The Renewal That Was Never Confirmed
On 3 March, broker Milena sends client Petrov a written renewal quotation for his commercial property policy (sum insured BGN 450,000, premium BGN 3,200), valid until 20 March. The existing policy expires 31 March. Petrov replies by email on 18 March: "Agreed, go ahead, but I want the deductible at BGN 2,000 not BGN 5,000." Milena forwards this to insurer Zeta the same day but Zeta's underwriter is on leave and never responds. On 2 April a fire causes BGN 300,000 damage. Petrov claims. Zeta says no contract was concluded because the deductible change was never accepted; Petrov says Milena is his agent and her quotation bound him. Milena's brokerage agreement with Petrov states she acts as his intermediary; her agreement with Zeta authorises her to receive proposals but not to bind cover.
1. Was an insurance contract in force on 2 April, and between whom? Analyse the effect of the counter-offer and of Milena's dual capacity.
Read the worked answer
Step 1 – Classify the 18 March email. Petrov's reply did not mirror the quotation: it altered the deductible. Under general contract law a purported acceptance that changes terms is a counter-offer, which rejects the original offer. So the 3 March quotation was extinguished and no contract formed on those terms.
Step 2 – Whose offer/acceptance matters. A contract requires a meeting of minds between Petrov and Zeta, not between Petrov and Milena. Milena's quotation was a proposal to arrange cover; it does not itself bind Zeta unless she holds binding authority. Her agency agreement expressly withholds authority to bind cover, so her act cannot create Zeta's consent.
Step 3 – Dual capacity. Milena acts for Petrov under the brokerage mandate and for Zeta only for transmitting proposals. Where an intermediary acts for both sides, the scope of each authority is decisive; she cannot be treated as Zeta's agent for a power she does not have.
Step 4 – Conclusion. No contract of insurance with Zeta existed on 2 April because the counter-offer was never accepted. Petrov has a potential claim against Milena for failure to obtain timely confirmation or to warn him that cover was not yet bound - a professional liability issue, not an insurance claim. The lesson: silence by an insurer is not acceptance unless the parties agreed otherwise.
2. What should Milena have done on 18 March, and what does this case illustrate about the boundary between broking and binding authority?
Read the worked answer
Correct handling:
- Treat the email as a counter-offer and immediately tell Petrov, in writing, that cover is not yet bound and that the expiring policy lapses on 31 March.
- Escalate to Zeta's underwriting with a deadline, and if no response, seek alternative cover or a short-term extension of the expiring policy.
- Confirm the final terms in a written record once Zeta accepts.
Boundary illustrated: A broker places cover; only an insurer (or an intermediary with express binding authority) grants it. The brokerage mandate gives Milena duties of care and information toward Petrov, but those duties do not manufacture Zeta's consent. The professional failure is one of process and communication, exposing Milena to a negligence claim for the uninsured loss - not a basis for holding Zeta liable.