Court Sentences Defendant, Insurer, and Insurance Broker to Pay Damages Jointly and Severally After Traffic Accident

In the case “Sánchez, Hugo Daniel c/ Díaz, Daniel Horacio s/ ordinario daños y perjuicios" (File No. 7496/C), the plaintiff claimed damages suffered as a result of a traffic accident. In the reply to the complaint, the defendant had the liability insurer join the proceedings, while also summoning the insurance broker on the grounds that he had been a part of the insurance selling chain.
 

According to the Court's ruling, when the reply to the complaint was filed, the insurer was in liquidation as a result of the economic and financial difficulties it had been experiencing. These circumstances had even led the Superintendence of Insurance to order a ban on it issuing any new policies. However, the broker had failed to inform these circumstances to the insured. The ruling does not clarify whether these difficulties were already occurring when the incident took place or even when the policy was taken out.
 

The broker argued he lacked standing to be sued, and that his obligations were defined by the specific law and regulations applicable to the insurance contract and brokers activities. Following these, the activities of brokers are not subordinated to those of insurers.
 

On April 5, 2023, the Civil and Commercial Court No. 1 of the City of Gualeguaychu upheld the claim, ordered the defendant to pay damages for ARS 2,086,496.67 plus interests, and held the insurer and the insurance broker jointly and severally liable.
 

The Court held that although Law No. 22400 –which exclusively regulates the activity of insurance brokers– and Law No. 17418 –which regulates the insurance contract in general but includes some rules on brokers– establish that there is no subordination relationship between the insurer and the broker, they also state that the broker is an auxiliary in selling the insurance. Therefore, the broker is a part of the commercial chain. This makes the broker a part of the consumer relationship between the insured and the insurer and thus reached by the joint and several liability established in section 40 of the Consumer Protection Law.
 

The insurance broker appealed the first instance ruling arguing that he should not be held jointly and severally liable because he had complied with his obligations and because, in his capacity of intermediary, a broker does not assume responsibilities for the obligations arising from the insurance contract itself. He also argued that the liability established in section 40 of the Consumer Protection Law does not apply to insurance brokers, who are simple intermediaries, and that the plaintiff did not attribute any liability to him.
 

On July 25, 2023, Chamber 1 of the Civil and Commercial Court of Appeals in the City of Gualeguaychu confirmed the first instance ruling, plus costs. The Court of Appeals considered that there was a consumer relationship in the terms of section 1 of the Consumer Protection Law and that both the broker and the insurer had intervened in that operation as professionals.
 

The Court highlighted that several judicial decisions had held that all the obligations arising from this contractual relationship are covered by the rules of Consumer Law and that the right to have adequate information is one of the pillars of the consumer protection system, whether or not the insurance activity is also regulated by special laws.
 

The decision stated that the first instance sentence had found the broker responsible for the deficits in his obligation to advise the insured, an obligation that must be maintained throughout the term of the insurance contract, and stressed that the appeal had not provided a different interpretation of this or regarding the attributed lack of diligence, especially considering the information available in the insurance market on the situation of the insurer.
 

Further, the court sustained that section 40 of the Consumer Protection Law establishes the strict liability of all the links in the commercial chain, and that the broker had not explained or proved that he was not part of such chain.
 

Although it may be reasonable that insurance brokers should be aware of the status of the insurance companies for which they intermediate and warn policyholders of situations that may affect the ability of insurers to meet their obligations, especially when the Superintendence of Insurance has taken measures as was in this case, it may be arguable to sustain that there is strict joint and several liability among all the participants under the terms of section 40 of the Consumer Protection Law for any breach of the insurer, under any circumstance. Brokers can, of course, be held liable for any breach of their own obligations. It is usually argued that if brokers were held jointly and severally liable for any breach of the insurers, for whom they intermediate,  this may jeopardize the entire insurance commercialization scheme.