Insurance broker not responsible for setting sum insureds

Insurance broker not responsible for setting sum insureds


Insurance broker not responsible for setting sum insureds

The UK Queen’s Bench division has recently confirmed that an insurance broker is not responsible for setting sums insured under business interruption insurance.

In Eurokey Recycling Ltd v Giles Insurance Brokers [2014] EWHC 2989 the Court considered a claim by a grossly underinsured client who alleged its insurance broker had negligently advised and failed to arrange adequate cover.  In finding for the insurance broker, the Court observed:

  • a broker’s obligation is to provide sufficient explanation about the policy terms to enable its client to provide instructions about appropriate sums insured
  • this obligation necessarily requires an insuarance broker to explain the method of calculating the sum insured under the policy
  • to provide a proper explanation, the insurance broker must explain key terms used in thepolicy (e.g. “Estimated gross profits”) and undersatnd the nature of the client’s business and its insurance needs

Importantly, the Court confirmed existing authority to the effect that a broker’s obligation does not extend to verifying information provided by a client unless there is reason to believe it is not accurate.

Jermaine

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