A Maryland appeals court reinstated charges against a unit of Arthur J. Gallagher & Co. for its alleged failure to obtain insurance coverage for a policyholder’s business.
Vincent P. Mona was the owner of three companies – Clinton, Maryland-based Mona Electric Group Inc., Charleston, South Carolina-based Three Palms Design Build LLC and Coral Springs, Florida-based Clinton Investment Group LLC, according to Friday’s decision by the Court of Special Appeals of Maryland in Annapolis i Vincent P. Monda et al. v. Arthur J. Gallagher Risk Management Services Inc.
Beginning in 2016, Mona Electric hired Gallagher as an insurance broker and reached an agreement that required Gallagher, for $135,000 a year, to provide ongoing consulting.
While Mona Electric was the only customer listed in the indemnity agreement, Gallagher also presented Mona with a final insurance proposal that identified Three Palms and Clinton Investment Group as additional insureds.
Although Gallagher obtained insurance for Mona Electric from Travelers Property Casualty Co. of America, Three Palms and the Clinton Investment Group failed.
During the policy period, an employee of Three Palms and Clinton Investment Group stole money belonging to the companies, according to the verdict.
Mona filed a claim with Travelers for $999,119 under the policy’s criminal protection portion. Travelers refused to pay because they were not insured under the policy.
Subsequently, Mona sold Mona Electric, but it was agreed that any insurance proceeds would be paid to Mona, Three Palms and Clinton Investment Group.
Gallagher and Gallagher’s insurance broker Dennis C. Ourand were charged in state court with negligence, misrepresentation, breach of fiduciary duty and breach of contract. The District Court dismissed the case.
The Court of Appeals affirmed the dismissal of the breach of contract and fiduciary claims, but reinstated the negligence and negligent misrepresentation claims brought by Three Palms and Clinton Investment Group.
“Gallagher represented that Three Palms and Clinton Investment Group would be insured under ‘all lines’ of coverage but then failed to actually obtain the promised insurance premium for those entities. These facts alone would be sufficient to invoke a duty,” it said.
“However, the amended complaint goes further,” the ruling said. Gallagher “held himself out to the plaintiffs as having expertise in insurance brokerage and advisory services” and in return, Gallagher was paid $135,000 a year for those services in addition to customary commissions, the ruling said in reinstating the negligence claims.
A spokesperson for Gallagher and Mona’s attorney could not be reached for comment.