For brokers or hard money lenders, there are lessons to learn. This dates back to 1966, when Joseph and Clarice Wyatt walked into Union Home Mortgage’s office to borrow $2,500. What they didn’t know is that the loan, and the lawsuit that would ensue from it would lay a precedent where it would continue to be a future reference. As the Broker, Union did not call the attention of Wyatt to a set of unfavorable clauses present in the loan, which was regarded as “breaching their fiduciary duty.” The importance of this story and the case is that it established a precedent for brokers to protect their borrowers’ interest as heavy damages to the tune of $200,000 was awarded against Union.
However, it was the Murray v. UPS Capital Management ruling that established a “Wyatt-like” requirement on insurance brokers. This was after Murray had sued UPS Capital Management for not making the insurance policy understandable. In his argument, Brokers, like lenders, owe it as a point of “duty of care” to explain better and expansively clauses and other information with regards to his insurance. He won the case on appeal, despite losing at trial.
In the process of Murray v. UPS Capital Management, two major lessons are striking:
- Brokers/agents have duties restricted to similar ones existing in agency relationship. These duties include diligence, reasonable care, and decision in obtaining the insurance an insured has requested.
- Brokers/agents may take on greater responsibility to the insured should any of the following arises:
- Misrepresentation of the nature and scope of the offered coverage
- Personal request of or enquiry by the insured for a specific coverage
- Express agreement or appearing as an expert in the specific field the insured sought.
Do you want to know about the possible complications that could arise from misinterpretation or inadequate interpretation of clauses? Find out here and learn about the Wyatt and Murray.