Policyholders commonly seek help when they find they are underinsured or do not have adequate coverage following a loss. In California, an insurance broker may be personally liable for losses suffered by an insured as a result of the broker’s breach of duty to the insured.1

In order for an insured to recover in California, the insured must prove that but for the broker’s negligence, the insured would have had insurance coverage for a loss that occurred. Insureds who have uninsured or underinsured losses and claim their damages are due to a broker’s failure to recommend adequate coverage may fall short. Generally, an insurance broker owes no duty to volunteer to an insured that the insured should purchase additional or different coverage. Many insureds purposely under-insure their property due to financial constraints. Therefore, courts have ruled that the "person seeking …insurance knows better than the broker the extent of his personal assets and the premium he can afford or is willing to pay.”2

Despite these rulings, and fortunate for California property owners, courts have indicated the result may differ when a policy is supposed to cover the loss of a property with an ascertainable value. A broker may owe a greater duty of care when an upper limit of property value is known at the time of purchase.3 A broker’s liability is very specific and depend on the particular facts and circumstances of each claim.

1 Troost v. Estate of DeBoer (1984) 155 Cal. App. 3d 289; Hydro-Mill Co., Inc. V. Hayward, Tilton & Tolapp Ins. Associations, Inc. (2004) 115 Cal. App. 4th 1145.

2 See Jones v. Grewe(1987) 189 Cal. App. 3d 950.

3 See Paper Saver, Inc. v.. Nasca(1996) 51 Cal. App. 4th 1090.