If we are fortunate, we develop “special relationships” in our lives. But believe it or not, there are situations – at least legally – where such relationships are undesirable because they come with higher expectations and, thereby, additional room for legal exposure. In the case of an insurance broker, the establishment of a “special relationship” could create unique avenues for liability. Generally, in New York, insurance brokers are not fiduciaries and have no continuing duty to advise, guide or direct a client to obtain additional coverage other than the coverage requested by the client. American Bldg. Supply Corp. v. Petrocelli Group, Inc., 19 N.Y.3d 730, 735 (2012). But sometimes, “particularized situations” may develop through insurance brokers’ conduct or by express or implied contract with customers and clients where they “acquire duties in addition to those fixed at common law.” Murphy v. Kuhn, 90 N.Y.2d 266, 272-273 (1997). These “particularized situations” may just give rise to a “special relationship.” New York Courts have recognized three scenarios, each of which can signal this rare development:

• The agent receives compensation for consultation apart from payment of the premiums. 
• There was some interaction regarding a question of coverage, with the insured relying on the expertise of the agent. 
• There is a course of dealing over an extended period of time that would have put objectively reasonable insurance agents on notice that their advice was being sought and specially relied on. 

Why do New York courts insist on digging a bit deeper for the facts pertaining to the broker-client relationship than the typical common law duties attributed to insurance brokers? Well, for fairness reasons – to reflect the realities wherein customers do, in fact, rely on insurance brokers for their “expertise” within the industry, rather than just accomplishing a singular goal (i.e., obtaining an insurance policy). 

In the case of Voss v. Netherlands, Ins. Co., 22 N.Y.3d 728, 731 (2014), the plaintiff had a long-time relationship with her insurance broker. The plaintiff owned two properties and met with an insurance broker to discuss potential coverages for the premises and, in particular, sought business interruption insurance – just in case something unforeseen occurred that forced her to temporarily close up shop. The policy proposed by the broker covered up to $75,000 per incident for business interruption losses, and when the plaintiff asked whether that amount was sufficient, she was allegedly assured that it was. Note that was the first red flag – “when the plaintiff asked.” For the Court of Appeals, this signals that the plaintiff was actively inquiring and seeking the broker’s expertise – potentially creating that “special relationship.” As the years went on, the plaintiff sought to expand her business and discussed her new arrangements with the insurance broker. The broker renewed the same $75,000 policy. As life happened, she eventually experienced a roof leak at her business, causing her to sustain business losses that were thankfully covered by the policy. However, in the midst of dealing with the roofing issue, she met with the broker again, who indicated that her business interruption coverage would be reduced from $75,000 to $30,000. She questioned the reduction, and the broker said they would “take a look.” The plaintiff never followed up, and the coverage stayed at the reduced $30,000 amount. Note that was the second red flag – “she questioned the reduction.” This once again indicated to the Court of Appeals that the plaintiff was relying on the broker’s opinion and knowledge regarding the insurance policy. When the plaintiff’s roof unfortunately failed again, the plaintiff’s business was disrupted once more – and the reduced amount, this time, was inadequate to cover the losses. 

THEN CAME THE LAWSUIT. 

From the insurance broker’s perspective – they did what they needed to do. They technically obtained the insurance policy that the plaintiff requested. That’s their common law duty, after all. But for the Court of Appeals, the facts suggested that the plaintiff was assured the coverage would be sufficient, sought the broker’s opinion, and when she expanded her business, the broker recommended a downward adjustment of her coverage. The Court of Appeals stressed that these special relationships are “not the norm” – but, clearly, they do happen from time to time, and here, whether one existed was a factual question precluding resolution on a dispositive motion and necessitating a trial. Facts of the relationship matter. New York state courts now look into the status of the broker-client relationship, the advice given by the broker and, sometimes, what advice the broker should have given in the scenario depending on the individual’s circumstances. “Special relationships” are difficult to form – but if the insurance broker finds himself in one, he may just have exposed himself to liability where there otherwise would not have been any.