A January 16 decision by one of New York's appellate courts is guaranteed to rankle insurance brokers throughout New York - and to put them on notice - that they had better dot their "i"s and cross their "t"s when receiving requests to procure insurance. Otherwise, they run the risk that a court will entertain a lawsuit against them if the coverage they ultimately procured was either the wrong kind of insurance, or didn't afford adequate coverage.
And this is precisely what happened in Gagliardi v. Preferred Mut. Ins. Co.
In this case, there was a fire at the plaintiff's premises which severely damaged three structures at the property; unfortunately, however, there was insufficient coverage to cover the plaintiff for their losses. In seeking to dismiss the plaintiff's complaint that charged them with failing to heed their specific instructions as to which insurance (and how much) to procure on their behalf, the brokerage claimed that the nature of the coverage was apparent on the policies' declaration pages, and therefore, the plaintiff was negligent in failing to notice it and rectify the situation on their own.
The appellate court disagreed, stating as follows:
"Where an insured makes an explicit request for a specific amount of coverage, the mere fact that the insured had ample time, yet failed to read the policy to discern the actual liability limit under the policy, is not a superseding cause precluding liability as a matter of law (see Reilly v Progressive Ins. Co., 288 AD2d 365; Kyes v Northbrook Prop. & Cas. Ins. Co., 278 AD2d 736; Mets Donuts v Dairyland Ins. Co., 166 AD2d 508)."
For additional information on claims against insurance brokers under New York law, please see "Two Ways New York Insurance Brokers Can Be Liable for Getting the Wrong Coverage").
(Parenthetically, this decision makes another point clear as well: it behooves insureds to memorialize in writing to their brokers the precise coverage that they want.)