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Failure to Allege a “Special Relationship” Between Insurance Broker and Client Required Dismissal of the “Breach of Fiduciary Duty” Cause of Action

In determining defendants’ motion to dismiss the “breach of fiduciary duty” cause of action was properly granted, the Second Department explained that an insurance broker can be liable to a client for breach of a fiduciary duty only when a “special relationship” over and above the ordinary broker-client relationship exists.  Here the plaintiffs failed to allege the existence of a “special relationship.” The court explained the relevant law:

The common-law rule is that “an insurance broker acting as an agent of its customer has a duty of reasonable care to the customer to obtain [specifically] requested coverage within a reasonable time after the request, or to inform the customer of the agent’s inability to do so, [but] the agent owes no continuing duty to advise, guide or direct the customer insured to obtain additional coverage” … . However “[w]here a special relationship develops between the broker and client, [the] broker may be liable, even in the absence of a specific request, for failing to advise or direct the client to obtain additional coverage” … . The Court of Appeals has identified three “exceptional situations” which may give rise to such a special relationship: ” (1) the agent receives compensation for consultation apart from payment of the premiums; (2) there was some interaction regarding a question of coverage, with the insured relying on the expertise of the agent; or (3) there is a course of dealing over an extended period of time which would have put objectively reasonable insurance agents on notice that their advice was being sought and specially relied on'” … . Waters Edge @ Jude Thaddeus Landing, Inc. v B & G Group, Inc., 2015 NY Slip Op 04634, 2nd Dept 6-3-15

 

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