NY Appeals Court Upholds Breach of Contract & Negligence Claims Against Insurance Broker September 11, 2009

In a decision that was just handed down on September 1, New York’s Appellate Division, First Department (which oversees all cases in Manhattan and Bronx County) reversed a lower court’s dismissal of a breach of contract and negligence lawsuit brought by an insured against its broker.

In this case, the plaintiff claimed that the broker should be held liable because they failed to notify the plaintiff that the insurer was going to reduce their liability limits, leaving them without adequate insurance to defend a particular claim. In reversing the trial court, the Appellate Division held that a plaintiff is free to sue his insurance broker in either breach of contract or negligence (or both) if the broker failed to use due care in brokering an insurance agreement. (Although one of the judges on the Appellate Court dissented, and held that the negligence claim was properly dismissed, even he conceded that the breach of contract claim should stand.)

On the other hand, the Court unanimously held that under normal circumstances (like this case) a breach of fiduciary duty claim against an insurance broker cannot survive because the broker does not have a continuing responsibility to advise his client to obtain additional insurance coverage.

Jonathan Cooper is a New York Business Litigation and New York Commercial Litigation Lawyer with a focus on New York breach of contract and New York business fraud claims before the Nassau, Queens, Brooklyn, Bronx, Westchester and Suffolk County courts of New York State. For more information, feel free to contact his Long Island office at 516-791-5700.

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