The Insurance Coverage Law Information Center
The following article is from National Underwriter’s latest online resource,...
3) contended that when the CHI representative later returned with a proposal that included $75,000 in business
interruptio...
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Because of Evidence of a "Special Relationship" Between Insureds and Their Broker, Insureds' Suit Against Broker Should Not Have Been Dismissed, NY's Highest Court Holds

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Because of Evidence of a "Special Relationship" Between Insureds and Their Broker, Insureds' Suit Against Broker Should Not Have Been Dismissed, NY's Highest Court Holds

New York’s highest court, the New York Court of Appeals, has ruled that sufficient evidence of a “special relationship” existed between insureds and their insurance broker such that a negligence lawsuit brought by the insureds against their broker should not have been dismissed at the summary judgment stage.

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Because of Evidence of a "Special Relationship" Between Insureds and Their Broker, Insureds' Suit Against Broker Should Not Have Been Dismissed, NY's Highest Court Holds

  1. 1. The Insurance Coverage Law Information Center The following article is from National Underwriter’s latest online resource, FC&S Legal: The Insurance Coverage Law Information Center. BECAUSE OF EVIDENCE OF A “SPECIAL RELATIONSHIP” BETWEEN INSUREDS AND THEIR BROKER, INSUREDS’ SUIT AGAINST BROKER SHOULD NOT HAVE BEEN DISMISSED, NY’S HIGHEST COURT HOLDS February 27, 2014 Steven A. Meyerowitz, Esq., Director, FC&S Legal New York’s highest court, the New York Court of Appeals, has ruled that sufficient evidence of a “special relationship” existed between insureds and their insurance broker such that a negligence lawsuit brought by the insureds against their broker should not have been dismissed at the summary judgment stage. The Case Deborah Voss and three business entities that she owned and controlled sued their insurance broker, CH Insurance Brokerage Services Co., Inc. (“CHI”), alleging that they had suffered property damage and business interruption as a result of water damage that had occurred following three separate roof breaches. The plaintiffs alleged that they had a “special relationship” with CHI and that CHI had negligently secured inadequate levels of business interruption insurance for the roof breaches. Following discovery, CHI moved for summary judgment dismissing the complaint. The trial court granted its motion and the dispute reached the N.Y. Court of Appeals. The Decision of the New York Court of Appeals The court reversed. The court observed that, in the ordinary broker-client setting, the client may prevail in a negligence action only where it could establish that it made a particular request for coverage to the broker and the requested coverage was not procured. The court noted that the plaintiffs in this case had not alleged that they specifically had requested higher business interruption policy limits and they had not proceeded against CHI under this common law theory of liability. The court added, however, that where a special relationship developed between a broker and client, the broker “may be liable, even in the absence of a specific request, for failing to advise or direct the client to obtain additional coverage.” It noted that, under New York law, there were three situations that could give rise to a special relationship, thereby creating an additional duty of advisement: 1) the agent received compensation for consultation apart from payment of the premiums; 2) there was some interaction regarding a question of coverage, with the insured relying on the expertise of the agent; or 3) there was a course of dealing over an extended period of time that would have put objectively reasonable insurance agents on notice that their advice was being sought and specially relied on. Here, the court found, “there was some interaction regarding a question of [business interruption] coverage, with the insured relying on the expertise of the agent.” The court noted that Ms. Voss had: 1) testified that she and a CHI representative had discussed business interruption insurance from the inception of their business relationship; 2) asserted that the CHI representative had requested sales figures and other relevant data to calculate the proper level of coverage; Call 1-800-543-0874 | Email customerservice@SummitProNets.com | www.fcandslegal.com
  2. 2. 3) contended that when the CHI representative later returned with a proposal that included $75,000 in business interruption insurance, she had questioned that amount and he had assured her that it was adequate based on his review of her business finances as well as the layout of the building; and 4) testified that the CHI representative repeatedly had pledged that CHI would review coverage annually and recommend adjustments as her businesses grew. Under these circumstances, the court held, the complaint could not be dismissed on the basis that no special relationship arose between the parties. The court concluded by observing that “special relationships in the insurance brokerage context” were the exception, not the norm, and that it remained to be determined whether a special relationship actually existed in this case. The case is Voss v. Netherlands Ins. Co. (N.Y. Feb. 25, 2014). Attorneys involved include: Dirk J. Oudemool, for appellants; Thomas M. Witz, for respondent. Call 1-800-543-0874 | Email customerservice@SummitProNets.com | www.fcandslegal.com Copyright © 2014 The National Underwriter Company. All Rights Reserved. NOTE: The content posted to this account from FCS Legal: The Insurance Coverage Law Information Center is current to the date of its initial publication. There may have been further developments of the issues discussed since the original publication. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice is required, the services of a competent professional person should be sought. For more information, or to begin your free trial: • Call: 1-800-543-0874 • Email: customerservice@SummitProNets.com • Online: www.fcandslegal.com FCS Legal guarantees you instant access to the most authoritative and comprehensive insurance coverage law information available today. This powerful, up-to-the-minute online resource enables you to stay apprised of the latest developments through your desktop, laptop, tablet, or smart phone —whenever and wherever you need it.

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