7 N.Y.3d 152 (2006)
An insurance broker has a duty to either obtain the coverage a customer specifically requests or inform the customer of the inability to do so; a general request for coverage is insufficient to trigger this duty, and a “special relationship” requires more than an ordinary broker-client relationship involving payment of premiums.
Summary
Hoffend & Sons sued its insurance broker, Rose & Kiernan (R&K), alleging failure to obtain a policy covering property damage to a foreign construction project. Hoffend argued they made a specific request for such coverage and had a special relationship with R&K, imposing a continuing duty to advise. The New York Court of Appeals held that Hoffend failed to demonstrate a specific request for the needed coverage or a special relationship with R&K. Thus, the broker had no duty to obtain the insurance, and the dismissal of the complaint was affirmed.
Facts
Hoffend, a theater stage design and construction firm, used R&K as its insurance broker. R&K provided a proposal including a Travelers builders’ risk policy for domestic projects and a Great Northern policy for foreign projects, covering general liability, auto coverage, and workers’ compensation, but not foreign property damage. R&K informed Hoffend that foreign projects required project-by-project discussion. Hoffend contracted with an Argentine firm for a project in Argentina. A Hoffend principal claimed he discussed the project with R&K and indicated it should be “covered.” The contract with the Argentine firm required Hoffend to obtain insurance for labor-related accidents. During the project, a lighting bridge collapsed, causing property damage that was not covered by either policy.
Procedural History
Hoffend sued R&K, alleging failure to acquire the requested coverage. The Appellate Division found factual questions regarding the specific request and special relationship but dismissed the complaint because Hoffend received the policy and was charged with knowledge of its contents. Hoffend appealed to the New York Court of Appeals.
Issue(s)
1. Whether Hoffend made a specific request to R&K for insurance coverage for property damage on its foreign construction project in Argentina?
2. Whether Hoffend had a special relationship with R&K that created a continuing duty for R&K to advise and procure additional insurance coverage for Hoffend?
Holding
1. No, because Hoffend’s recollection of events was vague and did not establish a specific request for coverage of the particular risk involved.
2. No, because the services provided by R&K did not rise to the level of a special relationship; Hoffend did not compensate R&K for insurance advice apart from premiums, nor did it delegate insurance decision-making.
Court’s Reasoning
The Court of Appeals stated that an insurance broker has a common-law duty either to obtain the coverage that a customer specifically requests or to inform the customer of an inability to do so. Citing Murphy v Kuhn, 90 NY2d 266 (1997), the court emphasized that a general request for coverage will not satisfy the requirement of a specific request for a certain type of coverage. Donald Hoffend’s vague recollection that “we are covered” was insufficient to impose liability on R&K. Ruth Abate’s letter stating the relevant policy would “cover [Hoffend’s] U.S. projects only” and foreign coverage remained open for discussion undermined Hoffend’s claim. The court found no special relationship existed, emphasizing Hoffend was a sophisticated commercial entity, and did not compensate R&K for advice beyond premiums. The court distinguished a special relationship from an ordinary broker-client relationship: “Hoffend told R & K in general what insurance Hoffend had decided to purchase. It did not ask R & K what that insurance should be.” The court found that because there was neither a specific request nor special relationship it did not need to determine whether Hoffend’s receipt and opportunity to read the policy barred recovery. The order of the Appellate Division was affirmed.