Presented by the Insurance Agents & Brokers Liability Practice Group

New York Court Addresses When an Insurance Broker Has a Special Duty of Advisement  

Edited by Timothy G. Ventura, Esq.

In New York, the duty of an insurance broker to obtain insurance coverage for a client is narrowly defined to require that a client identify that it made a particular request to the broker and the requested coverage was not procured. Generally, a broker does not have a duty to advise, guide or direct a client to obtain additional or specific coverage. An additional duty of advisement, however, may exist if the broker and client had a “special relationship.”

In Tracey Road Equipment, Inc. v. Ally Financial, Inc., 2018 U.S. Dist. LEXIS 52434 (N.D. N.Y. March 29, 2018), the court was asked to address whether a duty of advisement existed where the client used the defendant as its exclusive broker for 20 years and entrusted it to identify, select, and procure a variety of insurance policies for a truck and construction equipment dealership. The plaintiff claimed that, because of that relationship, the broker should have known that a large percentage of its sales were executed via credit card and that it needed credit card fraud coverage. When the parties met to evaluate the existing coverage for 2016-2017, the client relied on the broker’s advice to procure certain policies it understood would provide such coverage, but it was not specifically discussed.

A customer of the client used a fraudulent credit card to charge more than $120,000 in purchases. When the client sought coverage for the loss under the policies, the broker reported that none of the policies covered credit card fraud losses. The plaintiff sued the broker for negligence and breach of fiduciary duty, claiming a failure to advise the client to acquire specific credit card fraud insurance.

An insurance broker may have an additional duty of advisement in New York in three limited circumstances: (1) the agent receives compensation for consultation apart from the payment of a premium; (2) there was interaction regarding a question of coverage, with the insured relying on the agent’s expertise; or (3) there is a course of dealings over an extended period of time that would have put an objectively reasonable agent on notice that their advice was sought and specially relied on.

Neither of the first two exceptions were present in this case because no compensation was paid for consultation work and the plaintiff did not allege ever discussing credit card fraud coverage with the broker, as a general conversation about obtaining “adequate” insurance was not a specific request for coverage. The court considered whether the “course of dealings” exception applied to create a duty on the broker to advise the client of the need for particular coverage for credit card fraud. The court noted that this exception to the limited duty of an insurance broker is more likely to exist where the parties have a longstanding relationship, the client is relatively unsophisticated, and the broker exercises significant decision-making control over the procurement of insurance.

The court in Tracey Road held that the plaintiff failed to establish a “special relationship” with the broker to establish a duty of advisement under the course of dealings exception. The client did not allege that it knew little about insurance or delegated insurance decisions to the broker. The broker informed the client annually of appropriate or necessary changes to coverage and obtained the client’s consent to the policies obtained. The court found that the plaintiff identified nothing more than an “ordinary consumer-broker relationship,” with their meetings to review coverages insufficient to create a duty of advisement. The fact of a long-standing relationship, without more, did not impose such a duty.

The Tracey Road opinion is significant in that it underscores the limited duty of an insurance broker to advise a client on specific insurance coverages absent the type of special circumstances noted.

*G. Jay Habas is a shareholder and the managing attorney of the firm’s Erie, Pennsylvania office and is admitted to practice in both Pennsylvania and New York. He can be reached at



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