An insurance broker answers to its own client, not an outsider seeking coverage. A federal appeals court reaffirmed that on August 13, 2026.
The dispute ran back to the 1990s. Aon helped insurance broker Stirling Cooke Brown Holdings (SCB) build a professional liability program. Gulf Insurance Company (Gulf) wrote the primary $15 million layer, and four other carriers - the "Excess Carriers" - sat above it. The policies told SCB to give carriers "written notice of any [ ] Claim as soon as practicable."
The plaintiffs were former shareholders of the parent of Clarendon America Insurance Company (Clarendon), a reinsurer. Years earlier, an SCB subsidiary called Raydon Underwriting Management Company (Raydon) had steered Clarendon into a troubled reinsurance program that ran up heavy losses. When Clarendon later brought claims against Raydon, SCB sent some to Aon. Aon forwarded two to Gulf - but not to the Excess Carriers.
That gap was the case. The former shareholders, who had bought Clarendon's right to sue, said Aon breached two agreements and was professionally negligent for not notifying every carrier.
The court disagreed. Clarendon was not a third-party beneficiary of either agreement. Under Illinois law, the intent to benefit an outsider must be "practically an express declaration," and it was not here. When Aon faxed the claims to Gulf, it wrote only, "[p]lease see the attached to keep you up to date under [SCB's professional liability insurance] policy."
The negligence claim failed for a related reason. A broker's duty runs to the insured, not to a "similarly situated non-insured." The court cited an earlier Illinois case, also involving Aon, holding that brokers owe no duty to shield third parties from harm caused by a client.
The court added a further ground: the claims were too late. Illinois gives two years to sue an insurance producer over placement or notice. The plaintiffs were on inquiry notice by 2012 but did not file until 2019.
The Seventh Circuit affirmed the district court, which had dismissed the negligence claim and granted Aon summary judgment on the contract claim.
For brokers and their E&O carriers, the ruling holds the duty line at the client.
