| Bruckmann, Rosser, Sherrill & Co., L.P. v Marsh USA, Inc. |
| 2009 NY Slip Op 06366 [65 AD3d 865] |
| September 1, 2009 |
| Appellate Division, First Department |
| Bruckmann, Rosser, Sherrill & Co., L.P., et al.,Appellants-Respondents, v Marsh USA, Inc., et al.,Respondents-Appellants. |
—[*1] Willkie Farr & Gallagher LLP, New York (Christopher J. St. Jeanos of counsel), forrespondents-appellants.
Order, Supreme Court, New York County (Milton A. Tingling, J.), entered December 19,2008, which granted defendants' motion for summary judgment dismissing the complaint,modified, on the law, to reinstate the causes of action for negligence and breach of contract, andotherwise affirmed, without costs.
The second cause of action for breach of contract should be reinstated. "Under New Yorklaw, a party who has engaged a person to act as an insurance broker to procure adequateinsurance is entitled to recover damages from the broker if the policy obtained does not cover aloss for which the broker contracted to provide insurance, and the insurance company refuses tocover the loss" (Long Is. Light. Co. v Steel Derrick Barge "FSC 99", 725 F2d 839, 841[2d Cir 1984]; Landusky v Beirne, 80 App Div 272 [1903], affd 178 NY 551[1904]). Plaintiffs' settlement of their underlying claim against the insurer, under circumstancesin which the merits of the claim for coverage were equivocal, did not break the chain ofproximate causation with respect to their claim against their broker for failure to procureappropriate coverage (see Bernstein v Oppenheim & Co., 160 AD2d 428, 430 [1990]).Resource Fin. v National Cas. Co. (219 AD2d 627 [1995]), upon which the motion courtrelied, is distinguishable because the insured there settled its claim against the insurer despitehaving prevailed against the insurer on the underlying coverage issue.
An insurance agent or broker can be held liable in negligence if he or she fails to exercisedue care in an insurance brokerage transaction. Thus, a plaintiff may seek to hold a defendantbroker liable under a theory of either negligence or breach of contract (Bedessee Imports,Inc. v Cook, Hall & Hyde, Inc., 45 AD3d 792, 793-794 [2007]; see also Hersch v DeWitt Stern Group,Inc., 43 AD3d 644, 644-645 [2007]; Katz v Tower Ins. Co. of N.Y., 34 AD3d 432 [2006]). On thisappeal, defendants did not argue that the negligence claim should be dismissed as duplicative ofthe breach of contract claim, and it is clear that plaintiffs allege a breach of duty independent ofthe contract itself. Specifically, plaintiffs maintain that defendants' failure to exercise due care isshown, inter alia, by their failure to include in the binder a reference to the tie-in provision and[*2]to timely review the draft policy and alert plaintiffs to thepotential for a reduction in the limits of liability. Thus, the first cause of action for negligenceshould be reinstated.
The third and fourth causes of action for breach of the duty of loyalty and breach of fiduciaryduty were properly dismissed. What is involved here is a dispute between insureds and theirbroker over whether the broker failed to obtain coverage requested and whether the broker isliable for damages as a result of that failure. "[T]he law is reasonably settled . . .that insurance agents have a common-law duty to obtain requested coverage for their clientswithin a reasonable time or inform the client of the inability to do so; however, they have nocontinuing duty to advise, guide or direct a client to obtain additional coverage" (Murphy vKuhn, 90 NY2d 266, 270 [1997]). Thus, absent a special relationship, a claim for breach offiduciary duty does not lie (see e.g.People v Liberty Mut. Ins. Co., 52 AD3d 378, 380 [2008]; Sutton Park Dev. Corp.Trading Co. v Guerin & Guerin Agency, 297 AD2d 430, 431-432 [2002]). Punitive damagesare not available, since they are not recoverable for an ordinary breach of contract (Rocanovav Equitable Life Assur. Socy. of U.S., 83 NY2d 603, 613 [1994]) or for ordinary negligence(Munoz v Puretz, 301 AD2d 382, 384 [2003]). Concur—Catterson, Renwick andRichter, JJ.
Tom, J.P., and Nardelli, J., dissent in part in a memorandum by Nardelli, J., as follows: Iagree with the majority that the cause of action for breach of contract should be reinstated andthat the causes of action for breach of the duty of loyalty and breach of fiduciary duty should not.I respectfully dissent, however, from the majority's determination to reinstate the first cause ofaction for negligence, which I view as duplicative of the cause of action for breach of contract.
I recognize, as the majority observes, that an aggrieved client can proceed against a broker innegligence or contract. I do not believe, however, that, in the circumstances presented, plaintiffscan proceed simultaneously under both contract and negligence. "It is a well-establishedprinciple that a simple breach of contract is not to be considered a tort unless a legal dutyindependent of the contract itself has been violated" (Clark-Fitzpatrick, Inc. v Long Is. R.R.Co., 70 NY2d 382, 389 [1987]). "This legal duty must spring from circumstances extraneousto, and not constituting elements of, the contract" (Teller v Bill Hayes, Ltd., 213 AD2d141, 144 [1995], lv dismissed in part and denied in part 87 NY2d 937 [1996]).
The majority concludes that the failure to include in the binder a reference to the tie-inprovision, or to conduct a review of the insurance policy issued, constitutes the breach of dutiesindependent of the original contract to obtain insurance. I submit, respectfully, that these claimsof negligence duplicate the contractual claims. Defendant brokers were retained to obtainspecified insurance, and apparently failed to do so. That the appropriate coverage was notobtained because defendants failed to read the terms of the policy which was procured isirrelevant—plaintiffs did not get the coverage requested. The proof that defendantsbreached the contract to procure specific coverage will track the proof that they were negligentin performing their duties to procure that coverage.
Thus, since plaintiffs can be made whole by proof that defendants breached their contract[*3]to obtain the requisite insurance, I believe that only thesecond cause of action need, or should be, reinstated. [See 2008 NY Slip Op 33410(U).]