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PLAINTIFFS ALLEGED THEY PAID A BROKER FOR THE INSURANCE POLICY ISSUED BY DEFENDANT INSURER BUT THE INSURER CANCELLED THE POLICY FOR NONPAYMENT; THE INSURER ALLEGED THE BROKER WAS NOT IN THE CHAIN OF BROKERS LEADING FROM PLAINTIFFS TO THE INSURER; QUESTIONS OF FACT PRECLUDED SUMMARY JUDGMENT (FIRST DEPT).

The First Department, reversing (modifying) Supreme Court, determined defendant-insurer’s (Interstate’s) motion for summary judgment in this “wrongful policy cancellation” suit should not have been granted. Plaintiffs alleged they paid a broker for the policy issued by Interstate . The premiums never reached Interstate. Interstate alleged the broker was not in the chain of brokers leading from plaintiffs to Interstate. The policy was cancelled for nonpayment:

Plaintiffs allege that they paid a broker the initial premium for the excess liability coverage issued by defendants, and that the broker also procured a financing agreement for them for the balance of the premiums. The party financing the premiums paid the broker on plaintiffs’ behalf and plaintiffs complied with the financing agreement. Plaintiffs’ president testified that plaintiffs only dealt with that broker, who delivered the policies to them. However, the premiums never reached defendants, who canceled the policies. Thereafter, three persons were killed during the term of the policies in an accident on plaintiffs’ premises when the decedents inhaled hydrogen sulfide fumes (the accident). Defendants disclaimed coverage.

Where an insured makes timely payment to a broker in the chain of brokers and the insurer delivers the policy to the broker pursuant to the broker’s request, Insurance Law § 2121 precludes the insurer from canceling the policy based on nonpayment of premiums where the broker did not remit the payment to the insurer … .

Here, the record is replete with triable issues of fact as to whether the broker with whom plaintiffs state they dealt was in the chain of brokers leading from plaintiffs to Interstate, such that the payment of the premiums to the broker was sufficient to bind Interstate. Plaintiffs referred to the testimony of their president that the broker was the only broker used by them, and that the broker’s employee delivered the policies to them. Moreover, the premium checks were made payable to the broker, who prepared a loss summary, and no evidence was presented demonstrating that another broker delivered the policies to plaintiffs. However, the absence of significant paperwork naming the broker cited by plaintiffs as a broker in the transaction, the testimony of the wholesale brokers that they did not deal with the broker cited by plaintiffs and would not do so, and the Notice of Excess Line Placement naming a different entity as plaintiffs’ broker, raise questions that preclude summary judgment in favor of either plaintiffs or Interstate. Royal Waste Servs., Inc. v Interstate Fire & Cas. Co., 2020 NY Slip Op 03616, First Dept 6-25-20

 

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