HNRK Coverage Corner

On December 21, 2017, the Third Department issued a decision in Cromer v. Rosenzweig Ins. Agency Inc., 2017 NY Slip Op 08926, affirming the dismissal on summary judgment of negligence and breach of contract claims against an insurance broker because the plaintiff failed to establish that the insured made a specific request for coverage that was not provided in the policy. Individuals and businesses frequently obtain insurance coverage through brokers, and may rely on the broker’s advice as to what coverage to purchase. An insured who suffers a loss that turns out not to be covered may blame the broker for procuring the wrong policy or misrepresenting the scope of coverage. But can the insured bring a claim against the broker? In some cases, yes. The Third Department's decision in in Cromer provides a useful overview of the law in this area, explaining:

As a general rule, an insurance broker has a common-law duty to provide requested coverage within a reasonable time and may be held liable for negligence or breach of contract when a client establishes that a specific request was made for coverage that was not provided in the policy. Although an insurance broker’s common-law duty to his or her clients does not include a continuing duty to advise the clients on appropriate coverage or to recommend additional coverage that the clients did not request, an insurance broker may nevertheless be found liable for failing to provide appropriate advice regarding insurance coverage where it is determined that a special relationship has been established with his or her client. Whether such a special relationship exists is best determined on a case-by-case basis upon consideration of such factors as whether the broker received compensation for his or her consultation services distinct from the payment of premiums, whether the broker and the client had a specific interaction with respect to the insurance coverage such that it was apparent that the client was relying on the advice of the broker or whether there existed a course of dealing over an extended period of time that would have put an objectively reasonable insurance broker on notice that his or her advice and/or expertise were being relied upon.

In Cromer, the insured had no claim against the broker because he made only a generalized request for a commercial general liability policy, and the broker satisfied any “duty of advisement” by informing the insured that the policy he was buying did not cover injuries to construction workers, and explaining how the insured could obtain that coverage if he wanted it.