Common Insurance Broker Negligence Claims
The Broker's Duty — FCA ICOBS and Common Law
FCA-regulated insurance intermediaries are subject to the Insurance: Conduct of Business Sourcebook (ICOBS). Key ICOBS obligations include:
- ICOBS 4 — demands and needs — the broker must ensure that the policy recommended meets the client's demands and needs. This requires the broker to identify the client's requirements, recommend products that meet those requirements, and explain why a particular product meets them.
- ICOBS 5 — pre-contract information — the broker must provide the client with information about the insurance product, including a Product Information Document (IPID) for consumer products, before the contract is concluded.
- ICOBS 8 — claims handling — where the broker handles claims on behalf of the insured, they must do so with the insured's interests in mind. Conflicts of interest between the insured and the insurer must be managed.
- Common law duty of care — independently of FCA regulation, an insurance broker who undertakes to advise a client on insurance matters owes a common law duty of care to exercise reasonable professional skill in doing so. The extent of the duty depends on the scope of the retainer — a Bolam-standard assessment by an independent insurance broker expert establishes whether the broker's conduct fell below that standard.
Frequently Asked Questions
The insurer declined my claim — can I now claim against the broker instead?
Potentially — if the insurer declined the claim because of an error by the broker (for example, non-disclosure the broker should have advised on, an inadequate policy the broker placed, or a notification deadline the broker missed), the broker is liable to put you in the position you would have been in if the claim had been paid. This is assessed as the amount the insurer would have paid under a correctly placed policy, less any amount you recover from the insurer on appeal. A solicitor analyses the insurer's grounds for declining the claim and identifies whether those grounds are attributable to broker negligence.
The broker says the insurer avoided the policy because of my non-disclosure — not their advice. What can I do?
A broker who is instructed to arrange insurance owes a duty to advise the client on their disclosure obligations — particularly on material facts that the broker knows, or ought to know, are relevant to the underwriting of the risk. Where the broker was aware of a material fact (for example, because it appeared in documents the client provided to the broker) but failed to include it in the presentation, or failed to advise the client that it was material, the broker's negligence contributed to the non-disclosure. An independent insurance broker expert assesses whether a competent broker in the same position would have identified and disclosed the material fact.
Can I complain to the Financial Ombudsman Service about a broker?
Yes — the FOS has jurisdiction over complaints against FCA-regulated insurance intermediaries. For consumer and eligible business complaints, the FOS is free and can award up to £415,000. For a consumer client whose broker has caused them to be uninsured or underinsured, the FOS complaint route is often the most efficient first step. Where the loss exceeds the FOS limit or the client is an ineligible business, a civil professional negligence claim is the appropriate route. A solicitor advises on the most appropriate route for your claim.
The broker works as a sub-agent for a larger broker — which broker is liable?
Where an insurance broker uses a sub-agent or wholesale broker to place cover, the liability analysis depends on the chain of relationships: whether the client broker owed the client a duty in respect of the sub-agent's actions (agency principles); whether the wholesale broker owed a direct duty to the end client; and whether there are rights of contribution between the two brokers. In practice, the client's direct contract is with the retail broker who undertook to arrange the insurance — that broker is primarily liable and has contribution rights against the wholesale broker for errors in the wholesale layer. A specialist solicitor identifies the full liability chain.
What is the "loss of a chance" measure in insurance broker negligence claims?
Where broker negligence has caused the client to be uninsured or underinsured, the basic measure of damages is what the client would have recovered under a correctly placed policy — the "lost chance" of a valid insurance claim. This is not reduced by litigation uncertainty in the same way as a "lost claim" in solicitor negligence cases — because the measure is not what a court would have awarded but what the insurer would have paid under a properly placed policy on a valid claim. Where the claim was a valid one (the loss occurred and was covered under a correctly placed policy), the broker is liable for the full policy limit that would have applied. A solicitor calculates the correct measure including all heads of loss that a properly placed policy would have covered.