Broker’s inexperience in commercial lines leads to reprimand

A B.C. broker inexperienced in commercial lines received a reprimand from the province’s broker regulator last week for failing to provide information to a client about D&O coverage.

Had the broker passed along information about a managing general agent (MGA)’s employment practice liability (EPL) offering, the client company would have been covered for legal expenses related to two wrongful termination disputes, the Insurance Council of B.C. found.

“Council has concluded that the [broker] likely did not intend to act contrary to the usual practice and that [his] inexperience in commercial insurance probably contributed to this incident,” the broker regulator concluded.

In addition to ordering the broker to pay for the council’s legal and investigation costs ($1,437.50), council ordered the broker to complete two courses, one in completing commercial lines applications, and another on D&O for private companies.

On Feb. 8, 2023, council staff received a complaint from an online marketing company, named ‘ABC Company’ in the council’s decision. ABC purchased both a media professionals commercial general liability (CGL) policy and an errors and omissions policy from the broker on Mar. 9, 2022.

The policy was placed with an insurer through an unnamed MGA.

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ABC contacted the broker for a quote based on a referral. The broker communicated with the company until early March 2022 to understand more about ABC’s business — for example, the number of employees it had, revenue expectations, property coverages, any revenues from other countries, and if ABC required subcontractors to carry their own insurance.

“The [broker told council investigators] that ABC was a small, new venture, and that he never met the complainant face-to-face,” the broker regulator found. “As a result of COVID-19, all communication was done either by email or phone.

“The complainant’s initial inquiry and request was for liability coverage as required by the landlord for their rented space, so the licensee focused on the commercial general liability coverage.”

The MGA emailed the broker a quotation for its media professionals package for ABC on Mar. 8, 2022. Along with its quotation, it sent a page of additional coverages available, including directors and officers coverage and employment practices liability (EPL) coverage.

“That same day, an agent of the [brokerage] sent the complainant [ABC Company] an email providing the quotation, however, the page relating to additional coverages was not included in the information sent to the complainant,” council’s decision states. “The [broker] advised he was out of the office when this correspondence was sent.”

ABC was subsequently involved in two wrongful termination civil claims. It wasn’t aware until then that the policy it purchased did not include that coverage. ABC was left to pay for the legal costs of defending the claims.

ABC complained to council that it would have purchased the EPL coverage had it known it would cover its legal costs for the wrongful dismissal suits. But the MGA’s page of information never made it into their hands, and the broker had not advised ABC about the missing information.

In reaching the decision to reprimand the broker, council determined they had not acted maliciously, and cooperated fully with its investigation. Ultimately, council noted the broker’s inexperience in commercial lines led to the omission.

 

Feature image courtesy of iStock.com/Peresmeh