses that desire to his or her life insurance agent, the agent procuring insurance for the insured owes the insured’s intended beneficiaries a duty of care to procure the insurance requested.  The Iowa Supreme Court identified several reasons for allowing the plaintiff to sue the deceased’s insurance agent.  First, the main purpose of the agent’s transaction with the insured is to benefit the intended life insurance beneficiary.  Second, damage to parties other than the life insurance policyholder, such as the intended beneficiary in the event of negligence, is foreseeable to the insurance agent.   The intended life insurance beneficiary is exactly the person the insurance agent could reasonably know and foresee was relying on the agent’s professional performance.

The Iowa Supreme Court carefully circumscribed the potential liability of life insurance agents to intended beneficiaries.  In order to limit the potential liability of insurers, avoid conflicts of interests, and not interfere with the insured–insurer relationship, Iowa requires a plaintiff to show that he or she was the direct, intended, and specifically identifiable beneficiary of the life insurance policy as well as prove negligence.  Further, the plaintiff must produce evidence from the life insurance policy itself that indicates the plaintiff is the intended beneficiary of the policy.  If the plaintiff cannot show that he or she is the intended beneficiary of the policy, then the insurance agent does not owe that person a duty of care.

Please feel free to contact me if you have an insurance law question about a life insurance policy or would like to discuss a negligence action against a life insurance agent.  I’ll be happy to review your circumstances with you to determine whether you may have a possible case.


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