Ruling confirms tort liability for insurance broker who, despite being asked for specific coverage, negligently failed to ‘procure the insurance requested’
What happens to an insurance broker who, despite being asked for specific insurance coverage, fails to provide the insurance as requested?
He or she could be sued for “negligent failure to procure the insurance requested” and possibly, negligent misrepresentation, according to the U.S. Court of Appeals for the 6th Circuit.
This case has interesting applications for attorneys in many different areas of insurance practice. In my own cases, as a lawyer who helps people injured in serious automobile accidents, I routinely see my clients receiving bad advice from insurance agents.
For example, it’s not uncommon to see a million-dollar insurance policy taken out on bodily injury coverage that an agent has advised is important to protect someone else if my client ever causes a car accident. But that same policy with the $1 million in liability/bodily injury protection has the minimum $20,000 policy limits for uninsured and underinsured motorist coverage (UM/UIM), which makes no sense. That means my client took out $1 million in liability coverage to protect a stranger if he or she caused a serious automobile accident, but nothing or next to nothing to protect herself and her family if she is ever injured by a stranger in a car wreck.
And what is worse, my clients tell me that they asked their agent for the best possible protection for their family, and still the agent ignored UM and UIM insurance.
Therefore, this case may have interesting repercussions for people who suffer very serious personal injuries, and are hurt by a driver with either no insurance or the minimum $20,000 policy limits.
The case itself is Cleveland Indians Baseball Company, L.P., v. New Hampshire Insurance Company and CSI Insurance Group, where the federal appeals court said an insurance broker could be sued for negligence for “mistakenly fail[ing] to obtain … insurance that would cover [an] accident …”
According to the 6th Circuit judges, the key to a negligence claim against an insurance broker is “foreseeability”:
An insurance broker owes a duty of care “to all those whom” the insurance broker “reasonably should have foreseen would be injured by” the insurance broker’s “fail[ure] to procure the intended coverage …”
The federal court also ruled that an insurance broker could be sued for “negligent misrepresentation” when the broker supplies information that inaccurately “implie[s] that the requested insurance was in force” and the broker’s misinformation is relied on.
The keys to such a claim, said the judges, include both “foreseeability” and “reliance”:
“[W]hether the [insurance broker] had any reason to know that a … party might be using the information”; and,
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“[W]hether the [insurance broker] knew that the … party would be relying on the information.”
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Failure to provide the requested car insurance
In Cleveland Indians, the 6th Circuit allowed the Cleveland Indians baseball team to sue CSI Insurance Group, an insurance broker, for negligence and negligent misrepresentation for failure to obtain liability coverage for an inflatable slide at a “Kids Fun Day” event at the Indians ballpark.
The Indians contracted with a company to provide the inflatable slide and, as part of the contract, the company was obligated to get a “comprehensive general liability insurance policy” for the slide, with the Indians named as “an additional named insured.”
The company contacted CSI, requesting liability coverage which would include “inflatables.”
CSI obtained coverage from an insurance company and forwarded a “Certificate of Liability Insurance,” which wrongly and inaccurately suggested the “requested coverage” for the inflatable slide “was in place.”
Without having received the actual policy, the Indians relied on the information in the Certificate and, thus, went forward with their “Kids’ Fun Day” event.
Tragically, the slide collapsed, killing one man and seriously injuring another.
A lawsuit was filed, naming the Cleveland Indians as defendants.
It was only after the accident was reported to CSI that it was discovered that, “despite [the] specific request on the application for insurance …, that CSI had mistakenly failed to procure a comprehensive liability policy that expressly covered inflatables.”