If an insurance employer did not register an employee with the state insurance commission,are there grounds for a suit?

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If an insurance employer did not register an employee with the state insurance commission,are there grounds for a suit?

An insurance salesman who opened a new franchise of a nationally known insurance agency hired a woman and paid for her to take her exams to be qualified to sell life, health and auto insurance. The franchise owner neglected to forward her completed test results and information to the insurance company and state insurance commission. For 3 months the employee unknowingly sold insurance even though as far as the company and state commission were concerned, she was unable to sell their products. He has since fired her and she has spoken with the state commission which encouraged her to file a complaint. Should she sue? Among other things she is now ineligible for commission of the policies that she “sold”.

Asked on July 11, 2011 under Employment Labor Law, West Virginia

Answers:

S.L,. Member, California Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

The employee could sue the employer for negligence.  Negligence is based on the failure to exercise due care (that degree of care that in this case a reasonable insurance salesman would have exercised under the same or similar circumstances to prevent foreseeable harm).  In order to establish negligence in this case, the employee has to prove duty, breach, actual cause, proximate cause, and damages.

Duty is the duty to exercise due care mentioned above.  Breach of duty occurred when the salesman failed to submit the employee's test results and required information to the insurance company and state insurance commission so that the employee would receive the required license.  Actual cause means but for the employer failing to submit employee's test results and required information to the state and insurance company, would the employee  have lost income from the insurance sales?  If the answer is no, which appears to be the case, actual cause has been established.  Proximate cause means were there any unforeseeable intervening events which would relieve the employer of liability?  If the answer is no, proximate cause has been established.

Damages (the amount of compensation employee is seeking in her lawsuit) would be based on the lost income from the invalid insurance sales due to employer's negligence in failing to submit the test and required documents for employee to the state insurance commission and to the insurance company.

Employee will need to file her lawsuit for negligence prior to the expiration of the applicable statute of limitations or she will lose her rights forever in the matter.


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