There are at least two questions that insureds should ask upon receiving a letter denying coverage for a claim or learning of the absence of a particular type of coverage that would have otherwise covered the claim: (1) Was the insurer’s denial of coverage supported by the terms and conditions of the policy?; and (2) Is my broker liable for the damages resulting from the absence of coverage? Answering the first question in the affirmative does not necessarily mean a “yes” answer to the second question. There are certain circumstances under New York law in which an insurance agent or broker can be potentially liable for failing to procure coverage on behalf of its insured.
NY Law Governing Insurance Broker Liability
“As a general principle, insurance brokers have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so; however, they have no continuing duty to advise, guide or direct a client to obtain additional coverage.” Hefty v. Paul Seymore Ins. Agency, 163 A.D.3d 1376, 1377 (3d Dep’t 2018) (citing Voss v. Netherlands Ins. Co., 22 N.Y.3d 728, 734 (2014)). In other words, as a general matter, a broker is not obligated to affirmatively contact its client and suggest the procurement of a particular type or amount of coverage. “Hence, in the ordinary broker-client setting, the client may prevail in a negligence action only where it can establish that it made a particular request to the broker and the requested coverage was not procured.” Id. at 735.
