THE BOTTOM LINE
- Policies Don’t Renew Themselves: Businesses cannot assume insurance policies will automatically renew. The court confirmed that a policy with a specific end date terminates on that date, and inaction by the policyholder can leave a business completely exposed.
- Brokers’ Warnings Matter: An insurance broker who provides clear and repeated warnings about an expiring policy—even through channels like WhatsApp—is likely to be found to have met their professional duty of care, shifting responsibility to the client.
- Inaction is a Choice: The ultimate responsibility for ensuring continuous insurance coverage lies with the business. A court has now reinforced that ignoring a broker’s clear instructions to renew is a business decision, the consequences of which cannot be blamed on the broker or insurer after a loss occurs.
THE DETAILS
A Sint Maarten hospitality company, Docta Catering N.V., recently learned a costly lesson after a fire caused an estimated US$1.5 million in damages to its property. When it turned to its insurer for coverage, the claim was denied because the fire insurance policy had expired nearly three months prior. The company subsequently sued both its insurer (ICWI) and its insurance broker (Esurance), arguing the policy should have renewed automatically and that the broker was negligent for failing to secure coverage. The Joint Court of Justice, however, sided firmly with the broker and insurer, leaving the business to bear the full cost of the loss.
The court’s decision hinged on the nature of the insurance agreement. Docta Catering argued its policy was continuous, but the court found otherwise. By examining the policy’s history, the court noted that the previous renewal had a different start date than the original policy, creating a coverage gap. This demonstrated that the coverage was structured as a series of separate one-year policies, each requiring active renewal, rather than one continuous contract. Since the company never provided instructions to initiate a new policy after the previous one expired on November 8, 2022, it was operating without fire insurance on the day of the fire, January 29, 2023.
The central issue then became whether the insurance broker was liable for this coverage gap. The court analyzed the broker’s communications and found its actions to be reasonable and sufficient. Although an initial renewal email in October was sent to the wrong address, the broker followed up with multiple clear WhatsApp messages to the company’s principals in December 2022 and January 2023. These messages explicitly warned that the policy had “expired,” asked for “renewal instructions,” and ultimately stated that the broker would “close the file.” The court concluded that these warnings gave the company ample opportunity to act. The failure to secure coverage was not due to the broker’s negligence but to the company’s own inaction in the face of clear and repeated alerts.
SOURCE
Source: Joint Court of Justice of Aruba, Curaçao, Sint Maarten and of Bonaire, Sint Eustatius and Saba
