Summary
This New York Appellate Division opinion addresses cross-appeals from a trial court order denying both parties' motions for summary judgment in a dispute over an insurance agent's alleged failure to procure adequate hired vehicle coverage. The court examines whether a "special relationship" existed between the plaintiff and its insurance broker that would impose a duty to advise on coverage availability, finding triable issues of fact based on conflicting deposition testimony. Additionally, the court holds that lost profits are potentially recoverable as damages resulting from the agent's failure to secure the requested insurance. The lower court's denial of summary judgment is affirmed.
Topics
Practice areas
Questions Presented
- Whether a special relationship existed between the insurer and the insured giving rise to a duty to advise on coverage.
- Whether the insurer breached a common‑law duty by representing that coverage was unavailable when it could have been procured.
- Whether plaintiff’s claim for lost profits is recoverable as a consequence of the alleged breach.
- Whether the hired‑vehicle endorsement applies to the plaintiff’s business relationship with Schlumberger.
Holdings
- The court found material factual issues as to whether a special relationship existed; therefore summary judgment on liability was improper.
- The court held that there are triable issues of fact as to whether the insurer’s representations were inaccurate and whether the coverage could have been procured, precluding summary judgment.
- The court found a triable issue of fact as to whether lost profits are the natural and probable consequence of the insurer’s alleged breach, and therefore denied summary judgment on that claim.
Key quotations
“The insurance agent‑insured relationship is not a generally recognized professional relationship in which continuing obligations to advise might exist but, rather, is an ordinary commercial relationship which does not usually give rise to a duty to provide such ongoing guidance.” (*1)
“The question whether negligence on the part of an insurance agent or broker proximately caused a client's losses should generally be resolved by the factfinder.” (*5)
“[U]nder modern practice, the right to recover profits claimed to have been lost as a result of a tort or of a breach of contract is determined by the same rules as govern the recovery of other damages.” (*6)
Factual background
Plaintiff, Marcellus Energy Services LLC, obtained a commercial insurance policy from defendant in 2014. Plaintiff’s employees operated vehicles owned by Schlumberger. After a 2015 accident, plaintiff learned that its policy did not cover such hired‑driver situations. Plaintiff repeatedly asked defendant’s agent, Eric Toftegaard, whether coverage for Schlumberger vehicles was available; the agent replied that it was not. Subsequent accidents in 2019 caused further damages, and plaintiff continued to rely on the agent’s representations while paying out‑of‑pocket. Defendant later provided limited hired‑vehicle coverage for a rental truck but denied coverage for the Schlumberger arrangement.
Procedural history
The Supreme Court of Tioga County denied both parties' summary‑judgment motions. The parties appealed, raising issues of whether a special relationship existed between the insurer and insured and whether the insurer breached a duty to advise, as well as the recoverability of lost profits.