Commercial Division Blog

Posted: April 16, 2014 / Categories Commercial, Insurance

Insurance Broker Owes Non-Contractual Duty to Other Brokers

On April 8, 2014, Justice Schweitzer of the New York County Commercial Division issued a decision in Rampart Brokerage Corp. v. RIBS NY LLC, 2014 NY Slip Op. 30938(U), addressing the duties owed by one insurance broker to another.

In Rampart Brokerage Corp., the plaintiff insurance broker brought tort and breach of contract claims against other brokers and several of their employees. In arguing that the plaintiff's negligence claim should be dismissed, the moving defendants argued that insurance brokers do not owe each other duties other than contractual duties. The trial court disagreed, explaining:

The Court of Appeals has held, however, that insurance agents have a common-law duty to obtain requested coverage for their clients within a reasonable time, or inform the client of their inability to do so. While defendants assert that this common-law duty does not apply to a broker dealing with another broker, they have not offered any support for that proposition, nor have they made any convincing arguments as to why they should be permitted to mislead another broker about the coverage that they have obtained for a client. The same considerations that apply to a broker's duty to a consumer would seem to apply with equal force to a broker obtaining insurance for another broker for that broker's clients. The fact that [the plaintiff] is also a broker does not give [it] an advantage with respect to knowing whether the policy promised was actually procured. [The plaintiff] was working through defendants in order to be able to obtain policies from underwriters that it did not deal with directly. Consequently, it was dependent on defendants for accurate information regarding the procurement of the policies. Thus, defendants have failed to demonstrate that the fact that [the plaintiff] is a broker is an adequate basis for dismissing the negligence cause of action.

(Internal quotations and citations omitted) (emphasis added).

This decision extends duties owed by an insurance broker to insureds to brokers working for insureds. This likely is not the last word on this issue.