McGriff died in dispute concerning the builder’s risk policy

Broker McGriff Insurance Services Inc. is not liable for a hotel company’s failure to purchase a builder’s risk policy for a warehouse that was later damaged in a flood the broker did not know about, a federal appeals court ruled Wednesday, affirming a lower court.

Little Rock, Arkansas-based I Square Management LLC helped create Arkansas Knoxville Hotel LLP to buy a hotel in Knoxville, Tenn., with plans for its major renovation, according to a ruling by the 8th U.S. Circuit Court of Appeals in St. Louis i In Square Management LLC; Arkansas Knoxville Hotel LP v. McGriff Insurance Services Inc.

Furniture, fixtures and equipment were purchased in bulk and stored in a warehouse, according to the verdict. At one point during the project, McGriff, a subsidiary of Trust Insurance Holdings Inc., notified the project̵

7;s general contractor that a builder’s risk policy was unnecessary for the construction.

After a flood damaged or destroyed property in the warehouse, I Square and AKH filed claims with their insurance companies, which were denied. They then sued McGriff, alleging that he had negligently informed them that they did not need to purchase a builder’s risk policy for the project.

The U.S. District Court of Coutt in Little Rock ruled in favor of the broker and was affirmed by a three-judge court panel.

The Arkansas Supreme Court has consistently held that it is an insured’s responsibility to educate himself about insurance coverage, the ruling said.

However, it has recognized that an agent may have a duty to advise clients of appropriate coverage in some jurisdictions when there is a “special relationship” between the two.

That relationship did not exist here, the panel ruled. The plaintiffs “have failed to show that a special relationship exists between McGriff and the insureds that gave rise to additional obligations on McGriff’s part to ensure they had adequate coverage,” it said.

“Any assumed duty to give proper advice would have been based on McGriff’s knowledge of the project and it does not appear that anyone at I Square or AKH had told McGriff about the warehouse or that McGriff otherwise knew about it so that could ensure it was properly covered, said the ruling, which affirmed the lower court.

Attorneys in the case did not respond to requests for comment.