Insurance Broker Negligence Claims Solicitors
An insurance broker who places inadequate cover, fails to notify the insurer of a material fact, or leaves a client uninsured for a risk they specifically asked to cover has committed professional negligence — and is liable for the uninsured loss.
Insurance brokers owe their clients a duty of care — in contract (under the terms of the broking contract) and in tort — to exercise the skill and care of a reasonably competent insurance broker. The duty encompasses: advising the client on the cover appropriate to their needs; placing that cover with a reputable insurer on the best available terms; ensuring the policy accurately reflects the client's requirements; advising the client of the duty of disclosure; and notifying the insurer of material facts on renewal. Where the broker fails in any of these duties and the client suffers a financial loss — an unmet insurance claim or a reduced settlement due to inadequate cover — the broker is liable for the shortfall. A solicitor will assess the merits and pursue the claim.
Insurance Broker Negligence — Common Types of Claim
Insurance broker negligence — the most common failures and the uninsured losses recoverable from the broker's professional indemnity insurer.
The measure of an insurance broker's negligence is simple: what would the client have recovered from the insurer but for the broker's failure? Where the answer is more than they recovered, the broker is liable for the difference. A solicitor will calculate that difference and pursue it from the broker's professional indemnity insurer.
Inadequate cover — failing to arrange the cover the client needed
A broker advising on insurance has a duty to understand the client's specific insurance needs and to arrange cover that addresses those needs. Where a broker places a policy that does not cover a specific risk the client needed covered — for example, a business that suffers a flood but finds its business interruption cover does not include denial of access; or a professional who finds their indemnity policy excludes a specific type of work — and that risk materialises, the client can recover the uninsured loss from the broker. The broker is liable for the loss that the correct policy would have covered — effectively stepping into the shoes of the insurer that should have been on risk. A solicitor will establish that the broker was instructed to cover the specific risk and failed to place adequate cover.
Failure to disclose material facts — policy avoidance by the insurer
An insurer can avoid (rescind) a policy for non-disclosure or misrepresentation of material facts at inception — facts that would have affected the insurer's decision to underwrite the risk or the premium charged. Where a broker fails to advise the client of the duty of disclosure (or to make adequate enquiries of the client and disclose the answers to the insurer), and the insurer subsequently avoids the policy for non-disclosure, the client is left without cover. In that case, the client has a claim against the broker for failing to advise on disclosure — recovering the loss that the avoided policy would have covered. The client must demonstrate that, had they been properly advised on their disclosure obligations, the material fact would have been disclosed and the policy would not have been avoided.
Negligent renewal — failure to review the policy and update the cover
At renewal, a broker has a duty to review the client's existing cover in light of any changes in the client's risk profile — changes in the insured premises, changes in the business activities, changes in the sum insured required — and to advise the client if the existing cover is no longer adequate. Where a broker renews a policy without reviewing the cover and the client's circumstances have changed so that the renewed policy is inadequate, the broker is liable for the shortfall between the claim paid on the inadequate policy and the claim that would have been paid on an adequate policy. A solicitor will assess the broker's renewal process, identify the failure to review and advise, and quantify the loss attributable to the broker's negligence at renewal.
Non-renewal and lapsed policies — leaving the client without cover
A broker who is responsible for managing a client's insurance programme has a duty to ensure the client does not inadvertently go without cover — by renewing policies before they expire, by notifying the client when a policy is not renewed, and (in some cases) by arranging temporary cover to bridge a gap in the programme. Where a broker fails to renew a policy that the client believed was in force — because the client relied on the broker to manage the renewal — and the client suffers a loss during the period when the policy was not in force, the broker is liable for the uninsured loss. The client must show that the broker was responsible for managing the renewal and failed in that responsibility — leaving the client without cover through no fault of the client's own.
Underinsurance — sums insured that do not reflect the true replacement value
Where a broker advises on the sum insured for property cover and the advice is negligent — failing to recommend that the client obtains a reinstatement cost assessment, or advising a sum insured that is significantly below the actual reinstatement cost — and the client suffers a total loss at a time when the property is underinsured, the insurer applies the "average clause" (pro-rating the claim by the degree of underinsurance). The client recovers only a proportion of their loss from the insurer — and can recover the balance from the broker. A solicitor will obtain a reinstatement cost assessment at the date of the policy to quantify the degree of underinsurance and the loss attributable to the broker's negligent advice on the sum insured.
Professional indemnity and liability cover — exclusions that should not have been accepted
Professional indemnity, employers' liability, and public liability policies can contain exclusions that significantly limit the cover provided. Where a broker accepts an exclusion that should have been negotiated out of the policy — or fails to advise the client on the existence and effect of a material exclusion — and the client subsequently finds their claim excluded by that provision, the broker is liable for the uninsured claim. A solicitor will review the policy terms, identify the exclusion that applied, assess whether a competent broker should have challenged or removed that exclusion in placing the cover, and pursue the broker for the loss the exclusion caused. The claim is brought against the broker's errors and omissions professional indemnity insurer.