Judge Hurley of the United States Southern District Court of Florida recently set out what may be the most extensive statement of an insurance broker’s duty under Florida law.1

In Tiara Condominium Association, Inc. v. Marsh, USA, Inc., the court was posed with the question:

When an insurance broker shares a ‘special relationship’ with its client, is the broker subject to an extra-contractual enhanced duty of care requiring the broker to advise the client about the amount of coverage prudently needed to meet its complete insurance needs?

Florida law recognizes that an insurance broker owes a fiduciary duty of care to the insured.2 The duty generally imposes an obligation on the broker to inform and explain the coverage it has secured at the client’s direction.3 In addition, Florida law imposes a separate duty of care upon a broker, requiring it to use reasonable care in the procurement of requested insurance coverage.4

Generally, beyond the duty stated above, insurance brokers have no duty to advise clients about their insurance coverage needs.5 However, case law throughout the country establishes an exception to the general rule of no duty to advise. This exception applies when an insurance broker encourages and engages in a “special relationship” with its client, which triggers an enhanced duty of care to advise the client about the amount of coverage prudently needed to meet its complete insurance needs.6

The Tiara court answered the question posed above in the affirmative: a finding of a “special relationship” between the broker and insured imposes a heightened duty upon the broker to advise the insured regarding the amount of coverage prudently needed to meet its insurance needs.

The court determined that whether a “special relationship” exists between the broker and insured depends upon a multi-factor analysis, which includes:

  1. representation by the broker about its expertise;
  2. representation by the broker about the breadth of the coverage obtained;
  3. the length and depth of the relationship;
  4. the extent of the broker’s involvement in the client’s decision making about its insurance needs;
  5. information volunteered by the broker about the client’s insurance needs; and
  6. payment of additional compensation for advisory services.

Ultimately, whether an insurance broker has a “special relationship” with its client is a question of fact for the jury.

This statement of Florida law provides clarification and guidance to insureds seeking full compensation from their broker after an underinsured loss.
1 Tiara Condominium Ass’n., Inc. v. Marsh, USA, Inc., No. 8-80254, 2014 WL 109140 (S. D. Fla. January 13, 2014).
2 See Wachovia Ins. Serv., Inc. v. Toomey, 994 So. 2d 980, 987 (Fla 2008).
3 Id.
4 Toomey at 990 n. 4.
5 Tiara, at page 7.
6 See generally Peter v. Schumacher Entr., Inc., 22 P.3d 481 (Alaska 2001).

  • John Nixon

    Be wary of any appraiser that advertises “certification” relative to insurable value estimates. Certification and licensing apply to appraisers’ market value work, not insurance.

    Check inputs in the estimate carefully. Condos/Apts too often report Net SqFt instead of Gross SqFt (includes exterior dimensions, common areas, garages, etc.). Quality setting may need to be increased for luxury high-rises. Construction type inaccuracy can materially impact estimated RC.