Legal Updates for Insurance Agents & Brokers
Pennsylvania Superior Court Reiterates Prevailing “Special Relationship” Standard: No Heightened Duty to Advise in Absence of “Confidential Relationship”
In Gemini Insurance Co. v. Meyer Jabara Hotels LLC, 213 A.3d 839 (Pa. Super. Apr. 3, 2020), the Pennsylvania Superior Court rejected Meyer Jabara Hotels LLC’s allegation that the insurance broker defendants owed a duty to advise as to Meyer Jabara’s insurance coverage needs, affirming the trial court’s determination that the broker owed no heightened duty to the insured because it owed no fiduciary duty. The Gemini court invoked the Pennsylvania Supreme Court’s analysis under Yenchi v. Ameriprise Financial, Inc., 161 A.3d 811 (2017), finding that a confidential relationship between an insurance broker and client, “[where] the relationship goes beyond mere reliance on superior skill, and into a relationship characterized by overmastering influence on one side or weakness, dependence, or trust, justifiably reposed on the other side,” creates a heightened duty of care or fiduciary duty. Id. at 854 (quoting Wisniski v. Brown & Brown Ins. Co. of PA, 906 A.2d 571, 577 (Pa. Super. 2006)).
The parties, Meyer Jabara Hotels and its broker, entered into a compensation agreement which explicitly stated that the broker was not acting in a fiduciary capacity and made no warranties regarding policy limits or coverage considerations. The court concluded that Meyer Jabara was a sophisticated business entity, with a legal department and a head of operations with a juris doctor and MBA, and that its representatives did not cede decision making control to their broker regarding insurance coverage limits and terms.
The Gemini decision reinforces the high threshold for establishing a heightened duty to advise of a breach of fiduciary duty claim against an insurance broker in Pennsylvania, particularly where the insured retains decision making control. Insurance brokers should continue to be cognizant of their role in insurance procurement, specifically in assuming decision making control in the insurance selection process. The “duty to advise” is a common allegation against insurance brokers and agents in litigation, which goes beyond the typical arm’s-length relationship between an insured and insurance broker or agent. However, the applicable standard of care owed is impacted if the customer can establish a “confidential relationship” and, thus, a heightened duty to advise.
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