Do you have a “Special Relationship” With An Insurance Broker?

May 19, 2014
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New York’s highest court has confirmed that insurance brokers may be held liable to their customers for failure to obtain proper insurance coverage. The case, decided by a 4-3 vote, is Voss v. Netherlands Insurance and CH Insurance Brokerage Services (2014-01259 (N.Y. Feb. 25, 2014).

Case history

The two lower courts granted summary judgment in favor of the broker and dismissed a negligence complaint. New York’s Court of Appeals reversed, ruling that a question of fact existed as to whether or not the broker could be liable.

Facts of the case

The plaintiff is a business owner who had obtained property and business interruption coverage beginning in 2004. The broker requested sales figures and other information in order to determine the amount needed for the business interruption coverage. The broker advised the plaintiff that $75,000 in coverage would be sufficient and that the amount would be reviewed annually to confirm it was still adequate. Plaintiff’s business grew and relocated to a larger space. The broker did not review the business interruption policy limits in regard to the new location.  After a loss, the insurance company lowered the business interruption coverage to $30,000. The broker provided assurances to the plaintiff that the change would be reviewed. When no policy changes were made and additional losses occurred, the plaintiff sued the broker for negligence.  The plaintiff alleged that the broker had failure to procure sufficient business interruption coverage.


Under New York law, a broker has had no duty to advise its insured regarding the scope and nature of coverage absent a “special relationship.”  In other words, a broker’s duty does not include providing insurance coverage advice, unless a special relationship exists. A special relationship may exist if the broker receives additional compensation from the insured, if the insured relies upon the advice and expertise of the broker regarding coverage, or there is a sufficient course of dealing between the broker and insured that places the broker on notice that his advice is being relied upon. The Voss court found that the plaintiff relied upon the broker’s promise to review the adequacy of the business interruption coverage each year and denied summary judgment. The court provided the plaintiff with an opportunity to demonstrate that a special relationship existed, which means that the issue of “special relationship” can no longer be resolved against an insured as a matter of law. Additionally, the insured’s knowledge of policy limits does not preclude a claim from being made. From a practical standpoint, it seems that the Voss decision has opened the door for insureds to proceed with litigation (including Sandy-related matters) against insurance brokers if there is a factual basis for establishing that a special relationship existed. If you have any questions about this case or the issues discussed, please contact me, or the Scarinci Hollenbeck attorney with whom you work.