Action Against Broker for False Certificate of Insurance Dismissed

CGL – CERTIFICATE OF INSURANCE – BROKER LIABILITY
Tishman Constr. Corp. v. American Safety Indem. Co.
(Sup. Ct., New York Co., decided 10/16/2008)

An employee of one of Tishman's subcontractors, Manhattan Concrete Structures, was injured while working at a construction site.  The subcontract required required Manhattan to indemnify Tishman and its parent and subsidiary companies, and to procure insurance naming them as additional insureds.

When American Safety denied additional insured coverage to Tishman for that construction-site accident and related personal injury action, Tishman commenced this action against Manhattan's broker, John Joseph Insurance Brokerage, Inc., alleging causes of action for fraud and misrepresentation for the broker's alleged issuance of a false certificate of insurance (COI).  Tishman also sued American Safety, which successfully moved for summary judgment.

After discovery, the broker moved for summary judgment based on its arguments that: (1) it had not issued the COI in question; and (2) it had no legal relationship with Tishman sufficient to support any cause of action against it. Through an affidavit of its vice-president, the broker established:

• Manhattan never requested that the broker issue a COI to Tishman;
• it procured from American Safety a policy of insurance for Manhattan bearing policy number 10 AP-GL-00383;
• the COI listed an incorrect policy number -- 10APGL000;
• the fax number on the COI was not the broker's;
• the signature on the COI -- "John Joseph" was not the broker's; when the broker issues a COI, it is signed with the name of the individual broker, not the company; 
• no one by the name "John Joseph" has ever been associated with the broker; John and Joseph are the first names of the husbands of the broker's co-owners. 
  

In opposition to the broker's motion, Tishman pointed to the various references to "John Joseph" on the COI and to the fact that Manhattan's application for insurance from American Safety was signed by "John Joseph" as the producer.  Tishman did not, however, come forward with any proof that it had any relationship with the broker, that it received any verbal representation from the broker, or that the broker actually provided the COI to Tishman.

Based on this evidence, New York County Supreme Court Justice Shirley Werner Kornreich granted the broker's motion for summary judgment, holding:

An insurance broker cannot be held liable for a negligent misrepresentation in an insurance certificate to a party with whom the broker has no contractual relationship absent proof of a relationship approaching privity. Benjamin Shapiro Realty Co., LLC v. Kemper Nat’l Ins. Cos., 303 A.D.2d 245, 245-246 (1st Dep‘t 2003); Superior Ice Rink v. Nescon Contracting Corp., 40 A.D.3d 963 (2d Dep’t 2007). Moreover, a disclaimer stating that an insurance certificate is for information only bars a negligent misrepresentation claim. Benjamin Shapiro Realty Co., LLC v. Kemper Nat’l Ins. Cos., supra. In Benjamin Shapiro Realty and Superior Ice Rink, there was no dispute that the insurance broker had issued an incorrect certificate, and the Courts still held that a third party could not sue the broker for negligent misrepresentation based upon a certificate issued to its client, the insured.  Tishman has failed to come forward with evidence that the Broker was connected to Tishman by either word or deed.  See, Houbigant, Inc. v. Deloitte & Touche LLP, 303 A.D.2d 92,94 (1st Dep’t 2003) (before law permits negligence claim against professional by non-client third party, there must be “linking conduct” by word or action by professional to non-client).

The other basis of liability asserted by Tishman is intentional fraud or misrepresentation. There are cases which hold that a broker can be held liable for fraud, collusion or other special circumstances in the issuance of an insurance certificate. See, Griffin v. DaVinci Dev., LLC, 44 A.D.3d 1001 (2d Dep’t 2007); Binyan Shel Chessed, Inc. v. Goldberger Ins. Brokerage, Inc., 18 A.D.3d 590, 592 (2d Dep’t 2005)(summary judgment on fraud claim denied for need of discovery where broker allegedly made representations directly to plaintiff); Superior Ice Rink v. Nescon Contracling Corp., supra.  In order to recover for fraud, a plaintiff must prove the following elements: a representation of material fact, the falsity of that representation, knowledge by the party who made the representation that it was false when made, justifiable reliance by the plaintiff, and resulting injury. Global Mins. & Metals Corp. v. Holme, 35 A.D.3d 93, 98 (1st Dep‘t 2006). In this case, Tishman cannot prove the first element of fraud, a misrepresentation made to it by the Broker. Discovery is now complete. The Broker has come forward with evidence that it did not make a representation to Tishman. Tishman has failed to come forward with contrary evidence sufficient to raise an issue of fact. There is no proof that the Broker made a representation to Tishman or provided it with the Certificate. At most, an inference could be drawn that the Broker gave the Certificate to Manhattan. Hence, the Broker is entitled to dismissal of the complaint.

The court also declined to impose sanctions on Tishman for not voluntarily discontinuing this action against the broker and instead "requiring" it to move for summary judgment:

This is not a case where a party engaged in litigation misconduct or continued to press a claim after it had been rejected by the court (citations omitted).  Here, the court had denied the Broker’s first motion to dismiss and ordered discovery to proceed. While the Broker’s attorney did write to Tishman asking it to withdraw the complaint without the necessity of a summary judgment motion, in light of the unexplained etiology of the Certificate, the court does not consider Tishman’s conduct to be beyond the pale of legitimate advocacy.