Insurance Brokers Can Be Liable for Both Breach of Contract and Negligence

A ruling by the Appellate Division in New York concluded that insurance brokers can now be held liable to their clients on a negligence theory for failing to obtain an insurance policy to cover a loss that the broker was hired to cover. Prior to this decision, the law was relatively settled that a policyholder could only sue a broker for breaching the "contract to procure" the insurance.

There was a dissenting opinion objecting on grounds that the two types of claims (tort and contract) overlap. But the most interesting aspect of the decision is the legal conclusion that the broker has a duty of care -- independent of the the contract -- and a breach of that duty gives rise to liability in tort; i.e., on a negligence theory.

There may be ramifications of the decision that extend into other aspects of the insurance world in New York. Stay tuned.