Insurance brokers are usually sued when their customers find themselves without the necessary insurance to protect themselves from suit or damages. While brokers can face liability in certain scenarios, they have defenses that should not be ignored including investigating the actions or inactions of their customers. 

Pennsylvania courts have long explained that a customer has to act prudently to protect its property and business. “An insurance broker is liable for any loss stemming from his negligence ‘unless the customer is also guilty of failure to exercise care of a reasonably prudent businessman for the protection of his own property and business which contributes to the happening of such loss.’” Saracinaj v. Nationwide Ins. Co., No. 3:21-CV-793, 2022 WL 89841, at *6 (M.D. Pa. Jan. 7, 2022) (quoting Nw. Mut. Life Ins. Co. v. Babayan, No. CIV. A. 03-1622, 2004 WL 1902516, at *20 (E.D. Pa. Aug. 25, 2004), aff’d, 430 F.3d 121 (3d Cir. 2005)). (Emphasis added). 

The courts have made clear that, "[a]lthough an insurance broker owes a duty of care to its customer, that duty is not unaffected by the conduct of the customer itself." (Emphasis added). Industrial Valley Bank and Trust Co. v. The Dilks Agency, et. al., 751 F.2d 637, 640 (3d Cir., 1985). The Dilks court explained: 

An insurance broker is under a duty to exercise the care that a reasonably prudent businessman in the brokerage field would exercise under similar circumstances and if the broker fails to exercise such care and if such care is the direct cause of loss to his customer, then he is liable for such loss unless the customer is also guilty of failure to exercise care of a reasonably prudent businessman for the protection of his own property and business which contributes to the happening of such loss.

Id. at 639 (citing Consol. Sun Ray, Inc. v. Lea, 401 F.2d 650, 656 (3d Cir. 1968)); see also Al's Cafe v. Sanders Ins. Agency, 820 A.2d at 750. (Emphasis added).

While undoubtedly the focus will be on what the broker failed to do, the tables should be turned to investigate the customer’s conduct. Here are ten questions to consider when defending a broker:
 
1.    Did the customer fail to request a particular policy or coverage?
2.    Did the customer fail to timely decide whether to purchase a policy?
3.    Did the customer fail to request a new policy upon expiration?
4.    Did the customer fail to pay a premium?
5.    Did the customer fail to take appropriate action after becoming aware that coverage was no longer in place?
6.    Did the customer fail to provide information required to secure coverage?
7.    Did the customer ignore communications from the broker or insurance company?
8.    Did the customer fail to read the policy?
9.    Did the customer fail to remedy issues that prevented coverage?
10.    Did the customer fail to provide truthful information that prevented coverage?

An insurance broker should carefully and fully investigate any errors and omissions claim, which would include a thorough review of its file, its management system, any electronically stored information relating to that file and any other documentation or communications it may have relating to the matter. Timely reporting of the claim to the broker’s errors and omissions carrier is also critical. Finally, the broker should seek legal counsel for further guidance on how to best defend the claim.