Commercial Division Blog

Posted: July 19, 2017 / Categories Commercial, Insurance

Plaintiff's Failure to Read Policy No Bar to Claim for Failure to Obtain Proper Insurance

On July 11, 2017, Justice Knipel of the Kings County Commercial Division issued a decision in 386 3rd Ave. Partners Ltd. Partnership v. Alliance Brokerage Corp., 2017 NY Slip Op. 31484(U), holding that an insured's failure to read a policy was not a basis for dismissing the insured's claim against a broker for failure to obtain adequate insurance, explaining:

As a general rule, insurance brokers have a common-law duty to obtain requested coverage for their clients within a reasonable time, or to inform their client of the inability to do so. An insured must show that the broker failed to discharge the duties imposed by the agreement to obtain insurance, either by proof that it breached the agreement or because it failed to exercise due care in the transaction.

There are triable issues of fact precluding summary judgment to either party as to: (1) whether plaintiffs requested from defendant specific coverage for flood damage to their commercial properties, including the subject properties, and whether defendant failed to obtain an insurance policy as requested; (2) whether an alternative flood insurance policy for the subject properties was available from the FEMA; and (3) whether plaintiffs' reliance on defendant's unqualified representation in its Oct. 2011 email that all of their Brooklyn commercial properties had flood coverage was justified.

Plaintiffs' admitted failure to read the Travelers policy is not a superseding cause precluding defendant's liability as a matter of law. In the absence of any showing that an insured is aware of the discrepancy between the coverage it claims to have requested and that actually obtained by the insurance broker, an insured has a right to rely upon the broker's presumed obedience to his or her instructions.

(Internal quotations and citations omitted).