Brokers under pressure as E&O risks deepen across commercial lines
Legal expectations are rising – leaving brokers exposed to new kinds of E&O threats.
Fuelled by court rulings rather than new laws, the definition of a broker’s duty of care in Canada is rapidly expanding. The legal evolution is creating a complex and litigious environment for professionals, redefining their responsibilities in a landscape where accountability is constantly being tested.
The definition of a broker’s duty of care has expanded beyond placement, and it continues to grow with every lawsuit that makes it to court. said Michelle Loupret (pictured), vice president and chief operations officer at ProForm Insurance.
Loupret pointed to the 1977 Fine’s Flowers case as a legal turning point. That decision introduced the notion of the “intelligent insurance broker” – a benchmark that has only grown more demanding since. It’s no longer sufficient to relay policy information or fulfill client requests; brokers are now expected to take a more proactive role.
“They need to proactively identify coverage gaps, warn of foreseeable risks, and sometimes recommend additional coverage – whether or not the client actually asks,” she said.
Documentation now defines the defense
This expanded duty of care has triggered a shift in the types of E&O claims ProForm has seen in recent years. Loupret highlighted a rise in claims related to complex disputes over things like policy exclusions or coverage limits.
“Failure to recommend allegations – this is increasingly common in cyber, flood, and auto, but we are seeing this trend across all personal and commercial,” she said.
While technical gaps may trigger claims, the lack of documentation often decides them. Loupret pointed to a 2024 legal win for Westland Insurance in a case brought by a client who had suffered catastrophic injuries in an auto accident. The client alleged he hadn’t been offered underinsured motorist protection (UMP) – but Westland’s broker had documented the offer, and the client’s repeated refusal, 16 times.
“The court was able to look at that and say, ‘You were, in fact, offered this coverage,’” Loupret said. “Brokers do need to record these conversations. Whether it’s through a follow-up email; or standard documentation, a clear record will go a long way toward protecting them in a lawsuit like this.”
She emphasized that documentation isn’t just a risk management tactic – it’s a foundational part of meeting legal standards of care. And as client expectations rise, so does the scrutiny over how those conversations are tracked.
Brokers increasingly targeted in litigation
Part of what’s driving this shift is a more aggressive legal strategy from plaintiff counsel. Brokers are becoming primary targets when claims are denied and other avenues of compensation close.
“The most alarming trend we are seeing is that plaintiff counsel firms have been advocating for clients to take action against their broker when a claim is denied, regardless of whether the denial was fair and appropriate.” Loupret said. “This puts an enormous amount of pressure on brokers, given the target on their back is getting even bigger.”
In her view, a broker’s best line of defense against an increasingly litigious environment is a simple one. “The more we see our clients as human, to understand their needs not just for coverage but feel seen and heard, the more likely we are to take our time and pay close attention,” she said. “The reality is that we all make mistakes. But the key is to catch them before a lawyer does.”
Sales tactics creating future exposure
Mounting legal exposure is colliding with market dynamics that incentivize brokers to compete aggressively on price – often at the cost of sound advice.
“Negotiating harder for lower premiums is normal business practice,” Loupret said. “But consistently undercutting competitors could also result in steering clients towards cheaper policies that may or may not be suitable for their needs.”
She warned that this short-term thinking not only drives E&O exposure but also undermines long-term client trust and portfolio stability. “Sales-driven pricing may inadvertently create a trend amongst Insureds to shop brokers every year in pursuit of premium savings,” she said. “And when the market hardens, brokers may be left retaining underpriced, higher risk accounts at the expense of a more stable, long-term book.
The result is a volatile cycle where price compression leads to poor underwriting discipline and eventually harsh market corrections – something the E&O sector has seen before. “The E&O market at Lloyd’s of London hardened very suddenly over 2018-2019,” Loupret said. “The market lacked the financial resilience to withstand a series of complex losses.”
Market capacity is strong – for now
Despite the growing severity of claims, the current E&O market in Canada remains competitive. Loupret said capacity is high, and insurers are showing renewed interest – especially in financial and complex lines.
“We’re in a soft market, and that creates excellent, very competitive conditions,” she said. “A lot of capacity is available. A lot of extras are available. We’ll see how long that lasts.”
Soft markets don’t last forever – and neither do E&O policies and risk management practices that fail to keep pace with broker realities. With brokers increasingly acting as risk consultants, crisis counselors, and front-line defenders, generic professional indemnity coverage may no longer be sufficient.
“If brokerages and their E&O providers are not actively protecting, educating, and advocating for their broker workforce, they will be left carrying exposures their coverage never anticipated” Loupret said. “And the pressures that brokers are facing will only increase when market conditions change.”
Original article is here
About ProForm Insurance
ProForm provides industry-leading E&O coverage, CE-accredited online educational courses, and dedicated claims advocacy from incident through litigation to settlement. We go beyond insurance to Protect, Educate, and Advocate.
For more information, please contact:
ProForm Insurance
Michelle Loupret
Chief Operating Officer
Phone: 604-910-0695
Email: michelle@proforminsurance.com
