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Can you sue your insurance broker for not getting you enough insurance May 9, 2018

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Can you sue your insurance broker for not getting you enough insurance
May 9, 2018
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Can you sue your insurance broker for not getting you enough insurance
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    This issue can come up only after you have a claim that exceeds your insurance coverage.  Before the claim the issue of sufficient coverage would not come up.  Why?  Because by definition "sufficient coverage" will be defined by the size of the credible claim.  Before there is a claim how much coverage you should have is speculative; anticipatory; conjecture.  But isn't that what your broker is supposed to handle?  protect you?  advise you?  
    So you get the big lawsuit.  Your carrier lets you know that it will handle the case, but that you don't have sufficient insurance coverage and that you are free to engage your own counsel, at your expense, to monitor the case.  You panic.  Then begin to wonder who you can blame this predicament on.  Your lawyer or accountant who you consulted with?  How about the broker who placed the insurance?  That guy or gal did mention that he or she was an alarm company insurance expert and handled lots of alarm companies.  Maybe the broker didn't even mention that more coverage was available.  Maybe the broker did say, "I can get you more, do you want it?"
    Unless you have a special relationship with your broker, the broker has no liability for insufficient insurance.  Absent a special relationship, even failing to suggest more coverage would not be actionable.  Special relationship also translates to "exceptional circumstances".  In order to be able to hold your broker liable there will need to be exceptional circumstances that leads to a special relationship.  That could include:

  1. broker received compensation for consultation apart from payment of the premiums

  2. there was some interaction regarding a question of coverage, with you relying on the experise of the broker

  3. there was a course of dealing over an extended period of time that would have put an objectively reasonable broker on notice that you sought and relied on his or her advice

    Would it be reasonable to ask a broker you are considering using [or already use] if he or she has their own professional liability policy, and with what limits?  Just in case.  Sure why not.  I get that kind of question every so often from a new client, and while I admit the question peaks my interest as to where this conversation is headed, I have insurance so I do respond.  Your broker should carry insurance, because that's what you will be looking to if there is an error in judgment that gives rise to a meritorious lawsuit.
    You should be able to figure out if you have a special relationship with the broker from the criteria above.  It's OK if you don't have that relationship, just know that you're relying on your own judgment for the insurance coverage.  The broker will be responsible for getting you what you ask for.
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
516 747 6700
www.KirschenbaumEsq.com