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

A ruling by the Appellate Division in New York concludes that insurance brokers can now be liable to their clients on a negligence theory for failing to obtain an insurance policy to cover a loss which 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 claims (tort and contract) overlap. But the most interesting aspect of the decision is the legal conclusion that the broker has a duty -- independent of the the contract -- and a breach of that duty of care 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.