Failure to communicate costs broker $7.8million
Insurance agents and brokers must be careful in makingpromises, especially to multiple-party insureds. Failure toaccurately communicate with an insured--whether the direct clientof the broker or not--can be exceedingly expensive. In thefollowing case, the broker made representations that it knew orshould have known were false and failed to follow up with theinsured and the multiple subcontractors who became insured underthe wrap-up program.The broker raised several importantissues on appeal, none of which were effective.The key tothe case was that the broker promised to obtain insurance that ithad not obtained and compounded the error byadvising thebeneficiaries of the policy that coverage existed.

Misrepresenting coverage to an insured can make the broker into anall-risk insurer of the person receiving the misrepresentationwithout the benefit of a policy wording. It is the type of casewhere the broker--or its E&O insurer--should attempt to holdthe plaintiff to what it asks for in damages, for a jury wouldcertainly want to punish the broker as the jury in this casepunished Marsh.


















Negligent failure to procure insurance:Lucini-Parish Ins. Inc. v. BuckKeddie v. Beneficial Ins. IncHavas v. Carter
HavasHavas
Keddie
Buck







The economic lossissue:

SMI Owen Steel Co. Inc. v. Marsh USA Inc

Barry Zalma, Esq., CFE, is a California attorney specializingin providing expert witness testimony and consulting withplaintiffs and defendants on insurance coverage, claims handlingand bad faith. He founded Zalma Insurance Consultants in 2001 andserves as its senior consultant. He can be reached at[email protected]. Hisconsulting practice's Web site iswww.zic.bz.