Alpha/Omega Concrete Corp. v Ovation Risk Planners, Inc. 2021 NY Slip Op 05113 Decided on September 29, 2021 Appellate Division, Second Department is a textbook of causes of actions in insurance law and negligent underwiring.
“In July 2015, Alpha/Omega Building Consulting Corp. (hereinafter Consulting) was awarded a contract to perform concrete work on a construction project involving a residential high-rise apartment building being constructed in Long Island City. Before beginning work on the project, Consulting, via its principal, Anthony Frascone, contacted the second third-party defendant Michael Villano, the principal of the defendant/third-party plaintiff/second third-party defendant, Ovation Risk Planners, Inc., a retail insurance broker (hereinafter Ovation; together with Villano, the Ovation defendants), to obtain liability insurance for Consulting with respect to its work on the subject project. Villano, on behalf of Consulting, submitted a commercial insurance application to the defendant/third-party defendant/second third-party plaintiff, Scottish American Insurance General Agency, Inc. (hereinafter Scottish American), a wholesale insurance broker, which transmitted the application to nonparty Prime Specialty, Inc. (hereinafter Prime), for underwriting. Prime, in turn, placed the commercial general liability policy with the defendant State National Insurance Company (hereinafter SNIC), an insurance carrier. To pay for the policy, Consulting obtained a loan from nonparty Capital Premium Financing, Inc. (hereinafter CPF). The policy was to remain in effect from July 13, 2015, until the earlier of July 13, 2017, or the end of the project.”
“In general, “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” (AB Oil Servs., Ltd. v TCE Ins. Servs., Inc., 188 AD3d 624, 626 [internal quotation marks omitted]; see Murphy v Kuhn, 90 NY2d 266, 270; MAAD Constr., Inc. v Cavallino Risk Mgt., Inc., 178 AD3d 816, 818). The scope of the broker’s duty is “‘defined by the nature of the client’s request'” (Maxwell Plumb Mech. Corp. v Nationwide Prop. & Cas. Ins. Co., 116 AD3d 740, 741, quoting Loevner v Sullivan & Strauss Agency, Inc., 35 AD3d 392, 393). A claim of liability for a violation of this duty may sound in either contract or tort (see Broecker v Conklin Prop., LLC, 189 AD3d 751, 753; Gagliardi v Preferred Mut. Ins. Co., 102 AD3d 741, 741). To state a claim based upon violation of the insurance broker’s common-law duty, the client must demonstrate that the broker failed to discharge its duty either by breaching the agreement with the client by failing to obtain the requested coverage or by failing to exercise due care in obtaining insurance on the client’s behalf (see MAAD Constr., Inc. v Cavallino Risk Mgt., Inc., 178 AD3d at 818; Gagliardi v Preferred Mut. Ins. Co., 102 AD3d at 741).
Here, the Ovation defendants failed to establish, prima facie, that Ovation did not breach its common-law or contractual duty to Concrete. Even assuming that Campbell requested that Concrete be added to the existing policy, as the Ovation defendants argue, the deposition testimony submitted by the Ovation defendants in support of their motion demonstrated that Ovation agreed to obtain insurance for Concrete and then represented that it had done so without verifying this fact. In light of this evidence, the Ovation defendants failed to establish, prima facie, the absence of a triable issue of fact as to whether Ovation undertook a duty to Concrete which it then failed to discharge.
Whether Campbell had apparent authority to act on behalf of Consulting to request that Concrete be added to Consulting’s policy or requested a new policy for Concrete presents a triable issue of fact. However, it is a separate issue as to whether Ovation failed to verify that coverage on behalf of Concrete was in place before advising Campbell that it was. Moreover, the statement of Consulting’s principal that Campbell was “running the men, the job” for Consulting cannot be characterized as words which “[gave] rise to the appearance and belief that [Campbell] possesse[d] authority to enter into a transaction” on behalf of Consulting (Marshall v Marshall, 73 AD3d 870, 871 [internal quotation marks omitted]; see 150 Beach 120th St., Inc. v Washington Brooklyn Ltd. Partnership, 39 AD3d 722, 723). Likewise, Villano could not rely on Campbell’s own actions or statements since an agent “cannot by his [or her] own acts imbue himself [or herself] with apparent authority” (Marshall v Marshall, 73 AD3d at 871 [internal quotation marks omitted]; see 150 Beach 120th St., Inc. v Washington Brooklyn Ltd. Partnership, 39 AD3d at 723; Lexow & Jenkins v Hertz Commercial Leasing Corp., 122 AD2d 25, 26). Villano admitted that he never contacted Consulting’s principal to obtain authorization to add Concrete to Consulting’s policy or to confirm whether Campbell had authority to act on behalf of Consulting. Accordingly, the Supreme Court properly denied that branch of the Ovation defendants’ motion which was for summary judgment dismissing Concrete’s first cause of action, alleging breach of contract, regardless of the sufficiency of the opposing papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).”