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PLAINTIFFS RAISED A QUESTION OF FACT WHETHER THERE WAS A “SPECIAL RELATIONSHIP” BETWEEN PLAINTIFFS AND DEFENDANT INSURANCE BROKERS SUCH THAT PLAINTIFFS COULD REASONABLY RELY ON THE BROKERS TO RENEW A POLICY (FIRST DEPT).

The First Department determined the defendant insurance brokers may be liable in negligence with respect to an audit which led to plaintiffs’ coverage being dropped. Whether the brokers can be held liable depends on whether there was a “special relationship” between the brokers and the plaintiffs upon which plaintiffs could reasonably rely. The plaintiffs raised a question of fact on the existence of a special relationship:

Supreme Court properly denied summary judgment on plaintiffs’ negligence claim because there are issues of fact concerning whether the parties had a special relationship, exceeding that of a traditional broker-client relationship. Plaintiffs testified that, among other things, defendants advised plaintiffs regarding insurance issues, addressed plaintiffs’ audits, and handled insurance policy changes … . Although defendants’ principal testified that the insurance carrier did not contact defendants during the audit that eventually led to plaintiffs’ coverage being dropped, one of the individual plaintiffs testified that he had worked with defendants for more than a decade, used defendants for all six of his businesses, and that he would send everything in his possession relating to insurance to defendants, who would in turn take care of it, including when plaintiffs received audit requests from the insurance carrier. In such a situation where “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,” a special relationship may arise thereby “creating an additional duty of advisement” even in the absence of a specific request from the insured to the broker … .

There are also issues of fact concerning which party was responsible for managing the renewal process as defendants’ involvement with previous audits may evince a course of conduct demonstrating that the renewals were in fact defendants’ responsibility … . The record evidence does not disprove as a matter of law that defendants’ inaction in renewing the policy did not proximately cause plaintiffs’ injuries … . S & M Bronx Inc. v Diversified Planning Brokerage LLC, 2026 NY Slip Op 03247, First Dept 5-21-26

Practice Point: Consult this decision for insight into the proof necessary to demonstrate a “special relationship” with insurance brokers such that the brokers can be held liable in negligence for failing to renew a client’s policy.

 

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