Insurance buyers do not understand the difference between an insurance agent and an insurance broker. The basic insured who is not involved in the business of insurance believes–incorrectly–that the person they deal with to acquire insurance is an agent of the insurance company with the authority to bind the insurer to any representation made, whether in the policy wording or not. Insurance brokers often fail to disabuse their clients of such a misunderstanding.

Insurance companies often find that they are sued for actions of an insurance broker about which they had no knowledge or control. Before an insured can succeed in such a suit–relying on the misrepresentations of an agent–the insured must prove that the person who obtained the insurance for the insured transacted the insurance on behalf of the insurer. If the person obtaining the insurance was a "broker"– that is, was a person who transacted insurance with, but not on behalf of, the insurer–the insured's suit against the insurer will fail. The suit will then be pressed against the broker if the insured can prove that the broker misrepresented a material fact that caused damage to the insured.

In Century Surety Co. v. QSC Painting Inc., No. 2:08-cv-860 (W.D.Pa. 03/08/2010), the insured claimed his "agent" misrepresented coverages that the policy did not provide. The insurer proved that the "agent" was really a "broker" who merely transacted insurance with, but not on behalf of, Century Surety. The court, therefore, granted Century Surety's motion for summary judgment because its insureds were not entitled to indemnity under the terms and conditions of the policy, and no agent or representative of Century Surety misrepresented the coverages to the insured, QSC Painting.