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Court Rules That The Failure To Read An Insurance Policy Does Not Bar A Claim For Failure To Obtain Insurance

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  • Posted on: Jul 26 2017

No one likes to read fine print or lengthy agreements. Anyone buying insurance, for example, knows this to be so. In fact, a 2016 car insurance TV commercial by Liberty Mutual highlights this point. In the ad, the actress talks about an insurance policy that is over 20 pages long that no one reads, except for lawyers. The question becomes, then, does a failure to read an insurance policy bar a claim against an insurance company or broker for failing to obtain insurance believed to be in the policy? Justice Knipel of the Kings County, Commercial Division, found that it does not. In 386 3rd Ave. Partners Ltd. Partnership v. Alliance Brokerage Corp., 2017 NY Slip Op. 31484(U), the Court held that an insured’s failure to read an insurance policy was an insufficient basis to dismiss the insured’s claim against a broker for failure to obtain adequate insurance.

The Applicable Law

An insurance agent has a duty to provide requested coverage within a reasonable time or advise of its inability to do so, and may be held liable for negligence when a client establishes that a specific request was made for coverage that was not provided in the policy. See, e.g., Murphy v. Kuhn, 90 N.Y.2d 266, 270 (1997); Am. Bldg. Supply Corp. v. Petrocelli Group, Inc., 19 N.Y.3d 730, 735 (2012).

Background of the Action


The action arose from flood damage to the plaintiffs’ three Brooklyn, New York properties (the “Brooklyn Properties”) caused by Super Storm Sandy in October 2012 (the “Loss”).  Following the Loss, the plaintiffs (a group of associated partnerships, corporations, limited liability companies, and one individual), submitted insurance claims to their property carrier, Travelers Excess and Surplus Lines Company (“Travelers”). Travelers denied coverage for the Loss on the grounds that the properties were located in National Flood Insurance Program-designated flood zones excluded by the policy. The plaintiffs alleged that their insurance broker, defendant Alliance Brokerage Corp. (“Alliance”), negligently failed to obtain flood coverage for the properties despite a specific request to do so prior to the Loss.

Relevant Facts

Since 2002, the plaintiffs procured various lines of property and business insurance coverage for the Brooklyn Properties through Alliance. These policies included commercial general liability, property coverage, loss of rental income, boiler and machinery coverage, and excess umbrella coverage.

Prior to 2011, the plaintiffs instructed Alliance to obtain quotes regarding flood coverage. After reviewing the quotes, the plaintiffs instructed Alliance to obtain flood coverage for, inter alia, the Brooklyn Properties. The additional insurance coverage for risk of flood damage to, inter alia, the Brooklyn Properties was added to the Travelers policy. Pursuant to its express terms, however, the Travelers policy insured the plaintiffs for flood damage only with respect to the properties that were not located within one or more of the specified flood zones (the zone-based exclusion). Because each of the Brooklyn Properties was located within one or more of the specified flood zones, the Travelers policy did not insure any of those properties for flood damage. Thereafter, the plaintiffs annually renewed the Travelers policy without changing their flood coverage for the Brooklyn Properties.

Following Hurricane Irene in August 2011, the plaintiffs requested that Alliance advise them in writing “if any of the[ir] Brooklyn commercial properties have the flood coverage.” Alliance responded, in relevant part, that “[a]ll of the commercial properties have . . . a $1 million limit for flood.…” In making the request, the plaintiffs did not read the policy. The following year, the plaintiffs again renewed the Travelers policy without changing their flood coverage for the Brooklyn Properties. When the flood from Hurricane Sandy damaged each of those properties, Travelers denied the plaintiffs flood coverage, citing the zone-based exclusion in its policy.

In January 2014, the plaintiffs filed suit against Alliance. Their complaint asserted tort claims sounding in negligence, breach of fiduciary duty, and misrepresentation. After discovery was completed and a note of issue was filed, the parties filed motions for summary judgment.

The Court’s Decision

The Court denied the motions. In doing so, the Court found that there were issues of fact requiring the following determinations:

(1) whether plaintiffs requested from defendant specific coverage for flood damage to their commercial properties, including the subject properties, and whether defendant failed to obtain an insurance policy as requested; (2) whether an alternative flood insurance policy for the subject properties was available from the FEMA; and (3) whether plaintiffs’ reliance on defendant’s unqualified representation in its Oct. 2011 email that all of their Brooklyn commercial properties had flood coverage was justified.

As to the third issue, the Court held that the plaintiffs’ admitted failure to read the “Travelers policy [was] not a superseding cause precluding [the] defendant’s liability as a matter of law.” The Court noted that under New York law, “‘[i]n the absence of any showing that an insured is aware of the discrepancy between the coverage it claims to have requested and that actually obtained by the insurance [broker], an insured has a right to rely upon the [broker’s] presumed obedience to his or her instructions.’” (Quoting Mets Donuts, Inc. v. Dairyland Ins. Co., 166 A.D.2d 508, 509 (2d Dept. 1990).


As noted in the introduction to this post, the average person does not read fine print or lengthy agreements, including insurance policies. If a person has a coverage question, it is more likely than not s/he would contact his/her insurance company or broker to confirm the scope of the coverage and/or request that coverage be made. 386 3rd Ave. Partners teaches that insurance companies and/or insurance brokers cannot escape liability as a matter of law by pointing to a densely worded, multi-page insurance policy that does not expressly state if the insured is covered. This is especially so when the insured makes a specific request for coverage and receives a response from his/her carrier. As Alliance learned, an insured has the right to reasonably rely on “the expertise of its broker with respect to insurance matters.” Am. Bldg. Supply Corp., 19 N.Y.3d at 736.

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