Insurance agents and brokers are obliged to obtain the insurance that the insured requests if this insurance is on the market. They are not obliged to inform the insured about which insurance to buy unless there is a special relationship with the insured and the agent to provide such advisory services.
I Beautyko, USA, INC., Beautyko, LLC., Linoi, LLC, Bennoti, LLC, Shopflash, Inc. v. P&G Brokerage, Inc., Benjamin Hirsch, Am Trust, North America, Tower Insurance Company 2020 NY Slip Op 33526 (U), No. 653451/2018, Supreme Court of the State of New York County of New York: Commercial Division Part I in Motion 3EFM (October 26, 2020) Beautyko, LLC, Shopflash, Inc. and Bennoti, Inc. (collectively, "Plaintiff") sued their former insurance brokers, defendant P&G Brokerage, Inc. ("P&G") and Benjamin Hirsch (collectively, "defendant"), for negligence in: the non-procured insurance cover.
Special relationships – which are the exception, not the norm, in the case of insurance brokers – arise only when the agent receives compensation for consultation in addition to the payment of premiums; there was some interaction regarding the issue of coverage, where the insured relied on the agent's expertise; or there is a way to act for a longer period of time that would have made objectively reasonable insurance agents warn that their advice was sought and particularly trusted.
The plaintiffs are alleged to have cover to protect themselves against "[a] II [l] aw suits," including claims for breach of contract, and believed that the defendants had procured such a policy for them. However, this policy did not cover the plaintiff when they faced a $ 3.6 million judgment against them, following a jury trial, for breach of contract.
The plaintiff is in "direct to retail" and sells items ranging from health and beauty products to furniture, and the bulk of that business comes from online sales through major retailers. The plaintiffs sold consumer goods to Amazon Fulfillment Services, Inc. (“Amazon”).
Hirsch purchased a commercial general liability and a commercial real estate policy for plaintiff Beautyko on an annual basis. Beautyko accepted the policy with its payment of premiums. The plaintiff was sued by Amazon for purchase orders. Hirsch advised the plaintiff by passing on what the insurer's claims department could afford to him – that the plaintiff's "claim would be denied because Amazon claims you were doing fraudulent activity". No insurance claim was filed in connection with the arbitration proceedings.
The plaintiff sued Amazon, claiming breach of contract and other claims. Amazon then filed lawsuits against the plaintiffs, including for breach of contract and fraud. Hirsch informed the plaintiffs that the policy would only cover claims against named insureds and that would not cover "intentional" conduct. The Amazon disputes went to a jury trial. The jury issued a decision in favor of Amazon against the plaintiffs and the court issued a judgment against the plaintiff on November 22, 2017 for $ 3.6 million.
The plaintiff filed a claim with his insurance company for the court fees incurred by the plaintiffs and for the judgment. The insurer informed the plaintiffs that Amazon's claims and judgment were not covered by Beautyko's policy for several reasons, including the reason that there was no coverage for damages as a result of breach of contract.
The defendant made a prima facie which shows that the insurance cover alleged to be sought could not have been procured. It is well established in this state that a broker can be held liable, either for breach of contract or liability for damages, for failure to obtain insurance, to support such recovery it must be shown that the requested coverage could have been obtained before the insured event . To support a recovery, it must be demonstrated that coverage could have been obtained before the insured event made a summary assessment based on the total absence of evidence from the insured to determine the availability of such coverage.  Defendant's insurance expert, Thomas Ahart, reported that a commercial general liability policy does not cover losses such as the financial loss suffered by Beautyko as a result of the breach of contract with Amazon and, in addition, Beautyko's loss as a result of its breach of contract would be uncertain. also under other types of insurance, such as management liability policies. In addition, he judged that there is no insurance available that would provide insured coverage for their own financial losses as a result of their own actions, such as a breach of contract. The plaintiff failed to provide evidence (expert or otherwise) in response to Ahart's conclusions. The plaintiff neither did nor was able to establish a related cause, a necessary part of their negligence, without evidence showing that such coverage was available.
The plaintiff's final statements are insufficient to address the facts as to whether, and to what extent, the defendant. actions caused them near harm. The plaintiff's claim was rejected because their alleged request for coverage, by law, was not sufficient to impose an obligation on the defendants to obtain the insurance now claiming it wanted.
In addition, there was no special relationship between the plaintiff and the defendant in this post as a matter of law. Where there is a special relationship between an insurance broker and a client, the broker is charged with an "additional advisory obligation" in addition to the limited obligations under Community law. Insurance brokers usually have no ongoing obligation to provide advice, guidance or lead a client to obtain additional coverage. ; the only claim in the complaint alleging negligence.
Finally, the plaintiff did not provide evidence to suggest that Hirsch made any statements with intent to deceive or mislead the plaintiff.
The request for a summary judgment was granted.  By definition, insurance only provides compensation for a possible or unknown event. Intentional torture is therefore uninsured as well as breach of contract that can only be determined by intentional conduct. In this case, the plaintiffs breached their agreement with Amazon and lost a jury verdict establishing the breach. The plaintiffs could not establish a special relationship with the broker and even if there was such a special relationship, there was no insurance company that would in almost all cases agree to insure against the insurance's failure to meet the terms of a contract.  © 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance management, insurance claims and insurance fraud almost equal for insurers. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award.
For the past 52 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to enable insurers and their claims staff to become insurance claims staff.
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