A Cautionary Tale for Wholesale Brokers

Imagine that you are a Florida independent wholesale insurance broker. Your job is to coordinate relationships between retail agents and surplus lines insurers that provide the specialized kinds of insurance coverage needed by a retail agent’s customers. One day, a retail agent contacts you to find an insurer to provide his customer coverage for his business practices.  

As part of the process, the agent sends you a signed insurance application containing information concerning the insured customer’s business. You had absolutely no involvement in preparing the insurance application. As a wholesale broker, you relay the application to various insurers in an attempt to find the right coverage for the agent’s customer. An insurer contacts you in response to the application and gives you authorization to provide a quotation to the retail agent. In turn, the retail agent relays the quotation to his customer, who agrees to accept coverage.

During the transaction and term of the policy, you acted as an intermediary between the retail agent and the insurer, nothing more. You never provided any advice to the insured customer nor did you have a contract, either oral or written, with the insured customer. In fact, nobody associated with your company ever had any contact or communication with the insured customer. You never instructed the retail agent on how to operate his business nor did you have any right to control the retail agent’s operations. Likewise, the retail agent had no right to, and did not, control your business operations. More importantly, you never provided the retail agent with any authority to cause the insured customer to believe that his agent had the authority to act on your behalf.