CAN YOU SUE YOUR INSURANCE BROKER AND THE INSURANCE COMPANY
Last few days we discussed suing your employee [you won't win] and your agent [you should win] for their negligence causing you damages. What about your insurance broker?
You engage your broker to get you liability insurance. You expect it to have Errors and Omissions coverage. Your broker assures you that you're covered; you can sleep like a baby.
Turns out that sleeping like a baby means crying all night and crapping in your pants.
You get a claim from your subscriber. Burglary. Your carrier denies coverage because you're covered only for physical property damage and occurrence.
You get a claim. Signal was mishandled by the central station and you're sued for negligent monitoring services. Carrier disclaims because monitoring service is excluded from coverage since you're only an installing and servicing dealer who subcontracts out the monitoring.
You get a claim. Turns out your broker never got you insurance coverage, or kept the premium and never paid for it or let it lapse, or instead of getting one million with five million excess only got you half million with no excess. The claim is for multiple millions and your carrier wants to turn over the policy and leave you hanging for the defense and balance of the claim.
There is a threshold question that needs to be answered before you get the right answer to the question of who can you sue, if anyone. The question is, is the broker your agent or the agent of the insurance company? Because of the few examples I used I suppose the next question we need to consider is whether the broker was merely negligent or engaged in willful misconduct or fraud.
More than likely the broker is your agent. Unless the broker is a general or authorized agent of the insurance company [and very few are] the broker is independent. When you engage the broker to obtain insurance for you that broker is acting as your agent. One way you can tell is if the broker tells you it can only consider one carrier. A carrier's broker is not likely going to be shopping around for the best coverage because they are working for that particular carrier, not you. An independent broker, however, works for you and can place the insurance with various carriers, though the broker may need to meet some criteria before a carrier will accept applications from that broker, but that doesn't make the broker the carrier's agent.
When the broker is your broker and makes a mistake you can't complain to the carrier; it's your broker not the carrier's broker. It's as if you made the mistake, not the carrier. That's the case because the knowledge, or lack thereof, of your broker is attributed to you. You're the principal and the broker is your agent.
If the broker, your agent, engages in fraud or misconduct, that too is your problem, not the carrier's problem and the carrier will not be responsible.
If however the broker is general agent or authorized agent for the carrier then the carrier, as principal for the broker who is its agent, will be responsible for a mistake by the broker and you would likely have a sucessful claim that you will have the coverage you expected to have.
The lesson today is that you need to be careful selecting your broker because that broker is your responsibility and the stakes are too high. If your broker is not on The Alarm Exchange in the Insurance brokers / insurance companies for alarm industry category then you should find out why, and you should consider calling one who is. The brokers on The Alarm Exchange are all knowledgeable alarm industry brokers, or they wouldn't be there. Some may use carriers I don't prefer, but at least you would have coverage. Be selective and be careful.