A New York and New Jersey Lawyer Who Represents Policyholders and Beneficiaries in Life Insurance Denial Cases

A recent case from the Fourth Department shows how difficult it can be in New York to win a lawsuit against an insurance broker for failing to procure appropriate insurance coverage. (Radford v. Peerless Ins. Co., 2012 NY Slip Op 02244 (Mar. 23, 2012).

This situation often arises when the broker does not get high enough coverage limits or obtains a policy that has exclusions that do not cover a loss. The policyholder, in such as a case, is left holding the bag and is without insurance coverage to compensate him or her for the loss.

Here, the case does not set forth the underlying facts that gave rise to the claim. Rather, it focused on the legal claims asserted by the plaintiff and why they could not succeed.

Those claims were for (1)negligence, (2) breach of contract, (3) negligent misrepresentation, and (4) breach of fiduciary duty.

With regard to the first two, the court held that they were properly dismissed because there was no special relationship between the parties. In other words, the relationship did not go above and beyond the typical broker-customer relationship that involves the purchase of an insurance product. Furthermore, the plaintiff did not make a specific request for coverage that was breached by the broker.

As for the last two claims of negligent misrepresentation and breach of fiduciary duty, the court similarly held that no cause of action existed because of the lack of a special relationship. It went further to discuss how for there to be a valid negligent misrepresentation claim, the broker must “possess unique or specialized expertise, or [be] in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified.”

While the decision makes passing reference to the plaintiff’s claim that it made a general request for additional coverage, we don’t know further details. The thrust of the decision is that without something more, such as an extended course of dealing, or additional compensation to provide financial advice, or the failure to obtain specifically requested coverage, an insurance broker will not be liable for failing to procure appropriate insurance.

The decision also shows how litigants often bring both contract (2 & 4)and tort (1 & 3) claims, yet the legal analysis is similar for both.

Advice for insureds: make your request for coverage in writing and be as specific as possible, and read your policy when you receive it instead of just filing it away.

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