You're Never "Fully Covered": Obligations and Liabilities of Insurance Brokers in Procuring Insurance for Their Clients

April 24, 2013

By: Nancy N. Potter

USLAW Magazine

The following is an excerpt from, "You're Never 'Fully Covered': Obligations and Liabilities of Insurance Brokers in Procuring Insurance for Their Clients," originally published in the Spring/Summer 2013 issue of USLAW Magazine.

A few years ago, I arranged to purchase a homeowners insurance policy from a major national insurance company. When I received the policy, I thought that the stated replacement value for the structure seemed low, particularly since I have an old house with unique architectural features. I consulted the agent, suggesting that the replacement cost limit needed to be higher. He sent me a letter stating in part, “You have all the coverage you need to completely rebuild your house.” My first thought was, “Now I do.”

The insurance industry is in the business of providing peace of mind, and insurance brokers, whether independent or affiliated with an insurer, as the people with the direct relationship with the policyholder, often try to give that peace of mind. However, when a loss occurs, which for some reason is not covered, the broker can be liable if the coverage available did not meet the insured’s expectations. This article will discuss insurance brokers’ duties, and some of the ways in which brokers can find themselves liable to insureds when the coverage turns out to be less than the insured expected.

Many times, of course, there is nothing a broker can do about the disappointed coverage expectations: the loss is not insurable as a matter of law, or the claim set forth simply cannot be brought within the policy’s insuring agreement. This does not prevent the broker from being sued for negligence or misrepresentation, especially if they have been overly sanguine in their assurances of full protection. Brokers who advise their clients that they are “fully covered” or can “rest easy” in an age of increasingly complex insurance policies are inviting the disappointment of their clients and lawsuits when it turns out that there is seldom, if ever, “full coverage” for any loss or claim.

For the full article, please use the following link: You're Never "Fully Covered": Obligations and Liabilities of Insurance Brokers in Procuring Insurance for Their Clients.