Court of Appeals Finds Questions of Fact Exist As to Possible "Special Relationship" Between Insurance Broker and Its Client

In Voss v. Netherlands Ins. Co., the plaintiff sued her insurance broker alleging they negligently secured inadequate levels of coverage for her businesses.

Plaintiff Voss met with defendant CHI, who calculated $75,000 per incident would be sufficient coverage for her businesses, and that the amount would be reassessed and checked each year in the event it became necessary to increase the coverage.  In 2006, plaintiff purchased a new building for her businesses that contained more space that would house two additional ventures.  Defendant renewed the $75,000 policy, even though it included more businesses and more square footage.  Roof leaks occurred in 2007 that put a stop to business operations and required contract work.  A month later the roof failed, causing extensive water damage and all of the businesses to temporarily shut down.  While these incidents were treated separately, payments were delayed and never fully paid.  Meanwhile in also in 2007, CHI proposed reducing the plaintiff's insurance from $75,000 to $30,000.  Plaintiff questioned this and the CHI representative agreed to “take a look at it.”  However, the plaintiff did not follow up and the $30,000 coverage made it into the final plan.  The roof then failed a third time in 2008, causing further damage and interruption of plaintiff’s businesses. 

CHI moved for summary judgment, which was granted by the Supreme Court, who agreed that no special relationship existed, that if such a relationship existed then any breach was not a proximate cause of the plaintiffs injuries and that a negligence claim against CHI failed because plaintiff admitted that she was aware of what policies she had throughout the process.  The Appellate Division affirmed, although disagreeing with the Supreme Court on the special relationship issue.

The Court of Appeals granted leave and reversed.  The Court explained that looking at the facts in the light most favorable to the nonmoving party, the plaintiff,  there was a significant triable issue of fact in regards to the special relationship between the parties.  This was because “there was some interaction regarding a question of coverage, with the insured relying on the expertise of the agent.”  Since the plaintiff relied on the insurance broker’s assurances that the coverage was enough and that it would be continually reviewed to determine if it was still adequate, it is possible a special relationship, although not yet proven, could be proven at trial.  

As for the other grounds that the Appellate Division found satisfactory for dismissal, the Court of Appeals found it “wholly irrelevant whether plaintiffs were aware of the limits that were actually procured” and stated that issues like proximate cause and foreseeability “should generally be resolved by the fact finder.”  As such, summary judgment was denied.

Judge Smith dissented, agreeing with the majority that the issue was about special relationships, but finding that no such relationship existed.  He found that despite the fact that the plaintiff solicited advice when she moved her business and renewed her coverage, plaintiff never actually received advice from the defendant.  Judge Smith emphasized that while the defendant did not have great client service, this was not a reason to classify the plaintiffs interaction with them as a special relationship.  Furthermore, he discussed policy reasons against blaming insurance agents, including the fact that brokers earn very "modest" commissions and should not be made to be "back-up insurers" for their clients' losses.