A Kentucky trucking company suffered a theft of copper shipments and the insurers rejected the claim because there was a copper exclusion in the policy. The company then sued its broker for negligently failing to notify the company about the copper exclusion in its renewed policy.

The policies for the previous two years had provided coverage for losses due to copper theft but the latest policy excluded copper.

The court held that the broker did not have to advise the insured of the policy change because the policy included ‘a clearly stated copper exclusion’. The brokers had advised before renewal that the terms and limits of premiums would change in the next year and sent a proposal to the company that the new policy would not cover copper theft. According to Kentucky law, said the court, where an insurance policy unambiguously explains its terms and conditions, a broker has no separate requirement to notify a policyholder of changes from one year to the next.

This would not be good law in South Africa. The reason a company would employ a broker includes pointing out material information in the policy especially if it changes from previous cover.

(Atic Enterprises Inc. v Cottingham & Butler Insurance Services Inc, et al.)