Earlier this week, Judge Marsha Pechman granted summary judgment in favor of an insurance broker on a claim that it had failed to obtain adequate insurance for its customer. The case – SMS Services LLC v. HUB Int’l. NW, LLC (2012 U.S. Dist. LEXIS 29824) (March 5, 2012) – involved the total loss of a $33 million airplane that had insurance for only $27 million. The insured sued its broker, HUB Int’l., alleging negligence and seeking recovery for the $6 million shortfall.
Judge Pechman ruled that, as a matter law, HUB did not have any duty to advise its customer as to the adequacy of the insurance. In reaching this decision, Judge Pechman applied the following standard:
It is the insured's obligation to advise the broker of the insurance that he or she wants, including the limits of the policy to be issued. However, if the broker assumes additional duties by contract, holds herself out as possessing an extraordinary skill, or has a special relationship with the buyer, the broker has a duty to advise the buyer of the adequacy of insurance.
Because HUB had worked for the customer for only 2 years and there was no evidence that the insured had requested HUB to determine the adequacy of its coverage, Judge Pechman concluded that HUB owed no duty.