E&O Report | Recent decision of interest
E&O Report | September 2026 | Volume 41, Number 9
As the summer closes I sincerely hope it was enjoyable and relaxing, at least in part, to you and your families.
It is somewhat odd that any decisions should be issued by the Courts during the summer recess. But there were and more to the point, several concerned insurance Brokers and their duties to their Customers. This month’s article will report on one significant Appellate Decision.
THE ADAMS CASE
A. Basic Facts And Posture
In Adams v Blodgett v The Cesar Group 2026 NY Slip Op 04684 (4th Dept. 2026), the Appellate Court for Fourth Department[1] addressed a Third-Party action by an Insured against their Broker for failing to procure insurance for their optical business and the property. The policy received and purchased by Marcey, and subsequently renewed in several forms, named the optical business as an insured but did not name Blodgett, as owner of the property, as an insured.
Plaintiff commenced the primary action against Blodgett, among others, alleging that she fell in the parking lot on the property and sustained injuries after leaving an appointment with a chiropractor who also operated out of the duplex building on the property.
Following a claim investigation, the insurance company ultimately denied coverage to Blodgett on the ground that he was not named as an insured under the policy then in effect.
Blodgett commenced a third-party action against Cesar, alleging in a single cause of action that Cesar was negligent in failing to procure insurance coverage on the property naming Blodgett as an insured in light of Blodgett’s specific request for that coverage and in breaching its continuing duty to advise, guide, and direct Blodgett to obtain proper or additional coverage in light of Blodgett’s Special Relationship with Cesar.
B. Summary Judgment Motions[2]
The Trial Court (Supreme Court in New York parlance) denied Cesar’s motion for summary judgment seeking to dismiss the third-party complaint. It also denied Blodgett’s summary judgment against Ceasar. That meant that the Failure to Procure case had to go to a jury trial. The Appellate Court affirmed.
C. Some Legal Background
Begin with this. The ONLY claim (legal cause of action), against the Broker-Cesar was for Negligence. Not Breach of Contract and not Negligent Misrepresentation. Negligence has certain foundational elements called “prima facie elements” which all must exist for the claim to be legally recognizable to sue on. They are (i) Duty, (ii) Breach of Duty (iii) Causation and (iv) Damages. But each has Sub-Elements. In order to have a Duty, you need to have a legal relationship with the person suing you. That is called Privity. Lack of Privity prevents the creation of a duty. That is why an Insured cannot sue the Wholesale Broker since they do not deal with them, they deal with the Retail Broker.
Also, for a Duty to be created, there has to be a Specific Request for coverage – for the thing at issue in the lawsuit. Requests for “Full” or “the Best” coverage do not create a duty.
But certain circumstances based on the relationship and dealings between the Broker and its Customer may create duties not otherwise imposed by law. This is called a Special Relationship but it is not properly understood by lawyers or judges as it is limited to Negligent Misrepresentation claims.
D. The Analysis of the Court
1. Privity
Cesar contended on its appeal that it owed no duty to Blodgett as a matter of law because Blodgett was a non-client with whom Cesar was not in privity. The Court first found that there was “privity” although the factual recitation is muddled. The court held that Blodgett was a longstanding client of Cesar and procured insurance for another business and property prior to his acquisition of the property at issue here. Blodgett testified that he directly contacted the broker again to secure insurance for both the optical business and the property. “It is undisputed that Blodgett arranged the meeting between the broker and Marcey, who was in charge of obtaining insurance for the optical business that was jointly owned by Blodgett and Marcey, and that the broker ultimately procured an insurance policy as a result of those communications. The evidence thus indisputably establishes that Blodgett was a client of Cesar”, the court found.
2. Specific Request
The Court found this to be a question of fact for the Jury to determine saying:
“In light of the conflicting testimony as to whether Blodgett and Marcey informed the broker that Blodgett separately owned the property and thus needed coverage under the requested insurance policy, we conclude that “issues of fact exist as to whether [Blodgett] specifically requested coverage [in his individual capacity as owner of the property] in case of accidental injury and [whether Cesar], being aware of such request, failed to procure the requested coverage.”
3. The Duty to Read
Citing American Bldg. Supply Corp. v Petrocelli Group, Inc., 19 NY3d 730, 735 (2012), the Court held that despite the fact that the Insured had the Policy and thus the Duty to Read applied, based on this decision the Duty to Read is no longer an absolute bar to a Negligence claim. Now it is merely a factor to be considered in assessing COMPARATIVE Negligence between the Insured and the Broker.
Please note that to this day, we are unaware of any decision by a jury that actually calculated the percentage of fault to an Insured who had the policy prior to an uninsured loss. Nor do we know what factors a judge will charge a jury to consider with the apportionment of fault.
A final note is this. The Duty to Read is STILL AN ABSOLUTE bar to any other claim against a Broker. Comparative negligence is a concept that is limited, (hence its name) to Negligence causes of action. There is no such thing as “Comparative Breach of Contract” or Comparative Negligent Misrepresentation”.
4. Special Relationship
This is where the court got it completely wrong. The court said:
“Contrary to Cesar’s further contention on its appeal, we agree with Blodgett that there are triable issues of fact with respect to his other theory of liability against Cesar, i.e., that Cesar had an ongoing duty to advise and direct Blodgett to obtain additional coverage even in the absence of a specific request. Even assuming, arguendo, that Cesar met its initial burden with respect to that issue, upon viewing the evidence in the light most favorable to Blodgett as the nonmoving party on Cesar’s motion for summary judgment, we conclude that there are “material issue[s] of fact as to the existence of a special relationship” (Voss, 22 NY3d at 735). In particular, the evidence suggests that there was some interaction between Blodgett and Marcey and the broker regarding the question of insuring Blodgett as owner of the property on the policy, and thereafter Blodgett and Marcey relied upon the broker’s expertise as an agent of Cesar to effect the same.”
(Emphasis added)
Basically the Court is allowing a Special Relationship to be part of the trial of a Negligence Claim. That is 100% incorrect but something that we —you— face all the time that creates real problems as to E&O exposure.
A Special Relationship is a status, in fact it is a recognized prima facie element of a Negligent Misrepresentation claim but it is NOT an element of a Negligence claim. While there are hundreds of cases that list a Special Relationship as a prima facie element, there is not a single case that says it is part of a Negligence claim. Yet courts still apply that concept to Negligence.
What is frustrating is that the famous case of Murphy v Kuhn, 90 NY2d 266, 270 (1997) that created the limited duty on a broker to its client and the case that first mentioned the Special Relationship concept was NOT ABOUT NEGLIGENCE. It was about a Duty to Affirmatively advise which the High Court said was limited to a Negligent Misrepresentation Cause of Action.
Then there is also the troubling and incorrect parroting of the word “expertise” which was an incorrect and poor choice of words the Murphy court used. Brokers are not “experts” by any accepted definition of the term under New York law. Do they have superior knowledge compared to their customers. Yes. But that is a far cry from being a legally sufficient “expert”.
CONCLUSION
The reason we are so adamant about Best E&O Practices over the years is that (1) even a good decision, (correct on the law), often gets a lot wrong in this niche area of Broker/Agent E&O law and (2) with each new WRONG legal pronouncement, it gets hard and harder to undo the ever increasing Bad Law. Help yourself and your industry with good E&O practices. And, as always, when in doubt….contact the BIG I or me directly. We are here to help.
Submitted by:
Howard S. Kronberg, Esq.
Kaufman Dolowich, LLP
[1] New York has 4 appellate Departments. The 4th Dept. covers 22 counties across Central and Western New York and is more conservative in its decision than the downstate appellate courts. https://www.nycourts.gov/courts/ad4/Court/overview.html
[2] Summary Judgment motions are filed AFTER all paper discovery is exchanged and after all depositions are completed. They are based on the idea that there are NO FACTS IN DISPUTE and therefore all that needs to be done is apply the law to the facts, which is the province of the Judge ONLY. If there are facts and credibility issues to be resolved, then ONLY a jury can do that, and hence the Summary Judgment motion must be denied in favor of a Jury Trial.
Topics
Header
Info
QUESTIONS?
Header
Body copy
- Example 1
- Example 2
- Example 3