Axis Constr. Corp. v. O'Brien Agency, Inc.
(Sup. Ct., Suffolk Co., decided 10/21/2009)
Plaintiff, a general contractor and construction manager, brought this action against its insurance agent, alleging that it had failed to procure construction management liability insurance. In late 2002 and early 2003, the plaintiff made some inquiries of O’Brien regarding whether it needed to procure construction management liability insurance. O'Brien advised plaintiff that it did not have construction management liability insurance, that it was available but expensive, and that the plaintiff's existing business, as it was described to him, was covered by the existing general liability insurance policy. Plaintiff did not ask O’Brien to procure construction management liability insurance for it in 2002 or 2003.
In June and July 2003, plaintiff entered into two construction management contracts to build modular elementary school buildings in New Jersey. Both contracts clearly required the plaintiff to have construction management professional liability insurance in addition to CGL and excess liability insurance. Plaintiff reportedly sent the insurance provisions of the contracts to defendants, and the agency issued certificates of insurance for the contracts in September and October 2003. The certificates, which were sent to the plaintiff, indicated that the plaintiff had existing general liability, excess liability, automobile liability, and property insurance, but not construction management liability insurance as required by the contracts. There was no evidence that plaintiff subsequently asked O’Brien to procure the required construction management insurance for it.
In January 2004, the modular building company declared plaintiff in default of ts contracts and commenced two successive lawsuits in New Jersey. Through 2009, plaintiff allegedly incurred more than $1 million in legal and expert witness fees defending the second action and a third-party action.
Plaintiff subsequently commenced this action against the defendant agencies, seeking to impose liability on them for allegedly failing to procure construction management liability insurance on plaintiff's behalf. Plaintiff alleged that it had both express and implied agreements with the defendants, dating back to 1993, to provide advice regarding its insurance needs and to procure insurance for it when its coverage was insufficient. Plaintiff alleged that the agency defendant breached those agreements by failing to procure construction management liability insurance on its behalf. The defendants moved for summary judgment dismissing the complaint.
In granting summary judgment to defendants, Suffolk County Supreme Court Justice Elizabeth Emerson reviewed New York's common law rules of insurance agent liability for failing to procure insurance and held that plaintiff had failed to request construction management liability insurance prior to 2005:
Justice Emerson also rejected the plaintiff's contention that it had a special relationship with O’Brien because O'Brien had been its insurance agent for 16 years, was aware of plaintiff's construction management business, had reviewed the insurance requirements contained in the construction contracts that plaintiff bid on to determine whether plaintiff had adequate insurance coverage, and had agreed to advise the plaintiff and make recommendations to it regarding insurance matters:It is well settled that insurance agents have a common-law duty to obtain requested coverage for their clients within a reasonable time or to inform the client of their inability to do so. Insurance agents do not have a continuing duty to advise, guide, or direct a client to obtain additional insurance coverage (Murphy v Kuhn, 90 NY2d 266, 270). Insurance agents or brokers are not personal financial counselors and risk managers, approaching guarantor status. Insureds are in a better position than general insurance agents or brokers to know their personal assets and their ability to protect themselves, unless the latter are informed and asked to advise and act (Id. at 273). Unlike a recipient of the services of a doctor, attorney, or architect, the recipient of the services of an insurance broker is not at a substantial disadvantage to question the actions of the provider of services (Id. at 273).
Nevertheless, the Court of Appeals has acknowledged that exceptional and particularized situations may arise in which an insurance agent, through his conduct or by express or implied contract, assumes or acquires duties in addition to those fixed at common law (Id. at 272). Whether such additional responsibilities should be recognized and given legal effect is governed by the particular relationship between the parties and is best determined on a case-by-case basis (Id. at 272). While the New York courts disfavor finding such a relationship, they may recognize an additional duty in exceptional situations, for example, when the agent receives compensation for consultation beyond the premium payments, when the insured relies on the expertise of the agent regarding a question of coverage, or when there is an extended course of dealing sufficient to put an objectively reasonable insurance agent on notice that his advice is being sought and is specially relied upon (Id. at 272; see also, Curanovic v New York Central Mutual Fire Ins. Co., 307 AD2d 435,438). The burden of establishing such a relationship is on the insured (Murphy v Kuhn, supra at 273).
The court finds that the record establishes as a matter of law that the plaintiff failed to request the specific coverage at issue prior to November 2005 (see, Hoffend & Sons, Inc. v Rose & Kiernan, Inc., 7 NY3d 152, 156-158). While the plaintiff made some inquiries of O’Brien in 2002 and 2003 regarding whether it needed to obtain construction management liability insurance, the record reveals that the plaintiff did not specifically request O’Brien to procure such insurance at that time. Moreover, there is no evidence in the record that the plaintiff requested O’Brien to procure construction management liability insurance either before or after it executed the I-R Mobile and William Scotsman contracts. While the plaintiff sent the insurance provisions of the I-R Mobile contract to the O’Brien Agency on July 24, 2003, it was in connection with a request for a certificate of insurance. The court finds that such a request is not a specific request for a certain type of coverage. Accordingly, it was insufficient to trigger O'Brien's common-law duty (Id. at 157-158).
Takeaway points from this decision include:The court finds that the services provided by O’Brien to the plaintiff in his capacity as an insurance agent do not rise to the level of a special relationship. Although the parties had an extended course of dealing, the plaintiff did not compensate O’Brien for his insurance advice apart from its payment of premiums, nor did it delegate its insurance decision-making responsibility to O’Brien (Hoffend & Sons, Inc. v Rose & Kiernan, Inc., supra at 158). The record reflects that the plaintiff, a sophisticated commercial entity, was actively involved with O'Brien in procuring both the QBE and RLI insurance policies. The plaintiff is presumed to have had knowledge of the contents of those policies (see, McGarr v Guardian Life Ins. Co. of Am., 10 AD3d 254, 256; Busker on the Roof Ltd. Partnership Co. v Warrington, 283 AD2d 376, 377; Rotanelli v Madden, 172 AD2d 815, 817), as well as the contents of the I-R Mobile and William Scotsman contracts (see, Daniel Gale Assocs. v Hillcrest Estates, 283 AD2d 386, 387; Sofio v Hughes, 162 AD2d 518, 519; Avanta Bus. Servs. Corp, v Colon, 4 Misc 3d 117, 119). In fact, the record reveals that the plaintiff was well aware that it did not have the construction management liability insurance explicitly required by the I-R Mobile and William Scotsman contracts. O’Brien advised the plaintiff, in 2002 or 2003, before it entered into those contracts, that it did not have construction management liability insurance. Moreover, as previously discussed, the plaintiff sent the insurance provisions of the I-R Mobile contract to the O'Brien Agency on July 24, 2003, in connection with a request for a certificate of insurance. The certificates that were sent back to the plaintiff clearly indicated that the plaintiff had only general liability, excess liability, automobile liability, and property insurance. The plaintiff, a sophisticated commercial entity who was in a better position than O’Brien to protect itself, did nothing to procure construction management liability insurance at that time. The court finds that, under these circumstances, the plaintiff has no cause of action against O’Brien. It was the plaintiff's failure to obtain the construction management insurance explicitly required by the I-R Mobile and William Scotsman contracts, and not any breach of duty by O’Brien, that ultimately caused the plaintiff's damages (see, Busker on the Roof Ltd. Partnership Co. v Warrington, supra at 377). Accordingly, the complaint is dismissed insofar as it is asserted against the O’Brien Agency.
- an insured's request to its agent for a certificate of insurance is not, by itself, a specific request for insurance;
- absent a specific request or a special relationship, an agent cannot be held liable for allegedly failing to procure certain insurance;
- regardless of how long the insured and agent have had a business relationship, without compensation to the agent, or a delegation to or assumption by an agent of an insured's decision-making responsibilities, it is unlikely that a special relationship will be found to exist;
- sophisticated insureds that are involved in the procurement of their own insurance are less likely to be found to have had a special relationship with their agent, sufficient to impose liability for failing to procure insurance; and
- insureds, especially sophisticated ones, are presumed to have read and know the contents of their insurance policies.
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