Supreme Court, July 2007: Litigation relating to the status of intermediaries
A broker signed on behalf of an insurer an insurance proposal with an insured. Three days later, a loss occurred, but the insurer had not yet received the application signed by the insured; it acknowledged receipt one week later and accepted it at that time. Three days after its acceptance, the policy was finally issued. It was only after having made this commitment that the insurer became aware of the loss, which had occurred before its acceptance.
The insurer contended that it was not liable and that it was not required to compensate the client, as it was not aware of the loss when the policy was accepted. The insurer claimed that knowledge of this event would have changed its opinion of the risk and would have caused it to not enter into the policy, and that it was therefore not bound by the proposal signed on its behalf by the broker.
In this case, the judges went back to the time before the insurer’s acceptance of the risk, and focused on the very essence of brokerage. They thus found in favour of the insurer on the grounds that brokers are independent, not linked to insurers, and cannot legitimately bind them without their agreement. According to the court, the insurer therefore had no obligation to compensate the client because the broker represented only one party: the insured.
In this case, we can see the clear distinction that the Spanish court makes between a broker (who is the agent of its client) and a general agent (who is the agent of the insurer), and whose actions do not bind insurers to the same extent. Therefore, the result would have been entirely different if an agent had been involved in this case.