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A recent decision by New York state's highest court means insurance brokers can be held responsible for failing to procure adequate insurance coverage for a client even if the client signs off on the policy without reading it.
The decision came last month after the New York State Court of Appeals heard the case brought by American Building Supply Corp., a New York City-based company that sells and furnishes building materials to general contractors, against its insurance broker.
That means brokers should start documenting every interaction with clients so they can defend themselves against future claims. Terence Quinlan, founding member of the Garden City-based insurance law firm White, Quinlan & Staley, said even typical documentation isn't going to cut it; brokers must go above and beyond the typical day-to-day routine of policy review.
"I would say to brokers you're going to want to tell the proposed insured in writing what you understand their needs to be, and have them sign off on it before securing them a policy," Quinlan said.
That's going to require a lot more documentation, which means more time and potentially more expenses, said Tom Crowley, a partner at Southampton-based insurance brokerage Cook Maran & Associates.
"We've actually done signoffs in the past with certain transactions and it...