Insurance Broker is Only Required to Acquire the Policy Ordered by the Named Insured

Read the full article at https://www.linkedin.com/pulse/broker-owes-duty-third-party-barry-zalma-esq-cfe and at https://zalma.com/blog plus more than 3850 posts.

The Ohio Court of Appeal was asked to determine whether an insurance broker owes a duty of care to investigate and ultimately protect a third-party lienholder’s interest in a property despite the customer’s specific instructions otherwise. In S.L. & M.B., L.L.C., et al. v. United Agencies, Inc., et al., 2021-Ohio-2780, No. 109540, Court of Appeals of Ohio, Eighth District, Cuyahoga (August 12, 2021) the court was asked to find such a duty.

ZALMA OPINION

Insurance brokers are required by law to transact insurance with, but not on behalf of, insurance companies. In this case the insured ordered insurance in its name alone and instructed the broker – based on the advice of the insured’s lawyer – to name no loss payees. After the fire the named insured collected and the lien holder received nothing to protect its interest. The lienholder failed to protect itself and then sued the named insured’s broker, without any relationship with the insurer, for the benefits it believed it was entitled to receive. This case teaches that a lienholder should carefully establish that its interest is protected and demand copies of the policies to prove it existed or obtain a separate policy of insurance to protect its interest.