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Legal Updates for Insurance Agents & Brokers

Top Ten Ways an Insurance Broker Can Avoid Liability

Legal Update for Insurance Agents & Brokers – December 2022

December 20, 2022

by Estelle Kokales McGrath

How does an Insurance Broker avoid liability? My husband, who is a broker, would say it is having an attorney for a wife, but all brokers cannot be that lucky. Seriously, here are a few tips that can keep a broker out of hot water:

  1. Document Conversations. Brokers, like many professionals, speak to multiple clients a day, and certainly as time passes, memories fade. Even if you have a mind like a steel trap, it is better to have contemporaneous documentation that memorializes a transaction, including what insurance was offered and declined. Brokers should make it a practice to document conversations with clients, whether it is through an agency database or even something as simple as an email or letter.
  1. Do Not Interpret Coverage. Brokers should resist interpreting whether an insurance policy covers a particular claim. It is better to encourage a client to promptly report a claim to the insurance company and let them interpret the policy provisions. A broker should not be giving advice on whether a particular or anticipated claim is or would be covered.
  2. Do Not Advocate for Coverage. Of course, brokers want the best for their clients, but advocating for coverage is simply outside of the job duties. It is commonly argued that such advocating can blur the lines of a broker’s duties and responsibilities to the client. Brokers should stay in their lane.
  1. Check Your Website. Most professionals like to brag that they have expertise in a certain area or that they specialize in a particular line of business. Brokers should check their website, their social media content and marketing materials to ensure they are not holding themselves out as experts or specialists. These statements are commonly used against a broker in litigation.
  1. Direct Billing Preferred. If possible, the best practice is to have the insurance company bill the client directly versus agency billing. If the broker is taken out as the middle man, there can be no argument that the broker failed to properly or timely process such payment or premium.
  1. Require Clients to Complete Insurance Application. Brokers should have their clients review and complete all insurance applications. The client should sign the application on their own behalf as they are in the best situation to provide a proper history. Further, the broker should counsel their client to be honest and to disclose all information requested in any such application. The broker should refrain from completing the application or making any changes or additions.
  2. Responding to Insurance Company’s Request for Additional Information. If the insurance company requests additional information for an application or in response to a claim, the broker is encouraged to secure that information from the client in writing so there are no miscommunications.
  3. Notice of Cancellation Practice. Brokers should advise their clients that if a policy is cancelled, such notice will come directly from the insurance company. In Pennsylvania, the insurance company (not broker) has the responsibility to advise of a cancellation or refusal to renew. In a perfect world, a client would acknowledge that the broker has no responsibility or duty to give them notice of cancellation before any cancellation occurs. If a broker sends a courtesy copy of the notice of cancellation on one occasion but then fails to do so thereafter, the client may improperly think that the broker had some duty to provide such notice.
  4. Renewal Practice. Brokers should confirm current coverages are accurate with their client and should also carefully check renewal policies for any differences, including new exclusions or restrictions. The broker should also inform the client of the changes in writing and confirm the client’s approval.
  1. Inform Client of All Available Products. Brokers should inform their clients of all available products, including cyber, pandemic and employment coverage to maximize their protection. A best practice is to include a checklist of all available products offered to the client and document what products were rejected.

A broker should advise their Errors & Omissions carrier immediately when it is made aware of a claim or a potential claim. It is better to err on the side of caution and let the insurance company determine when a defense is triggered under the policy. The earlier the broker secures legal counsel, the better chances it has to reach an early, amicable resolution of such a claim.

Estelle Kokales McGrath is a shareholder in the Professional Liability Department in the Pittsburgh office of Marshall Dennehey. She primarily concentrates her practice in the areas of employment law, public entity/civil rights, real estate, and insurance agent errors & omissions litigation in both the state and federal courts of Pennsylvania and West Virginia. She may be reached at ekmcgrath@mdwcg.com.

 

 

Legal Update for Insurance Agents & Brokers – December 2022, has been prepared for our readers by Marshall Dennehey. It is solely intended to provide information on recent legal developments, and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. If you receive the alerts in error, please send a note tgventura@mdwcg.com. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2022 Marshall Dennehey. All Rights Reserved.

Firm Highlights

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Summary Judgment Secured, Preserving $750,000 in Coverage for Insured in Major Trucking Liability Dispute

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Thought Leadership

Legal Update for Special Education Law: Recent Positive Outcomes From the Group

Hearing Officer Confirms District Acted Appropriately Under IDEA and Section 504 Atty. William J. McPartland (Scranton) obtained a finding in favor of our client, a school district, on all issues following a due process hearing. The parent had filed a due process complaint alleging that the school district had breached its child find duty under the IDEA and Section 504, that the school district had discriminated against the student on the basis of disability in violation of Section 504, and that the school district had denied a free and appropriate public education to the student both by developing inadequate IEPs and via an actionable procedural violation.  Specifically, the student had received a Section 504 evaluation in October 2023, after a number of behavioral infractions culminating in a fight in September 2023, was identified as having anxiety and a sleep disorder, and received appropriate Section 504 accommodations. The student had never previously demonstrated signs of a learning disability, and the parent denied the school district permission to evaluate the student for special education needs in November 2023, and January 2024. The parent granted the district permission to evaluate the student in October 2024, after a private psychologist diagnosed the student with Attention Deficit Hyperactivity Disorder, possible Oppositional Defiance Disorder, a learning disorder, and anxiety. The school district issued a special education evaluation report in December 2024, finding that the student had an emotional disturbance and other health impairment, and an IEP providing an itinerant level of emotional support, as well as instruction in academics and social skills, was issued in January 2025, and amended in February, March, and April 2025. The student withdrew from the school district in April 2025, to attend a cyber charter school. The hearing officer determined that the school district had not violated its child find duty to the student in violation of either the IDEA or Section 504 where the district developed a Section 504 plan for the student within a month and a half of the parent’s first request for a Section 504 evaluation and where the parent repeatedly denied consent to conduct an IDEA evaluation of the student. The hearing officer noted that the student’s sporadic record of behavioral infractions prior to September 2023, did not suggest that the student had a disability prior to the parent’s initial request for an evaluation. The hearing officer further determined that no evidence had been produced to suggest that the student was discriminated against on the basis of disability in violation of Section 504. Additionally, the hearing officer determined that the IEP offered to the student was substantively adequate and that, to the extent the social and emotional programming offered by the school district was not received by the student, this resulted from the parent’s refusal to accept the same. The hearing officer finally determined that the school district did not commit an actionable procedural violation by delaying development of an IEP for the student where the parent repeatedly denied consent to evaluate the student. Court Dismisses Three of Four Claims Against School District Attys. Christopher J. Conrad and Daniel P. McGannon (Harrisburg) achieved a significant early victory on behalf of a school district client in. The team successfully obtained dismissal of three of the four claims asserted in the plaintiff’s amended complaint. The former district superintendent brought multiple claims arising out of his alleged “forced resignation,” including age discrimination under the ADEA, a Section 1983 Equal Protection claim, a Pennsylvania Whistleblower claim, and breach of contract. On behalf of the district, the defense team moved to dismiss the complaint in part, arguing: The plaintiff failed to plead sufficient facts to support a prima facie case of age discrimination. The equal protection claim was barred because the ADEA provides the exclusive federal remedy for age-based employment claims. The breach of contract claim could not stand because the underlying employment agreement had expired prior to the alleged breach. The court agreed, dismissing the ADEA, equal protection, and breach of contract claims in their entirety. As a result, only a single claim under the Pennsylvania Whistleblower Law remains pending. This outcome substantially narrows the scope of the litigation and positions the client for a more efficient defense moving forward.

Thought Leadership

Vendor Cyber Attack Compromises PII of More Than 3 Million Hunting and Fishing License Holders in Texas

The Texas Parks & Wildlife Department (TPWD) announced earlier this month that one of its vendors which handles the sale of state hunting and fishing licenses was the victim of a cybersecurity attack. The threat actor appears to have exfiltrated personal driver’s license information, passport numbers, email addresses, phone numbers and addresses of over 3 million hunting and fishing license holders.  The State Parks Department advised that the attack did not compromise social security numbers, dates of birth or financial information. Texas Cyber Command, the state’s new cybersecurity authority formed to protect critical infrastructure and coordinate threat responses across state and local government, reportedly assisted in detecting and containing the attack. TPWD has already set up free credit monitoring for those impacted through Kroll.  According to press reports, no specific group has yet been identified as the perpetrator of the theft. TPWD also advised that business has not been interrupted and license sales were continuing. This incident once again demonstrates that cybersecurity is only as strong as the weakest link in the supply chain. Businesses must prioritize security across their own environments and those of their vendors and contractors as well.

Thought Leadership

Featured Conversations... Key Takeaways from A.M. Best’s Webinar on the Misuse Defense in Product Liability Claims, Featuring Michael Salvati

Michael Salvati, shareholder in our Philadelphia office, was a panelist for the April A.M. Best webinar, “The Misuse Defense: Strategic Approaches to Defending Product Liability Claims for Insurers.” During the program, Michael and his fellow panelists offered practical, jurisdiction‑specific guidance on how misuse and failure‑to‑warn theories intersect in modern product liability litigation. Michael emphasized the unique challenges these claims present—particularly in states like Pennsylvania, where evidentiary rules diverge sharply from those applied in many other jurisdictions. Failure to Warn as the “Flip Side” of Misuse Salvati explained that failure‑to‑warn allegations often arise as a direct counter to a misuse defense. As he noted, “If our misuse defense is that the plaintiff didn't use a product properly or safely, then the failure to warn claim is that we didn't tell them how to use it properly.” He emphasized that these claims can stem from either the absence of warnings or criticisms of existing warnings, such as insufficient specificity or lack of clarity about risks. Pennsylvania’s Unique Evidentiary Landscape One of Salvati’s most notable points was the stark difference in how Pennsylvania treats evidence of compliance with industry standards. He highlighted that Pennsylvania is “one of the only states…where that evidence is not admissible” in strict liability cases. Manufacturers cannot rely on compliance with ANSI, UL, ISO, or even federal safety standards to defend the product against a strict liability claim—because the focus is solely on the product itself, not the manufacturer’s conduct. Salvati acknowledged the challenge this creates for defense counsel and clients who expect such compliance to carry weight. Understanding the Three Defect Theories Salvati also walked through the three primary defect theories recognized in many jurisdictions: - Design defect – a flaw in the product’s intended design - Manufacturing defect – a deviation affecting a specific unit - Failure to warn – inadequate instructions or warnings He noted that warnings claims are increasingly significant and sometimes stand alone when design or manufacturing theories are weak. As he put it, plaintiffs often default to warnings claims because “the default position seems to be, ‘If I got hurt, there must be something wrong.’” Warranties and State‑by‑State Variations Salvati addressed how breach‑of‑warranty claims fit into the broader framework, explaining that implied warranties—such as merchantability—often overlap with strict liability in Pennsylvania. He emphasized the importance of understanding local nuances, as warranty law and admissibility rules vary widely across states. Looking Ahead: The Growing Importance of Warnings In his closing remarks, Salvati stressed that warnings should never be treated as an afterthought in product liability defense. He observed that warnings‑only claims are becoming more common and urged manufacturers and insurers to continually evaluate the clarity and completeness of their instructions and warnings. His takeaway: “We should always be talking about what are the instructions that come with our products…to bolster a misuse defense.” Listen to the complete webinar here: https://www3.ambest.com/conferences/events/eventregister.aspx?event_id=WEB1074.

Result

No-Cause Jury Verdict Secured in Wrongful Death Trial

We successfully obtained a no-cause jury verdict in a 13-day wrongful death trial. The decedent, a 59-year-old man, was admitted to the emergency room on February 15, 2019, with complaints of abdominal pain, decreased appetite, and constipation, despite the use of laxatives. The patient did not complain of any nausea, vomiting, or diarrhea. He had a significant medical history including diabetes, hypertension, prior coronary artery stenting, morbid obesity (with past gastric bypass surgery), longstanding ventral hernia, and back pain. A CT scan revealed multiple hernias and a potential closed-loop bowel obstruction, leading to a surgery consultation. Our client, an emergency general surgeon, interpreted that the patient did not have a closed loop or any significant obstruction and recommended non-surgical management. The patient was approved to have clear liquids, and had a vomiting incident shortly after, but our client was not notified. The patient was returned to NPO status, and after improving overnight, he was returned to “clears” and additional medical and renal consults were ordered. Our client did not receive any communications from the residents/nurses of any changes in the patient’s condition. On February 18, 2019, two rapid responses were called due to increased heart rate and vomiting. It is believed that the vomiting resulted in aspiration, causing sepsis, ultimately leading to the patient’s death. During the trial, the plaintiff’s sole medical expert highlighted imaging on the wrong hernia, which called into question all of his opinions in the case. We made key objections related to the expert testimony, limiting what the allegations were, and preventing new allegations from being made. After approximately two and a half hours of deliberating, the jury returned a no-cause verdict.