Insurance Agents Potentially Responsible to Non-Clients

This article from Professional Liability Matters summarizes a recent court decision over an action brought by the Cleveland Indians baseball team against an insurance broker for what was essentially failure to provide adequate professional services. The funny part is, this broker was not a person placing coverage for the Cleveland Indians but rather was a broker who had merely added the Cleveland Indians as an Additional Insured to their own client’s policy. 

Long story short is that the Cleveland Indians hired National Pastime Sports, LLC, an entertainment and games provider, to operate festivities before a game; these included an inflatable slide. National Pastime used an independent broker to secure General Liability coverage which included the Cleveland Indians as an “Additional Insured”. The broker did not secure inflatable coverage even though they were specifically told of the use of such beforehand. 

Unfortunately, the inflatable slide collapsed and killed and attendee. The Cleveland Indians sought coverage under National Pastime’s policy as a Additional Insured but, as mentioned, there was no inflatable coverage so they were unable to collect. The Cleveland Indians brought suit against the broker which was upheld upon appeal. The court concluded that simply by virtue of being an Additional Insured on National Pastime’s policy, National Pastime’s broker owed them a certain level of care. 

In short, this means that insurance professionals could owe a duty not only to their clients but (theoretically) any other named party on their client’s policies including Additional Insureds, Mortgagees, etc. 

Without a Lexis Nexis account I can’t comment as to whether the duty owed to these additional interests is the same level of duty owed to direct clients. And, further, this particular case does seem to stand alone. However, we’ve all seen how liability and subsequent litigation always starts with a crack before the dam breaks. 

Following along this path leads to further questions, such as what happens when you have an adversarial relationship between the client and an Additional Interest. For example, it’s (usually) in your client’s best interest to limit the scope of Additional Insured status, say by using a newer “Designated Person or Organization” endorsement which tends to be more restrictive**. Are you obligated to notify the Additional Insured that they could get more comprehensive Additional Insured coverage even though it would (1) cost your client more and (2) mean any losses impact your client’s history? While perhaps it’s a stretch to make that argument, it’s still plausible. 

Note that Law 360 also states this case was denied for appeal.


* Mortgagee and Loss Payable status usually provide certain benefits not otherwise found in Loss Payee-type clauses. These include promise of notification should the policy cancel or non-renew, as well as the ability to retain coverage when it’s otherwise voided by the Named Insured, such as if the insured commits arson. 

** Older endorsements (e.g. CG 20 10 11 85) don’t limit coverage to just ongoing operations, meaning the endorsement provides Products/Completed-Ops coverage. There are various other restrictions as well.

Leave a Reply

Your email address will not be published. Required fields are marked *