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Free...and Worth It!

Posted By Louie Castoria, Wednesday, September 4, 2019

Should Insurance Professionals Provide Free Advice?


Oh, you’re a doctor!” the party guest gushes. “You see this blotch on my wrist? Is it something to worry about?”

“Well, I’m a podiatrist, but it looks fine. If it’s still there in two months go see a dermatologist, okay?”

This exchange gets played out daily in thousands of parties, chance meetings and business offices. Sometimes the person offering a polite response, which in reality is advice, is a lawyer, psychologist, accountant, insurance agent or other licensed professional, but the pattern is the same: An acquaintance or relative asks for free advice, and, not wanting to seem impolite, the professional puts the errors and omissions liability policy on the line.

An internet search of the phrase “the high cost of free advice” finds examples from varied professions. Many describe the risk to the advice recipient, such as the party guest with the wrist blotch. Fewer describe the risk to the advice giver, the podiatrist, which is equal and opposite to the recipient’s risk, as Isaac Newton might have put it. 

Is there a legal duty?

Should a professional person have a legal duty when giving a non-client free advice? There are several legal duties in this seemingly casual situation:

  • Duty to the firm: Professionals who practice in a firm owe fiduciary duties to one another. A lawyer giving off-hand advice at a dinner party puts the law firm at risk, and not just the risk of a malpractice suit. If the lawyer advises the guest on a point of law an implied attorney-client relationship can be created — usually with the benefit of hindsight after the advice has gone wrong. That’s one reason why lawyers who do pro bono work must first run a conflict check using the firm’s client ID system. From a business standpoint, taking on the implied client might prevent the firm from taking on a paying client who is averse to the “freebie.”
  • Regulatory or licensing duty: As a lawyer admitted in California, I’m licensed to give legal advice. Well, not always. I can advise people about California or federal law, but if the inquisitive party-goer is visiting from Florida and is asking about a child-custody problems back home, I’m not licensed to give that advice, and would be practicing without a license, from Florida’s point of view. Also, one needs to be cautious about states in which the unauthorized practice of a profession can implicate criminal repercussions, and in securities matters, where disclosures and other safeguards may be required before advice is given.   
  • Duty to stay within scope of expertise: In the same child-custody scenario, if the party guest was from Sacramento rather than Sarasota, I’d still be incompetent to answer his question. My state bar license allows me to give that advice, but my experience does not. Here’s the problem with “dabbling” in an unfamiliar area of practice: The dabbler is held to the same standard of care as the expert. And let’s not forget the firm’s “silent partner,” its E&O insurer, which may have limited the scope of its coverage to the firm’s core practice areas. The same can hold true for insurance professionals. If you only sell and service personal lines policies, are you knowledgeable enough about commercial auto, for example, to provide reliable advice on coverage? The person asking you certainly thinks so.
  • The contractual duty: Professionals enter into contracts all the time. Captive insurance agents agree to only offer one company’s products. Distributors sign exclusivity contracts. Thankfully, these subjects rarely come up at parties, sports events, or bar mitzvahs, but when they do the novelty of the question should set the professional’s spider-sense a’tingling — particularly if the din of the crowd, band or barker limits your ability to clearly hear the question.  

What’s a businessperson or professional to do when cornered at an event by someone posing pointed “hypotheticals” about “a friend’s” problem? At this point, the marketing urge may trample your spider-sense. It could be a sale, a client, an account. Or, maybe, borrowing another pop-culture meme, “It’s a trap!” If the advice is outside your licensing or expertise, the most helpful advice is a referral. 

Walking the tightrope

There is a tightrope across this abyss. There’s no need to be rude or to give up a potential lead. Here’s one way to reply — I hasten to add that this is not legal advice: “I’ll be happy to give you some general ideas, Mr. Hodges, but can’t provide advice without a more in-depth discussion. How about this, you give me your business card or email address and I’ll contact you tomorrow to set a time to talk.”

The follow-up is an email saying, “It was a pleasure meeting you yesterday. We discussed your situation in very general terms, and I’m writing to ask if you’d like to meet to see whether I can be of help.” The subtext: “We have no agreement for me to provide services, yet.” 

And if you then meet and decide to offer free services, it’s a reasoned professional decision, not a sudden impulse or ambush — and may result in a worthwhile encounter that yields a new paying client. 


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