Liège Court of Appeal, 12 September 2018: the courts clarify the scope of brokers’ oversight duties
Brokers make up the bulk of intermediaries in the Belgian market. They owe clients extensive duties to advise, verify and warn. However, the courts have recently, and quite rightly, limited their duty to monitor the situation of insureds.
Before converting his cottage into a “low-energy” home, a client approached a broker to obtain insurance, in particular against the risk of fire. When the work began, the chalet was valued at €143,000. During the following year, the client had the cottage dismantled, leaving only the foundations, whereupon an endorsement to the policy was issued, which valued the property at €84,432. The intermediary advised his client to schedule an appointment to inform him in the event of any changes in the situation, which the client never did. However, the owner undertook reconstruction work on his cottage, which was destroyed by fire a year later, when it was nearly completed. When the insured submitted a claim under the policy he discovered that he was underinsured because the cover amounts had not been adjusted despite the fact the reconstruction work had progressed considerably. The policyholder therefore sued his broker. He contended that the intermediary had a duty to inform the insurer of the change in the risk.
The broker was held liable at first instance, but this decision was reversed on appeal. The appellate court held that it was the insured’s responsibility to manage the insurance he had taken out and, if necessary, and as expressly provided in the endorsement, to inform the intermediary of any change to the property insured.
In this decision, the Liège Court of Appeal limited the insurance broker’s oversight duty, highlighting the fact that if the broker receives no information from its client it is unable, at its own initiative, to reassess the insured values of its clients’ properties.
The scope of this decision, which is positive for the profession, must be qualified. The Belgian courts have on numerous occasions stressed that the brokers’ duty to advise requires them to obtain specific information from clients and to monitor changes to the risk in order to adapt the insurance policy if necessary.