Having just joined Merlin Law Group’s New York office, I would like to introduce myself to the property insurance blog community. I am an attorney licensed in New York with extensive experience representing insurance carriers. In my new role at Merlin Law Group, I intend to apply my knowledge of the insurance industry exclusively to representing policyholders and their interests. I will be posting on various aspects of insurance law in New York, in particular as they relate to first-party property claims, so feel free to post any questions or comments that you might have.

In today’s blog post, I am going to discuss the important issue of when a Broker can be held liable for negligence in New York. As my colleague Robert Trautmann correctly mentioned in his blog post, Insurance Broker Negligence in New Jersey, many insured’s are unpleasantly surprised to discover that they are either underinsured or in some cases not insured at all for losses they fully expected to be covered. It is important for consumers and insurance professionals to be aware that the liability for this shortfall may well rest with their insurance broker or agent.

One example of this is when a broker negligently fails to procure additional insurance requested by an insured. In New York, a broker or agent may be held liable in this circumstance up to the amount the insurer would have owed, had the policy been in force at the time of the loss. This is illustrated in the case of Gorgone v. Regency Agency Inc.,1 In this case the plaintiff, Gorgone, requested his broker increase underinsurance coverage on his policy from $10,000 per person, $20,000 per accident to $250,000 per person $500,000 per accident to become effective November 15, 1989. The broker told Mr. Gorgone that he would add the additional insurance and led him to believe that he was covered as of November 15, 1989. In fact, the broker mistakenly effectuated the policy as of December 12, 1989. The plaintiff subsequently had an accident on December 2, 1989 with a taxi, ten days before the enhanced policy came into effect. The carrier summarily denied Mr. Gorgone’s claim citing that according to his policy Mr. Gorgone’s enhanced underinsurance limits did not come into effect until December 12, 1989. The matter was brought to suit and the court found in favor of the plaintiff on this issue. The court found that the broker had a fiduciary obligation to the plaintiff in this circumstance. Consequently, the broker’s acts necessitated finding in favor of the plaintiff on the issue of negligence for failure to procure additional insurance.

This case illustrates how a broker can negligently fail to procure insurance for an insured and subsequently be held liable. While each case is different, it is a good idea to explore the possibility of broker negligence in a case where you or your insured believes he or she was promised coverage that is not available at the time of loss.

1 Gorgone v. Regency Agency Inc., 656 N.Y.S. 2d 622 (1997).

  • Christopher,

    Congratulations on joining Merlin Law Group along with your new role of advocating on behalf of policyholders. Pride Public Adjusters holds The Merlin Law Group in high esteem. We are currently working in conjunction with Larry Bache in NY/NJ and Ken Kan in Los Angeles. We look forward to working with you also.

    A question you may be able to provide insight to or maybe someone in your firm; Do you think that the issue of applying depreciation to “labor” in New York will be challenged anytime soon? In CA depreciation can only be applied to materials and not labor since the ACV of labor… is exactly what it is. But in these other states like NY it greatly affects the payout of a claim with homes being built literally 100 years ago.

    I have seen $100k claims only payout $25,000.00. If there is an RCV policy this affects the progression of the build back causing unnecessary delays and the property owner having to seek ways to obtain the funds to keep the construction moving along.

    If the policy is an ACV policy – well… its just plain devastating.

  • Paul Samuel

    I would also like to add that, negligence or contract claim may stand against an insurance broker where the customer makes a particular coverage request to the broker and the broker failed to obtain such coverage. Nevertheless, the law is vague as to whether such claims are barred where, as here, the customer fails to review and/or object to the policy upon its receipt. So gather some knowledge on the laws and norms before going for a policy.