Applying Illinois law, the United States District Court for the Northern District of Illinois has held that an insurance broker was not liable in tort to a claimant for an alleged failure to provide timely and proper notice to an insured’s excess insurers because no fiduciary duty existed between the broker and the claimant. Ferguson v. Aon Risk Servs. Co., 2021 WL 4439305 (N.D. Ill. Sept. 28, 2021).

An insured contracted with its insurance broker to place and manage a program of E&O liability insurance. The insured “defaulted and failed to satisfy any part” of a judgment against it. Plaintiffs, as beneficial interest holders in the judgment, brought an action for breach of contract and professional negligence against the insured’s broker, alleging that their inability to collect the judgment from the insured’s excess insurance policies resulted from the broker’s failure to notify excess insurers of the judgment and concealment of its failure to the insured. The broker filed a motion to dismiss both claims.

With respect to the breach of contract claim, the broker argued that the judgment creditors were not parties to the contract between the broker and the insured, and thus lacked standing to sue for breach of contract. The court rejected this argument and held that the claimants were third-party beneficiaries because the insured used the broker to procure E&O insurance specifically for the protection and benefit of the entity that ultimately obtained the judgment against the insured. Further, that entity was the insured’s largest client, and the broker was aware of this fact.

The broker contended that the economic loss doctrine barred plaintiffs’ negligence claim. Plaintiffs argued that an exception for negligent misrepresentation applied to the economic loss doctrine where “one who is in the business of supplying information for the guidance of others in their business transactions makes negligent representations.” The court held that, while the broker was the insured’s professional business advisor, the complaint did not allege that the broker “was obligated to provide plaintiffs with guidance or advice or that there was a fiduciary duty” between the broker and plaintiffs. As a result, the court dismissed plaintiffs’ professional negligence claim.