Mealey's Litigation Report: Insurance Broker Liability
“New York Court Of Appeals Resolves Split In Authority And Clarifies Insured’s Ability To Claim Broker Negligence”
In American Building Supply Corp. v. Petrocelli Group, Inc., New York's highest court resolved a split in authority concerning whether an insured is barred from suing its insurance broker for negligently procuring an inadequate policy when the insured accepted the policy without reviewing the terms or conditions that are later claimed to be objectionable. Rejecting the argument that the insured's failure to review the policy should bar the insured's claim against the insurance broker, and over a dissenting opinion, the majority held that although the insured's failure to review the policy could support a comparative negligence defense by the insurance broker, such a failure was not an absolute bar against the insured bringing a claim against its broker.
This article reviews the history of American Building Supply, the competing visions articulated in the majority and dissenting opinions, how the new rule aligns with other jurisdictions, and the potential implications of the decision for insurance brokers.