Tag Archives: insurance broker

INSURANCE BROKER CAN BE LIABLE FOR OMISSION OF COVERAGE

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Claims against an insurance agent / broker can be actionable in negligence. Such a claim can arise with omitted insurance. “The party seeking to establish that improperly omitted insurance coverage was available must only show that ‘the requested coverage was generally available in the insurance industry when appellee obtained coverage for appellant.’” Leavitt Recreation & Hospitality Ins., Inc. v. Florida Caverns R.V. Resort, LLC, 50 Fla. L. Weekly D1641a (Fla. 1st DCA 2025) (citation omitted).

In a recent case, a company purchased an RV park. The company contacted an insurance brokerage firm to secure commercial property insurance. The company utilized the brokerage firm for another RV park and obtained a policy that covered power stations (or hook-up towers which are important to the operation of RV parks). The company provided information to the agent with a site map that included the hook-ups. The commercial insurance policy procured by the broker did NOT cover power stations. Thus, when a hurricane hit, significant damage was not covered to the power stations, and the insurer denied coverage. The cost to replace or fix power stations was over $1 Million.

The company sued the insurance broker for the damages sustained to the power stations. The company “alleged it had requested comprehensive coverage that would have encompassed the power stations, and that it was customary in the industry to include such coverage because of the inherent necessity of the power stations to operating an RV park. The complaint further alleged that, if the policy excluded power-station coverage, [the insurance brokerage firm], as broker had negligently failed to include that coverage, and that [the company] would have received insurance proceed covering the damage to the power stations but for [the broker’s] failures.” Leavitt Recreation & Hospitality Ins., Inc., supra.

The company’s owner testified in deposition that “he requested whatever insurance coverage would be adequate to protect against damage and loss to the business premises” and denied he would have rejected additional coverage simply due to a higher premium. The owner testified that he was not told coverage for the power stations was excluded. Leavitt Recreation & Hospitality Ins., Inc., supra

The insurance agent testified in deposition that the brokerage firm specializes in RV parks and could and did offer coverage for power stations. He testified the company elected not to obtain the coverage with power stations, although the company’s owner disagreed with this. A disputed fact.

The brokerage firm moved for summary judgment arguing that the company was required prior to trial to produce an actual insurance policy issued before the hurricane hit that covered the power station damage to prove such coverage was even available. While the trial court agreed, the appellate court vehemently disagreed. The appellate court noted the broker’s agent testified the disputed coverage was available at the time, thus, the brokerage firm would be hard-pressed to argue such coverage was not available.

We find no authority that would have required [the company] to produce, at the summary judgment stage, an executed, pre-[hurricane] policy providing power-station coverage and establishing a base for calculation of damages. The deposition testimony before the court established that the coverage was available, that both [the company’s owner and the broker’s] agent knew it was available, that [the owner] claimed he wanted it, and that the agent claimed [the owner] said he did not want it. The parties’ contract — the policy — does not on its face include the coverage. Producing an actual policy covering power stations was unnecessary. Further, even an agent’s failure to tell [the owner] the coverage was missing is actionable, and no policy could be required to prove that negative.

Leavitt Recreation & Hospitality Ins., Inc., supra.

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

NEGLIGENT PROCUREMENT OF INSURANCE

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shutterstock_540587629As you know, insurance is an important part of risk assessment for many, many business needs.  Oftentimes, an insured relies on an insurance broker or agent to procure specific insurance to meet its express business objectives and risks.  Notably, there is a potential negligence claim associated with an insurance agent or broker’s negligent procurement of insurance for an insured.  While this is not the easiest claim to prove, a recent Third District case explained this standard:

 

It is well settled that “where an insurance agent or broker undertakes to obtain insurance coverage for another person and fails to do so, he may be held liable for resulting damages for . . . negligence.  More specifically, and as applicable here, “[a]n agent is required to use reasonable skill and diligence, and liability may result from a negligent failure to obtain coverage which is specifically requested or clearly warranted by the insured’s expressed needs.”  As explained by our sister court, “[t]his general duty requires the agent to exercise due care in correctly advising the insured of the existence and availability of particular insurance, including the availability and desirability of obtaining higher limits, depending on the scope of the agents undertaking.” 

Kendall South Medical Center, Inc. v. Consolidated Ins. Nation, Inc., 42 Fla. L. Weekly D1071a (Fla. 3d DCA 2017) (internal quotations omitted).

 

 

In this case, a leak occurred on commercial leased premises.  The commercial tenant had a property insurance policy that provided $100,000 of coverage for the physical improvements and contents of the property.  However, there was a 90% coinsurance provision.  A coinsurance provision shifts risk to the insured when the insured purchases less coverage than the value of the property. 

 

As a result of the coinsurance provision, the insured only received a fraction of its damages, and less than the $100,000 in coverage.    The insured, however, claimed it was under the belief it would recover $100,000 in insurance proceeds as that was what it told its agent it needed.  The insured sued its insurance agent claiming the agent’s failure to advise it that the procured policy did not address its expressed insurance needs. “[W]hen an insured alleges that it specifically communicated its insurance needs to an agent who then undertook to procure a policy addressing such needs, the insured states a cause of action for negligent procurement where it also alleges that, without providing an explanation that different coverage was required, the agent procured a policy not meeting those expressed needs.”  Kendall South Medical Center, supra.

 

Perhaps this could have been avoided had the insured reviewed the specific terms of the insurance policy.  Perhaps there are e-mails or other records where the insurance agent explained that the coverage the insured was seeking could not be procured without a coinsurance provision that shifted the risk to the insured.  Know your insurance and know the risks and coverage afforded to you!

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.