When a spectator dies after being injured at amajor league baseball park, the insurance broker is named in alawsuit for failing to obtain the appropriate coverage.

At a “Kids Fun Day” event before a Cleveland Indians baseballgame, a large inflatable slide collapsed on and injured spectatorsDouglas Johnson and David Brown. Johnson died 9 days later.

This insurance dispute arises out of a lawsuit filed against theCleveland Indians and other parties by Brown and the estate ofJohnson in an Ohio state court for punitive and compensatorydamages. The question is whether the district court erred when itconcluded that the insurance broker, defendant CSI Insurance Group,which mistakenly failed to obtain the insurance that would coverthe accident, could not be liable in negligence. The Sixth CircuitCourt of Appeal resolved the disputeinCleveland Indians Baseball Co. L.P. v. New HampshireInsurance Co., 12-1589 (6th Cir. 08/23/2013).

On the first page of the application sent to the insurancebroker, under the heading “Qualification Questions,” a checked boxindicates that the events will have “bounce houses or inflatables.”CSI subsequently provided National Pastime with a proposal for apolicy from defendant New Hampshire Insurance Company for a premiumof $2,590, which was accepted. It is undisputed that neitherNational Pastime nor the Indians had received a copy of the fullpolicy at the time of the accident that killed Johnson andunderlies this insurance dispute.

Shortly after the accident, National Pastime was notified of theaccident. It was then that National Pastime learned, despite itsspecific request on the application for insurance, that CSI hadmistakenly failed to procure a comprehensive liability policy thatexpressly covered inflatables. In an email exchange between CSI andNational Pastime, National Pastime points out that it checked thebox on the cover page of the application that inflatables would beused at the event. In response, an employee of CSI emailed back,“Oh, ok. Sorry, I guess I missed it. I'm so used to quoting up yourevents I think I hardly look at anything but the dates and thedetails of the event.”

The underlying suit by Johnson and Brown was submitted to NewHampshire Insurance, which denied any responsibility to defend orindemnify National Pastime or the Cleveland Indians based on the“amusement device” exclusion in the policy. New Hampshire Insurancesubsequently filed a counterclaim against National Pastime and athird-party complaint against the Indians stating that it was notrequired to defend or indemnify under the terms of the policy. TheIndians then filed a counterclaim against New Hampshire Insurancefor a declaratory judgment seeking coverage under the policy andfiled a complaint against CSI, the insurance broker that failed toprocure the insurance as requested.

The district court held that any duty owed to the ClevelandIndians by CSI must lie in statute or contract and ruled out anynegligence claim.

Related: Read “ChampionProgram“

The Indians filed a complaint against CSI claiming tort injurydue to CSI's negligent failure to procure the insurance requestedby National Pastime Sports for the “Kids Fun Day” events, as wellas the Indians' reliance on a certificate of insurance theyreceived from CSI as notice that the requested coverage was inplace. The trial court granted summary judgment in favor of CSI.The Indians appealed.

Related: Read “Declarationof Independence“

The ball club set forth in its complaint several negligenceclaims based on CSI's failure to procure the requested insuranceand the Indians' reliance on the certificate of insurance the teamreceived from CSI, which caused the Indians to proceed with the“Kids Fun Day” under the false belief that the organization wascovered by the insurance it had requested and for which it hadpaid.

To establish a prima facie case of negligence, a plaintiff mustestablish that a duty existed, that the duty was breached;causation between the breach and the injury; and damages. Michiganlaw does not require that plaintiff have a link such as privity, abond approaching privity, or a fiduciary relationship with thedefendant in order for a duty of reasonable care to exist.Specifically, a contracting party owes a separate and distinctcommon law duty of care to all those whom the party knew orreasonably should have foreseen would be injured by the party'snegligent acts or omissions.

The Michigan courts have imposed “an independent duty of care”to be exercised by providers of professional services, likeinsurance brokers, toward third parties where the harm wasforeseeable and where the defendant had specific knowledge that itsactions might harm a specific third party.

In this case it is reasonably foreseeable that an additionalinsured will be harmed if an insurance agency or other intermediaryfails to procure the intended coverage, just as the primary insuredwould be. Although it is understandable that the law should notallow the insurance broker to be held liable to a limitless classof claimants who are total strangers to the relationship betweenthe insurance agency and the insured, or parties who were unknownto the insurance broker before the filing of a suit, this is notthat case.

CSI knew it was procuring insurance for the Indians as well asfor National Pastime; it knew exactly what dates and events theinsurance was for; it knew that the Indians had paid the premiumand that CSI had issued a certificate of insurance to the Indiansindicating that the policy was in effect. CSI was well aware thatthe Indians could be harmed if the proper insurance was notprocured.

The ball club contended that it also was injured when CSIdelivered a certificate of insurance that implied that therequested insurance was in force. The elements of the tort ofnegligent misrepresentation are: the defendant made a materialmisrepresentation; the representation was false; the defendant wasnegligent in making the misrepresentation, i.e., the defendantbreached a business or professional duty of care to provideaccurate information to those who employ him; and the plaintiffsuffered damages as a result.

If an insurance agent could have foreseen possible injury tosome specific third party, it can be held liable for a negligentmisrepresentation. Under this approach, concepts of foreseeabilityand reliance are combined to limit the professional's liability.Rather than imposing liability on any potentially foreseeable thirdparty, the parties must show a determination of whether theprofessional had any reason to know that a third party might beusing the information and whether the professional knew that thethird party would be relying on the information.

The element of foreseeability was conceded by CSI. It isundisputed that neither the Indians nor National Pastime had notyet received a copy of the full policy from New Hampshire InsuranceCo. or CSI. In the absence of receipt of the actual policy,reliance by the Indians on the certificate as a representation byCSI that CSI had procured the requested insurance, includingcoverage for inflatables, was reasonable.

The judgment of the district court was reversed and remanded forproceedings consistent with this opinion concerning the Indians'negligence claims against defendant CSI Insurance Group.

An insurance agent or broker issuing a certificate of insurancemust be certain that it accurately represents the coveragesobtained. The agent or broker owes a duty to its client and theadditional insureds it knows or should know will rely on thecertificate. Failure to be accurate and failure to get theinsurance promised by the certificate can be very expensive to theagent or broker who misrepresented a material fact on thecertificate, whether done intentionally or negligently.

“I guess I missed it” is not an excuse. It is an admission ofthe violation of the duty to obtain the insurance requested by theinsured and the Cleveland Indians ball club.

Related: Read “TheGreat Jewel Heist“