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.