Defendant homeowner-insurance brokers were not liable for failing to increase homeowners’ insurance coverage after homeowners renovated their home.

Defendant insurance brokers’ motion for summary judgment in a breach-of-contract/negligence action by the insureds was properly granted. The Insureds alleged they had an agreement with defendant broker to increase the insurance coverage on the insureds’ home which was destroyed by fire after renovations, and that there was a special relationship between the brokers and the insureds, but the Third Department ruled that the insureds’ evidence failed to support either theory.  Hefty v Paul Seymour Ins. Agency, 2018 NY Slip Op 05547, Third Dept 7-26-18

The insureds purchased their home in 2010 for $33,000 intending to renovate it and retire there.  The insureds took out a homeowner’s policy through defendant brokers that had a replacement cost limit of $92,000.  After a $200,000 renovation, the house was destroyed in 2013.  Insureds commenced the instant action alleging that defendant brokers were negligent in failing to secure higher coverage limits for the property after its renovation.

Defendant brokers successfully moved for summary judgment, which the Third Department affirmed.

To set forth a negligence or breach-of-contract action against an insurance broker, plaintiff must establish that plaintiff made a specific request to the broker for coverage that was not provided in the policy.  A broker will be liable for failing to do what he is asked, but the broker has no continuing duty to monitor the insured’s needs and advise the client to obtain additional coverage.

Both plaintiffs testified that after renovating the property, they had informed defendant brokers about the improvements and had requested that someone come over to reassess the property’s value, but the insureds acknowledged that neither of them ever specifically requested an increase in coverage.

The Third Department held that at best, these insureds expressed a general interest in increasing coverage on the property but did not specifically request a certain type of coverage.

Neither did the insureds establish that a special relationship exists between them and the brokers.  Even in the absence of a specific request to increase coverage, an insurance broker may be liable for failing to advise or direct the client to obtain additional coverage where a special relationship has developed between the broker and the client, but special relationships in the insurance brokerage context are the exception rather than the norm.  Special relationships may arise in three exceptional situations, none which these insureds satisfied:

• The insureds did not pay the brokers any compensation apart from the payment of premiums.
• There was no evidence that the insureds relied on the agent’s expertise. Although the insureds claimed they repeatedly requested a reassessment of the property, defendants never undertook to perform one.  Moreover, the insureds’ own submission confirmed that they did not rely on the brokers’ expertise in assessing the insureds’ needs.  Instead, the insureds demonstrated that they were sophisticated consumers of insurance who directly managed their insurance coverages.  The insureds owned 10 properties and secured coverages for the properties as they deemed fit, sometimes rejecting defendants’ advice and internationally procuring insurance in an amount less than the amount that defendants recommended.   On the subject property, for example, the insureds insured it for only 80% of the recommended coverage based on their belief that defendants’ recommendation was too high.  The insureds also disputed whether flood insurance was necessary and eventually cancelled that insurance and obtained a refund of premium.

There was no course of dealing over an extended period of time that would have put an objectively reasonable insurance agent on notice that his advice was being sought and specially relied on.  Defendants handled nearly all of the insureds’ insurance needs for more than a decade, but this fact was insufficient to raise a question of fact as to a special relationship especially given the insureds’ history of rejecting defendant’s recommendation and managing the specifics of their own insurance policy.  There was nothing on this record that evinced anything more than the standard consumer-insurance broker relationship.