Brokers may be found liable for damages to third-party 'intended beneficiaries'
Here is an unusual California case that an agents organization has been trying to get “depublished” so it can't be cited as precedent. Could this case mark a new threat to agents and brokers? How much must they do to “to secure insurance policies for their clients that meet their clients' needs”–particularly when those needs may involve a third party?)
In July 2000, a business hired a software company based in India to write a customized computer program for it. The contract obligated the software company to carry errors and omissions insurance and to compensate the business if the software company failed to deliver the promised software.
The business asked a retail insurance broker to arrange E&O insurance for the software company. The agent forwarded the information it received from the business to a surplus-lines broker. The broker contacted an insurer that issued a policy for the software company. Although the software company was an Indian company doing business in India, the policy excluded coverage for any claims arising from, or related to, work performed in India.
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