On the insurance broker´s liability: Acting as an intermediary between clients and insurance companies, insurance brokers perform as a vehicle for people seeking better knowledge about the type of product and company most suitable for their particular needs. While performing such duty, a question has been made in court: can the insurance broker be held liable towards the insured party for the type of product purchased? In a recent ruling from the Province of Entre Ríos, a local court has determined not only that the insurance broker is liable towards the insured person, but also that it shall be jointly and severally liable along the insurance company.
The Civil and Commercial Chamber of Appeals of Gualeguay (the “Chamber of Appeals”), from the Province of Entre Ríos, had to rule over an appeal process in a traffic accident court claim (“Sanchez Hugo Daniel C/ Diaz Daniel Horacio S/ Ordinario Daños y Perjuicios”). The main issue in this case was that the insurance company was undergoing a liquidation process at the time. The defendant (the insured party in this case) called the insurance broker and the insurance company to the claim, considering that they both had intervened in the insurance contract.
The first instance ruling, considering that the defendant was indeed liable for the accident, had determined that the defendant, the insurance company and the insurance broker were to pay for the compensation, being jointly and severally liable. It was the first instance judge’s view that the defendant was a consumer, in accordance with the Consumer Protection Law No. 24.240. According to section 40 of this law, every person or company who takes part of the commercialization chain of a product or service can be held jointly and severally liable towards the consumer over damage claims. Hence, the judge considered that the insurance broker, being part of the consumer relationship between the defendant and the insurance company for offering, selling, and advising over the available insurance products, was indeed a liable as well, in the terms of the Consumer Protection Law. In addition to this, the judge also took into consideration the duties comprised in section 10 of Law No. 22.400 of Insurance Brokers to determine the brokers participation over the insurance contract commercialization chain.
The insurance broker appealed the first instance ruling on the grounds that his job as an intermediary between the insurance company and the defendant could not be considered to be within the commercialization chain in the terms of the Consumer Protection Law. In doing so, the broker explained that he could not guarantee the insurance company would provide the agreed coverage, neither assume any type of liability for the contract, given that he was a simple intermediary of the parties, while also arguing that the plaintiff had never attributed any liability towards him during the claim. It is important to note that the insurance broker sustained the view that insurance contracts cannot be considered under the scope of consumer protection regulations, which in Argentina represents a constant discussion between case law and doctrine.
The Chamber of Appeals agreed with the first instance judge on the insurance broker’s duty to correctly advice the defendant on the most suitable coverage, in light of the liquidation process which the insurance company was undergoing. In particular, both courts understood that the contractual relationship which bound the insurance company, the broker and the defendant was under the scope of the Consumer Protection Law. Additionally, they analysed section 10, indent c), of Law No. 22.400 of Insurance Brokers, which expressly states that it is the broker’s duty to “inform the insurance company about the coverage conditions of the risk and advice the insured on the most suitable coverage”. Also considering that it was the broker’s duty to correctly inform the consumer about the offered product (pursuant to section 4 of the Consumer Protection Law), the courts declared that the broker was to be held jointly and severally liable along the defendant and the insurance company.
Rulings as the one previously analysed give rise to discussions about the insurance broker’s role over the insurance contract and the extent to which they can be held liable for the products they offer. While it is certain that case law and doctrine still discuss about the capability of including insurance contracts under the scope of consumer protection regulations, this issue represents yet another topic which falls under this general discussion. Considering cases as the one previously explained, insurance brokers will have to inform clients about situations which may threaten the coverage of the insurance contracts in which they intervened.
Insuralex Argentina (Allende & Brea)
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