The insurance marketplace is a complicated and unfamiliar world to many. In the non-business context, insurance relationships usually begin with a consumer requesting certain coverage from a broker, such as automobile or homeowners insurance. Many allegations of broker negligence arise out of the broker’s failure to place the coverage requested by the client. Harm comes to the client when he/she is involved in an accident or other event that makes him/her liable to pay money damages. The client may become personally responsible to make payments out of his/her own pocket because the broker failed to procure the requested insurance that otherwise would have covered the loss. Where a broker promises to obtain insurance but erroneously fails to do so, the client may hold the broker legally responsible for the promised coverage.
A professional selling insurance in Massachusetts must have specific industry knowledge and be “licensed under the laws of the Commonwealth to sell, solicit or negotiate insurance.” G.L. c. 175, sec. 162H; see also sections 162H to 162X. Consumers typically rely on a broker’s advice and guidance regarding which coverage is applicable and which provides the best value for the premium charged. Once the broker promises to obtain the coverage, he/she will be responsible for any errors and/or omissions in failing to properly bind the policy. A broker must exercise reasonable skill and diligence in obtaining coverage. However, the more a broker holds himself/herself out as an expert and the longer a broker services a client, the more likely the broker may be held responsible for not procuring proper coverage levels.
An automobile accident illustrates how a client’s rights against an insurance broker operate. If the client injures another party in a car accident, the client will become liable to pay the injured party money damages. If the client is personally responsible for the money damages because the broker failed to place the promised insurance coverage, the client may sue the broker for the value of the policy. The client may also “assign” or transfer his/her rights against the broker to the injured party. In exchange for the injured party’s agreement not to pursue the claim against the client personally, the client assigns all rights to the injured party allowing the injured party to sue the broker for failing to procure the coverage.
Thus, while the client does not have sufficient insurance to cover the loss, he/she does have the legal right to sue the broker, which itself has value to the injured party in the form of an “assignment.” Knowing what rights a consumer has against an insurance broker may permit the client to recoup out-of-pocket settlement payments or enable the client to limit his/her personal exposure in exchange for assigning to the injured claimant all rights of recovery against the broker.
SUGARMAN’s experience in handling cases like this spans decades, and we stand ready to answer questions by or on behalf of victims. Please fill out a Contact Form, call us at (617) 542-1000 or e-mail email@example.com.