Presented by the Insurance Agents & Brokers Liability Practice Group

Appellate Division Upholds Dismissal of Claims Against Insurance Broker

Edited by Timothy G. Ventura, Esq.

In a recent decision from the Appellate Division, Third Department, the court upheld the dismissal of negligence, breach of contract and fraud/material misrepresentation claims against an insurance broker. The lawsuit against the insurance broker was commenced after a property owner was sued by a construction worker who fell off of a ladder and obtained a jury verdict against the owner for $6.1 million.

In Cromer v. Rosenzweig Insurance Agency, Inc., 156 A.D.3d 1192 (3d Dep’t 2017), the Appellate Division was asked to address whether the trial court properly granted summary judgment to the insurance broker and dismissed the complaint, which asserted causes of action for negligence, breach of contract and fraud/material misrepresentation. In its decision, the Third Department restated the well-settled rule in New York that 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.

In support of its motion to the court below, the broker submitted an affidavit that indicated it obtained a quote for the insurance coverage requested. Prior to the submission of an application to bind coverage, the broker sent the owner a letter in which the broker specifically indicated that the quoted policy “did not cover injuries to construction workers.” The letter further stated that in the event the owner was interested in procuring such additional coverage, it could be obtained for an additional $5,000.

In response to its letter, the broker received a fully-executed application for the commercial general liability policy as outlined in the provided quote. At no time did the owner ever request the broker to obtain a policy that covered injuries to construction workers. Notably, the owner testified at his deposition that he was aware that the policy he purchased did not provide coverage for injuries to construction workers. He explained that he did not procure the more expensive policy because he mistakenly believed that the contractor already had procured liability insurance covering his employees.

Based upon the above evidence, the Appellate Court found that the broker met its burden on its motion for summary judgment. In opposition to the motion in the court below, the Appellate Division held that the owner failed to present any credible evidence rebutting the proof submitted by the broker. At best, the owner established that it had made a generalized request for liability coverage and that such a request was insufficient to satisfy the requirement that a specific request for a particular type of coverage be made.

Alternatively, the owner’s attorney argued that a special relationship existed between it and the broker. In this regard, 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 had been established with his or her client. Although whether a special relationship is dependent on the particular facts of the case, factors to be considered are: 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 by the client.

The Third Department rejected the owner’s argument that a special relationship existed. Instead, it held that the broker fulfilled any duty that it owed to the owner with the submission of an “unambiguous” letter to the owner advising that additional insurance coverage for injuries to construction workers was available and could be procured upon request and, further, that the owner was aware that injuries to construction workers was specifically excluded from the policy that the owner purchased. As a result, because there was no evidence of any specific request for such additional insurance coverage being procured, the appellate court held that the broker’s motion for summary judgment dismissing the complaint was properly granted by the court below.

Cromer is notable in that it re-emphasizes the high burden that a party has in attempting to establish a viable claim against its insurance broker for malpractice, negligence or breach of contract in New York. It further establishes that an insurance broker fulfills any duty it owes to its client by procuring the specific insurance that was requested, and the broker is obligated to do no more than that unless a special relationship exists. The decision further demonstrates that a party seeking to sue its insurance broker has a similarly difficult burden in establishing that a special relationship exists that would allow the lawsuit to proceed.

Martin is a shareholder in the firm’s Melville, New York office and can be reached at

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