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Insurance agents and brokers must be careful in making promises, especially to multiple-party insureds. Failure to accurately communicate with an insured--whether the direct client of the broker or not--can be exceedingly expensive. In the following case, the broker made representations that it knew or should have known were false and failed to follow up with the insured and the multiple subcontractors who became insured under the wrap-up program. The broker raised several important issues on appeal, none of which were effective. The key to the case was that the broker promised to obtain insurance that it had not obtained and compounded the error by advising the beneficiaries of the policy that coverage existed.
Misrepresenting coverage to an insured can make the broker into an all-risk insurer of the person receiving the misrepresentation without the benefit of a policy wording. It is the type of case where the broker--or its E&O insurer--should attempt to hold the plaintiff to what it asks for in damages, for a jury would certainly want to punish the broker as the jury in this case punished Marsh.
Negligent failure to procure insurance: Lucini-Parish Ins. Inc. v. Buck Keddie v. Beneficial Ins. Inc Havas v. Carter
Havas Havas
Keddie
Buck
The economic loss issue:
SMI Owen Steel Co. Inc. v. Marsh USA Inc
Barry Zalma, Esq., CFE, is a California attorney specializing in providing expert witness testimony and consulting with plaintiffs and defendants on insurance coverage, claims handling and bad faith. He founded Zalma Insurance Consultants in 2001 and serves as its senior consultant. He can be reached at zalma@zalma.com . His consulting practice's Web site is www.zic.bz .
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