Challenging the coverage refusal first: a broker's shield
Judgment of the Brussels Court of Appeal – 12 December 2024
In 2017, a policyholder engaged an insurance broker to arrange cover for his motorhome, expressly stating that the vehicle would be rented out. The broker provided him with a green card, but no written policy documents were issued.
In February 2018, the motorhome, at that time rented to a third party, was reported stolen and later recovered in a damaged condition. The insurer refused cover, relying on an exclusion clause for rental use contained in a policy that had only been drafted after the loss and had never been signed by the policyholder.
The policyholder subsequently issued proceedings solely against the insurance broker, without involving the insurer. The broker was held liable by the court of first instance and appealed the decision.
Contractual liability of an insurance broker requires the policyholder to prove three elements: a contractual breach, damage and a causal link between the two. A broker commits a contractual breach when he fails to comply with his duty of care, for example by proposing insurance that does not align with the customer’s expectations and needs. If damage arises as a result, such as a loss that turns out not to be covered, the policyholder may hold the broker liable. It is relevant, however, that the damage suffered must be certain and established.
In its judgment of 12 December 2024, the Brussels Court of Appeal held that the policyholder had not demonstrated certain and established damage. The refusal of cover was, at first sight, highly contestable and was merely a unilateral decision by the insurer. In such circumstances, the policyholder could not simply accept the insurer’s unilateral and evidently contestable refusal and then rely on the broker’s professional liability. In the absence of a judicial decision confirming the refusal of cover, the damage could not be regarded as certain and established.
The Court also referred to the duty to mitigate damage. The policyholder should have taken all reasonable steps to limit his loss, including legally challenging the insurer’s refusal. However, he did not provide a clear explanation as to why he had not initiated such proceedings.
According to the Court, damage can only be considered certain and established once a judge has definitively confirmed that the insurer was entitled to refuse cover. A unilateral refusal by the insurer is insufficient. This approach places the burden of proof firmly on the policyholder, who would be well advised to take action against both the insurer and the broker.
This judgment provides considerable protection for insurance brokers. By interpreting the damage requirement strictly, the Court limits the ability of policyholders to hold their broker liable without first challenging the insurer’s refusal. For brokers, this case law represents a positive development: they will no longer be the first or sole target when an insurer denies cover.
