By Lawrence T. Bowman, director, Kane Russell Coleman & Logan PC
A recent court case gives wholesale brokers good reason to review the contractual language before signing an agreement with a surplus-lines carrier obligating the wholesale producer to police risks—particularly when the broker doesn't have the opportunity to review the applications being submitted or ensure the risks being submitted comply with underwriting criteria.
In GeoVera Specialty Insurance Co. vs. Graham Rogers Inc., et al, the Eighth Circuit affirmed a ruling (on April 13, 2011) by the U.S. District for the Eastern District of Arkansas that although insurance brokerage firm Graham Rogers Inc. (“Graham”) did not act negligently, it was liable to underwriter GeoVera Specialty Insurance Co. (“GeoVera”) based on the language in the agreement between GeoVera and Graham—which placed the duty on Graham to apply GeoVera's underwriting guidelines to all applications of insurance submitted by retailers.
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