Cleveland Indians Sue Insurance Broker following Wrongful Death Claim

It is generally understood that an insurance broker may be held liable for failing to obtain requisite insurance for the insured.  But, there is plenty of room for debate when the broker fails to obtain coverage for a third-party; i.e. an additional insured.  This issue was put to the test by the Cleveland Indians following the death of one of its patrons attending pre-game activities. According to the Sixth Circuit, the team stated a valid claim.

Cleveland Indians Baseball Co. v. New Hampshire, Ins. Co., et. al., No. 12-1589 arose after a patron was killed while attending pre-game festivities during the Indians 2010 “Kids Fun Day.” Allegedly, the Indians hired National Pastime Sports LLC to put on events which included multiple inflatable toys. Tragically, a man died when a large inflatable slide collapsed on top of him. The crux of the dispute was whether the Indians had standing to assert a claim directly against the insurance broker retained by National Pastime.

Prior to the accident, National Pastime agreed to name the Indians as an additional insured on a liability policy.  National Pastime engaged an independent broker to procure the policy.  Importantly, National Pastime notified the broker that the event would include inflatable games. However, when the broker obtained the policy, it failed to request coverage for inflatable toys and when the slide collapsed, National Pastime and the Cleveland Indians were not adequately insured.

As a result, the team brought suit against the broker in the Federal District Court for the District of Michigan. Initially, the District Court concluded that the broker did not have a contractual obligation to the Indians because the broker’s relationship was only with National Pastime.  The Sixth Circuit reversed on appeal.  The court reasoned that the broker owed a distinct duty to those whom it reasonably should have known could have been injured by its omissions.  The court concluded that the Indians were named as an additional insured and therefore it was reasonably foreseeable to the broker that the team would be harmed by the broker’s omissions in obtaining the policy.

This case expands the duty of care of an independent broker.  Now, brokers are held to a foreseeability test.  Thus, when working to obtain coverage for clients, brokers should be cognizant that their obligation and liability may extend beyond immediate clients but to those who potentially may be impacted by their actions. Certainly, as a result of this decision, brokers should pay particular attention to the needs of additional insureds.

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  1. Michael A. Doering II

    Bad ruling, though the Additional Insured may (indirectly) be a party to the contract, they are not a client and thus a professional relationship and subsequent duties should not be inferred. The AI may even be little more than a name on a piece of paper to the broker.

    The Additional Insured is added *on behalf of* the Named Insured to conform to contractual obligations and similar. And, in fact, these obligations are often quasi-adversarial in that the AI wants coverage the Named Insured doesn’t want to purchase.

    I can see a theory of duty based on the fact that not having inflatable coverage puts the broker’s direct client at risk, since an uninsured loss is likely to wind up in their lap in some capacity. However, that duty is still to the immediate client – the Named Insured – though the action (requiring inflatable coverage for Additional Insureds) is still the same. That I can see, but not this.

    Though this is more of a stretch, I can also see a theory that the independent broker is responsible since they (assumedly) issued proof of coverage to the AI. If there was a major known activity taking place and the policy didn’t cover that, I can (maybe) see an inference of negligence in not specifically supplying that information. That said, any third party has the ability to request a full copy of the policy from the Named Insured.

    However, stating the theory that simply being a party to a contract obligates the broker to perform to a certain professional standard *for that party* is absurd. Especially when one considers those obligations can be in conflict with one’s duty to other insured’s.

    For example, is one obligated to offer a more expansive, but costlier, Additional Insured endorsement to any party requesting AI? Assuming contractual obligations are met, it could actually be against against a client’s best interest to do such because not only does it cost them premium, it makes their policy and loss history pick up claims it otherwise wouldn’t need to.

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