Insurance Representative’s Liability to Third Parties

Summary

This practice note addresses the potential for liability of insurance representatives to third parties where a claimant asserts a claim against a representative for failing to procure insurance or obtain insurance in a sufficient amount or proper type for a tortfeasor. An individual or entity that has sustained damage because of the negligence of another usually pursues a claim for damages against the wrongdoer. The action is frequently grounded in negligence but may also be in contract. Topics discussed include circumstances when a representative may be liable to a third party, common defenses for an insurance representative to a third-party claim, and issues involving policy limits. A third party is an individual or entity with whom the insurance representative does not have a direct contractual relationship to procure insurance. The definition does not include an individual or entity to whom the representative seeks to sell insurance on behalf of an insurer.