Legal Updates for Insurance Agents & Brokers
Court Grants Insurance Broker Summary Judgment Dismissing Complaint and Awarding Broker Its Fees
I was recently successful in obtaining summary judgment and dismissal of the plaintiffs’ complaint against my client, an insurance broker. In addition to dismissing the complaint, the court also granted summary judgment on the broker’s counterclaim and awarded the fees owed plus interest.
The plaintiffs were environmental contractors who required a myriad of coverages in order to be protected against all risks associated with a contract one of the companies had for performing work for a New York-based power company. In the ten days from when the broker became the Broker of Record for the plaintiffs to the renewal date, the broker was successful in putting together a comprehensive insurance program which provided all necessary coverages for the plaintiffs and involved obtaining the insurance from multiple carriers.
Under the heading of “No good deed goes unpunished,” the plaintiffs then proceeded to sue the broker, claiming there was a gap in coverage which potentially left the plaintiffs exposed to uninsured risks. Notably, the plaintiffs have a habit of suing their insurance brokers, having sued the broker’s predecessor as well.
The plaintiffs’ complaint asserted multiple causes of action against the broker, including negligence and breach of contract, and sought a declaratory judgment that the broker would be responsible for any future claims filed against them due to the alleged gap in coverage. Incredibly, the plaintiffs also sought damages from the broker due to lawsuits commenced by the plaintiffs’ finance company as a result of plaintiffs’ decision to voluntarily cancel the policies obtained by the broker (against the broker’s advice prior to its termination) and to not make payments to the finance company in violation of the terms of the finance agreement.
In support of the motion for summary judgment, an affidavit was submitted by the broker’s expert, Howard Tollin, who is the president of Sterling Environmental & Professional Services. Tollin’s affidavit was instrumental in demonstrating to the court that the broker met all of its professional insurance broker obligations in delivering comprehensive insurance solutions to the plaintiffs that met all of their requirements for coverage. Tollin further opined that the plaintiffs were improperly blaming the broker for common insurance premium increases that have become customary in New York for environmental contractors.
In opposition to the motion, the plaintiffs submitted an affidavit from one of its employees which erroneously claimed that there was a gap in coverage resulting in one of its companies not being covered for the power company’s work. The employee’s affidavit again blamed the broker for the plaintiffs’ own decision to voluntarily cancel the policies obtained by the broker, which resulted in an early cancellation penalty in addition to the lawsuits against the plaintiffs for their failure to abide by the terms of the finance agreement. Notably, the opposition papers failed to include an affidavit from a licensed insurance broker to substantiate any of the claims made in the employee’s affidavit.
The reply papers in further support of the broker’s motion for summary judgment included a reply affidavit from Tollin, which demonstrated that the employee who submitted the affidavit on behalf of the plaintiffs had no training, experience, or even a basic understanding concerning the underwriting, placement, policy issuance process or insurance policy interpretations of coverage. Tollin’s reply affidavit then detailed how there were no denials of insurance coverage or loss of work as a result of the services provided by the broker and concluded that the broker placed reasonable and customary insurance for the plaintiffs in accordance with industry standards and practices.
In granting the motion, the court found that the plaintiffs’ failure to submit an expert affidavit to challenge Tollin’s opinions was fatal to their claims since their employee’s affidavit demonstrated that “the insurance procurement issues involved in this action are not within the competence of a layperson to evaluate.” The court added that it was incumbent upon the plaintiffs to provide expert testimony to establish the standard in the insurance industry for insurance brokers in their community. The court, therefore, concluded that the broker established its prima facie entitlement to summary judgment as a matter of law through the submission of knowledgeable affidavits of the broker and its expert which established that the plaintiffs were, in fact, insured for any claims as a result of the work performed for the power company.
Not finished, the court further granted the broker summary judgment on its counterclaim, which sought fees owed by the plaintiffs. In awarding the fees, the court held that the plaintiffs owed the fees since they never contested the validity of the invoices submitted to them. The broker was also awarded statutory interest of 9% on those fees dating from December 2017.
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