In the Paige Report: Digest of Important Decisions from 2009, insurance broker expert witness David H. Paige writes:
Life insurance agents’ client held to be insured CEO, and agent held not liable to investor in CEO’s company.
A frequent issue confronting many courts involves what legal duty an insurance agent or broker has to a person or entity who the broker knows will benefit from insurance proceeds, but is not the insurance agent/broker’s client. Various courts have answered this question differently depending upon the legal precedent in their state and the facts of a given case. In this case, a court determined that the beneficiary of a key man life insurance policy had no ability to hold an insurance broker responsible for the investor’s own lack of attention to its transaction. In this decision, a Louisiana court* recently held that an insurance agent generally owes no duty to anyone other than her client to secure a certain amount of insurance coverage. In this case, the CEO of a Louisiana company had asked his insurance broker to obtain life insurance, partially to the benefit of an investor in the corporation. After the death of the CEO, the investor found that the life insurance actually placed was not at the levels expected by the investor. The Court found that the defendant insurance broker had no contractual agreement with the investor, and had no other duty or obligation as well.