Therefore, courts have noted that there is a fiduciary relationship that exists between an insurance carrier and an insured. In the typical setting. Cardinal Insurance,  18 O.R. (3d) , and held the insurer was not in a fiduciary relationship with Ms. Garneau, “but rather in a. ests of the policyholder. The relationship between the insured and the insurer under the contract closely approximates that of principal and.
Justice Ramsey started his analysis by identifying the relevant parts of the contract by which Youngs had to make available or provide information to Aviva.
Are you an agent or a broker? It matters in a fiduciary duty lawsuit | Insurance Business
In relation to the building services work carried out by Youngs on behalf of policyholders, the contract clearly stipulated that Youngs would act as principal.
Any fiduciary duties arising could only attach to the services performed by Youngs as claims handler for Aviva. Ramsey J explained that a fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence; the distinguishing obligation of a fiduciary is that of loyalty.
The individual facts and circumstances must always be carefully examined to see whether in fact a purported agent is in a fiduciary relationship with his principal. Ramsey J also set out the following further principles: The essence of a fiduciary relationship is that it creates obligations of a different character from those deriving from the contract itself.
Many commercial relationships involve an obligation by a party to do honestly and conscientiously what that party had by the contract promised to do.
However, merely because a party puts faith in another party and contends that their trust has not been re-paid does not give rise to fiduciary duty: In applying those principles to the present case, Ramsey J concluded that there were aspects of the claims handling services provided by Youngs where it acted as agent for Aviva in relation to claims made by policyholders.
Part of that agency relationship involved Youngs determining whether a claim was valid under the relevant policy.
Fiduciary Responsibility to the Client
In these circumstances, Aviva were relying on Youngs to decide what was the cause of any damage and whether damage so caused fell within the provisions of the policy. This precludes the agent from personally benefiting from secret profits, competing with the principal or obtaining an advantage from the agency for personal benefit of any kind. Duty of Good Faith — includes total truthfulness, absolute integrity and total fidelity to the principal's interest.
The duty of good faith prohibits taking advantage of the principal through the slightest misrepresentation, concealment, threat or adverse pressure of any kind.
Are you an agent or a broker? It matters in a fiduciary duty lawsuit
In the case of conflicting interests, the agent must disclose the "dual agency" acting for two parties at the same time or risk being accused of fraud from either or both principals. Most brokers are compensated by commissions.
This, in itself, creates a difficulty since there is an inherent conflict of interest. It is common knowledge to most insurance purchasers that agents and brokers earn a sales commission, which may mitigate the conflict somewhat.
Florida courts addressed this commonly held knowledge in the case of Beardmore v. Abbott — ruling that a broker does have a fiduciary responsibility to his clients, but the broker's failure to disclose the full amount of his commission does not breach that duty.
In this case, the client did not inquire as to the size of the commission at the time of the purchase, and broker did not volunteer the information. If the client had asked that question, presumably the courts would have ruled that the broker must honestly disclose that information as a matter of fiduciary trust. It should be noted that the client was very familiar with the insurance market, and knew that the broker would receive a commission — it was disclosure of the exact amount that was the crux in this case.
Agents should, at least, make clients aware that they may receive a commission as part of an insurance transaction. The fiduciary duty of insurance brokers was also addressed in another Florida case: In this case, a broker helped a small business set up a pension funded with an annuity contract, and the broker was also hired to handle administrative paperwork for the pension plan. The broker received notice from the annuity company that it was in seeking additional capital to remain in business, but he did not alert the clients to that notice.
The annuity company later became insolvent. As the court noted: In this case, there was a contract with the clients to administer the plan.