Failure to Place Appropriate Cover
Claims that the broker failed to obtain insurance addressing a particular business risk, asset, liability, activity or exposure which the client says should have been covered.
← Professional Negligence Claims Defence
Insurance Brokers
Professional Negligence Claim Against Your Insurance Brokerage?
When an insurer refuses or restricts a claim, the broker can quickly become the next target. But an unpaid insurance claim does not automatically establish broker negligence.
The dispute needs to distinguish what cover the client required, what the broker was instructed to do, what information was supplied, what policy was actually placed, why the insurer has declined or reduced the claim and whether any broker error genuinely caused an uninsured loss. Insurance Dispute Service provides fixed-fee claims analysis, defence preparation and litigation support, with specialist Direct Access barrister involvement where appropriate.
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Where Claims Arise
Broker claims often begin after the insured discovers a gap in cover.
The fact that a client expected a loss to be insured does not by itself establish what the broker should have arranged. The relevant duties depend upon the instructions, service provided, information available and circumstances of the particular placement.
Underinsurance & Sums Insured
Disputes arising where the insurer applies average, restricts payment or alleges that property, stock, business interruption or another insured value was materially understated.
Exclusions & Policy Limitations
Allegations that significant exclusions, conditions, sub-limits, warranties, excesses or other restrictions were not adequately identified or explained.
Disclosure & Presentation of Risk
Claims arising where the insurer alleges inaccurate or incomplete information, non-disclosure or problems with the presentation of the risk.
Renewal & Changes in Risk
Allegations concerning renewal instructions, altered business activities, increased values, acquisitions, new locations or other changes said to have affected cover.
Claims Notification & Assistance
Claims that a loss or circumstance was not notified correctly, was notified late or that the client did not receive the brokerage support it says was expected after the incident.
Start With the Broker’s Role
What service did the client actually ask the broker to provide?
A broker-negligence allegation can expand until it assumes the broker was responsible for identifying every conceivable risk facing the client's business. The actual engagement and sales process may show a much more defined role.
The defence should reconstruct what the client asked for, what questions were asked, whether the service was advised or non-advised, what information the client supplied and how the recommended or proposed policy related to those needs.
- Terms of business and scope of service
- Advised or non-advised sale
- Client's stated demands and needs
- Risk questionnaires and proposal information
- Existing insurance programme
- Instructions about limits and sums insured
- Market presentations and insurer quotations
- Policy summaries and significant terms
- Renewal information and later changes to the risk
FCA & ICOBS
The regulatory record matters — but the precise service still needs to be identified.
Current ICOBS rules require insurance distributors to identify a customer's demands and needs before the insurance contract is concluded and to ensure that the policy proposed is consistent with those demands and needs. Where advice is given, the FCA rules also require reasonable care to ensure the suitability of that advice for a customer entitled to rely on the firm's judgement.
The defence should therefore ask what information the firm
obtained, what service it was providing and what the
contemporaneous record actually demonstrates.
01
What were the customer's demands and needs?
Identify the information obtained from the client and the risks, assets or liabilities the insurance was intended to address.
02
Was advice actually being given?
The nature of the service matters. A claim should not assume an advised relationship if the contemporaneous documentation shows a materially different service.
03
What information did the client provide?
The broker's ability to understand and place the risk can depend upon accurate information about the business, property, activities, claims history and values.
04
What was explained before inception?
Policy information, significant restrictions, exclusions, limits and other relevant communications should be examined in their actual sequence rather than in isolation.
05
What records exist?
Contemporary emails, call notes, demands-and-needs material, quotations, insurer correspondence and policy documents may be central to answering later allegations.
Separate the Two Disputes
An insurer refusing the claim does not automatically make the broker liable.
The underlying insurance dispute should be examined first. If the insurer's refusal is itself wrong, the insured may have a valid claim under the policy rather than a broker-negligence loss.
If the policy genuinely does not respond, a second question arises: did the broker fail to arrange cover which reasonably should have been arranged, and did that failure actually cause the uninsured loss?
Question One
Was the insurer entitled to refuse the claim?
Examine the policy wording, facts, exclusions, conditions, valuation and insurer reasoning before assuming there was a gap in cover.
Question Two
If there was a genuine gap, did the broker cause it?
Identify the client's instructions, available insurance, broker service, information supplied and the cover that could realistically have been obtained.
The Counterfactual Policy
What insurance should supposedly have been placed instead?
It is not enough for a claimant simply to identify a gap in the actual policy. A negligence claim may also require analysis of the alternative insurance position the client says should have existed.
The alternative policy needs to be realistic: available in the
market, acceptable to an insurer and capable of responding to
the loss that actually occurred.
01
Was the proposed alternative cover actually available?
The market at the relevant time, insurer appetite, business activities and risk characteristics may all affect whether the suggested insurance could have been obtained.
02
Would an insurer have accepted the risk?
The hypothetical placement should take account of underwriting requirements, disclosure, claims history and information which would have been presented to the insurer.
03
On what terms and premium?
Alternative cover may have involved a higher premium, larger excess, lower limit, narrower wording or other conditions which affect the alleged financial difference.
04
Would the client have bought it?
Where the claimant says more expensive or materially different insurance should have been recommended, the evidence may need to address whether the client would actually have accepted the cost and terms.
05
Would the alternative policy have paid this claim?
The counterfactual policy wording must still be applied to the actual loss. Different insurance does not necessarily mean full recovery.
Underinsurance Claims
Who was responsible for the value that turned out to be too low?
Underinsurance disputes can appear straightforward after an insurer applies average or limits a payment. They often are not. The defence may need to establish how the sum insured was reached, what the broker was told, what advice was given and whether specialist valuation input was expected.
Where did the figure come from?
Was the sum insured supplied by the client, carried forward from a previous policy, calculated by another adviser or recommended by the broker?
What was the broker retained to advise upon?
Arranging insurance is not automatically the same task as providing a professional valuation of property or business assets.
Were adequacy warnings given?
Renewal communications, proposal documents and advice may have reminded the insured to check rebuilding costs, values or the adequacy of business-interruption limits.
Was the insurer's reduction itself correct?
The valuation methodology, policy wording and operation of any average or underinsurance provision should be tested before the broker is assumed to be responsible for the shortfall.
Follow the Uninsured Loss
The rejected claim value is not automatically the measure of the broker claim.
The claimant may start with the amount the insurer did not pay. The correct financial analysis can be more complicated.
The central counterfactual may be: what insurance position would the client probably have occupied if the broker had acted as the claimant says it should? That may require evidence about alternative cover, premium, excess, insurer appetite, policy terms and whether the counterfactual insurer would actually have paid the loss.
Would suitable alternative cover have been available?
Would the client have bought it at the required premium?
Would the hypothetical insurer have accepted the risk?
Would the alternative policy have covered this event?
What excess or policy limit would still have applied?
Was part of the shortfall caused by the client's own information or decisions?
Professional Indemnity
The broker may end up dealing with its own insurer as well as the claimant.
FCA rules require insurance intermediaries falling within the relevant MIPRU provisions to maintain professional indemnity insurance, subject to the rules and applicable exceptions. A negligence claim or circumstance should therefore also be considered against the broker's own PII wording.
Questions may arise around notification, policy period, aggregation, excesses, exclusions, defence costs or whether the PI insurer reserves its rights. That issue is separate from whether the brokerage is actually liable to the customer.
How We Can Help
Separate the insurance dispute from the broker-negligence claim.
That distinction is one of the reasons this type of claim is particularly suited to Insurance Dispute Service. The underlying insurer's position should not simply be accepted as the starting assumption of the negligence case.
01 / POLICY
Test the insurer's position
Review the underlying policy, rejection, reduction or coverage argument before assuming the client was genuinely uninsured.
02 / BROKER FILE
Reconstruct the placement
Organise the demands-and-needs material, client instructions, risk information, market presentations, quotations and policy communications.
03 / CAUSATION
Test the alternative cover
Examine whether different insurance could realistically have been obtained and whether it would actually have responded to the loss.
04 / STRATEGY
Prepare the defence
Structure the claim for expert analysis, specialist legal advice, pre-action response, negotiation or litigation support where required.
Common Questions
Claims against insurance brokers
Does an insurer rejecting a claim automatically mean the broker was negligent?
No. The insurer's own decision should first be examined against the policy wording and facts. If the policy should respond, there may be no broker-created uninsured loss at all.
What if the policy genuinely did not cover the loss?
That can lead to a separate question about what the broker was instructed to do, what needs were identified, what cover was available and whether the broker reasonably should have placed or recommended different insurance.
Is the broker responsible whenever the sum insured is too low?
Not automatically. The source of the valuation, scope of the broker's role, information provided by the client, warnings given and insurer's application of any underinsurance provision all need to be considered.
Does the FCA demands-and-needs requirement apply to non-advised sales?
Yes. ICOBS requires an insurance distribution sale to be accompanied by a demands-and-needs test based on information obtained from the customer. Where advice is given, additional suitability requirements apply.
Should the broker notify its own professional indemnity insurer?
The broker's PII wording should be checked promptly. Policies commonly contain requirements relating to notification of claims or circumstances, and delay can create separate coverage issues.
What if the PI insurer has appointed solicitors already?
That may provide the principal legal defence. There can still be circumstances where the brokerage wants independent support with the underlying policy dispute, the broker file or a separate PII coverage issue.
Can IDS act as the broker's solicitor?
No. Insurance Dispute Service provides claims analysis, case preparation and litigation support. Reserved legal activities must be undertaken by somebody with the appropriate regulatory authorisation.
Important information
Insurance-broker disputes can involve professional negligence, contractual duties, FCA rules, policy interpretation, insurance coverage, causation and professional indemnity issues. The applicable duties depend on the precise service, customer, policy, regulatory status and circumstances.
Insurance Dispute Service provides claims analysis, case preparation and litigation support. It does not replace a brokerage's own FCA compliance obligations or responsibilities as an authorised firm.
Public Access enables suitably registered barristers to accept direct instructions. Conduct of litigation is a separate reserved legal activity and appropriate authorisation is required where that work is undertaken on a client's behalf.
This page provides general information and is not legal advice. No particular outcome is guaranteed. Limitation periods, complaint deadlines, insurance notification requirements, applicable FCA rules and court procedure should be checked for the individual claim.
Claim Against Your Brokerage?
Establish whether there was really a gap in cover before deciding how to defend the claim.
If a professional negligence claim has been made against your insurance brokerage, speak to us about the underlying policy, broker file, causation and professional indemnity position.