Legal Updates for Insurance Agents & Brokers
Federal District Judge Dismisses Insurance Broker in Pandemic Case
Businesses across the nation have suffered losses as a result of COVID-19, which has sparked pandemic litigation nationwide. With coverage lawsuits against insurers meeting with little success and with many courts upholding virus exclusions and determining that government-imposed lockdowns do not arise to a “direct physical loss,” insureds are beginning to turn to agents and brokers for failing to recommend “pandemic” coverage. Insurance brokers have secured dismissal from pandemic-related lawsuits in California, New Jersey, New York, Pennsylvania and Texas.
We can now add West Virginia to the list of favorable decisions for brokers. On March 22, 2021, a Federal District Judge from the Southern District of West Virginia granted an insurance broker’s motion to dismiss and dismissed the suit in its entirety. The plaintiff was a women’s fashion and accessory boutique. The suit arose from a dispute over the plaintiff’s insurance coverage for damages it sustained while being ordered to close by West Virginia’s COVID-19-related orders. The insurance carrier filed a motion to dismiss and, thereafter, the plaintiff voluntarily dismissed the carrier. The broker filed a motion to dismiss all of the claims plead against it, including bad faith, West Virginia’s Unfair Trade Practices Act, estoppel and breach of fiduciary duty.
The court dismissed the counts of bad faith and Unfair Trade Practices Act, finding that the plaintiff failed to provide sufficient allegations to support such claims. The court further explained that the plaintiff alleged very few facts specific to the broker and that the allegations plead did not support any unreasonable conduct by the broker, which is required to establish bad faith or deception. For similar reasons, the court held that the plaintiff’s estoppel claim failed. The plaintiff alleged that the broker advised that they would have coverage as a result of the COVID-19 orders. The court found that the plaintiff failed to allege how it relied on those representations or how that reliance was detrimental. The alleged representations occurred months after the plaintiff accepted the policy and did not appear to have any impact on the plaintiff’s request for payments from its insurance carrier. Finally, the court explained that the plaintiff failed to identify any West Virginia authority to establish a breach of fiduciary duty against the broker. Regardless, the court found that the plaintiff failed to allege that it requested specific coverage before the broker procured the policy.
The broker was represented by Estelle McGrath from Marshall Dennehey’s Pittsburgh Office. Estelle frequently defends Agent E & O claims in Pennsylvania and West Virginia.
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