No implied payment contract for duration of policy established where insured is entitled to change broker of record.

The plaintiff, an insurance broker, sued its insurance customer (defendant) for purportedly changing its broker of record, thus forfeiting the plaintiff’s ability to collect premiums on the policies placed for the defendant. As is customary in the insurance industry, the plaintiff was compensated, by the defendant’s insurers directly, a portion of the premiums for each of four employee insurance policies placed. In the lawsuit, the plaintiff asserted four claims—breach of contract, unjust enrichment, promissory estoppel and tortious interference—arising out of its lost commissions after the defendant changed brokers of record, seeking termination of the defendant’s policies or payment of the accruing premiums on the policies the plaintiff had placed. 

The court found that the plaintiff could not establish the existence of a written contract or oral or implied in fact contract suggesting that the plaintiff was entitled to ongoing commissions for the policies it placed for as long as the policies remained in effect, irrespective of the defendant exercising its right to change brokers. The court similarly rejected the remaining claims, finding that the plaintiff had no reasonable expectation of being paid by the defendant (who, in fact, never paid the plaintiff directly regardless) (unjust enrichment); the defendant never promised to pay the plaintiff commissions, compensation or fees (promissory estoppel); and the plaintiff’s tortious interference claim was time-barred by the statute of limitations. 

Interestingly, the insurance broker in this case alleged an argument that insurance professionals often refute: the existence of an implied contract between an insurance broker and its retail customer. Indeed, it has been successfully argued that the insurance policy contract is between the insurer and insured, and (absent bona fide evidence of a separate written or oral contract) viable grounds do not exist for an insured to bring a breach of contract claim against its retail insurance broker arising solely out of an expectation of insurance procurement. Insurance professionals should remain cognizant of discussions with customers, and alleged promises exchanged by either party, to avoid needless litigation arising from disparate expectations. 

^{Case Law Alerts, 3rd Quarter, July 2022 is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2022 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.}