Ken Finch Jr., is a self-employed logger who is also engaged inthe business of putting on rodeos.

In connection with this business, Finch owns bulls and otheranimals, as well as trucks and trailers. Back around 2006, Finchbegan obtaining insurance from defendant Steve Cardell Agency, aNew York insurance agency of which Steven I. Cardell is president.Finch obtained liability insurance for rodeos by contacting Cardellbefore each show. Cardell would then procure coverage for the eventand provide Finch with an insurance certificate.

In August 2012, Finch contacted Cardell to obtain coverage foran upcoming rodeo in Pennsylvania. The transaction was handled byan office assistant. The carrier that had previously providedFinch's rodeo insurance declined to cover the event (apparentlybecause of its location in Pennsylvania), and the assistant insteadfound what she believed to be equivalent coverage issued by adifferent carrier, Atlantic Casualty Insurance Co.

At the conclusion of the Pennsylvania rodeo, four bulls escapedfrom a group that was being moved from a holding pen through asystem of gates immediately prior to loading into Finch's trailer.Several bystanders were injured before the animals were recaptured,and lawsuits were filed against Cardell as a result. When Finchadvised the defendant of the incident, Cardell reviewed theAtlantic Casualty policy and discovered that it contained anexclusion for injuries or damage caused by animals. Thereafter,Atlantic Casualty declined coverage, relying on the animalexclusion and also on a policy exclusion for losses arising out ofthe use of an “auto” (the auto exclusion), which the policy definedto include loading and unloading operations.

Finch commenced this insurance malpractice action inFinch v. Steve Cardell Agency, allegingthat Cardell was negligent in procuring a rodeo insurance policywith an animal exclusion.

Case analysis

The Supreme Court of New York determined that Cardell'spotential negligence was not the proximate cause of Finch's loss,as his claim would have been denied based upon the auto exclusion.Finch had alleged that Cardell negligently failed to advise him ofthe “gap in coverage” created by the auto exclusion, and that thisfailure resulted in his lack of coverage.

Although an insurance agent's common-law duty to his or herclients does not include a continuing duty to advise the clients onappropriate coverage or to recommend additional coverage that theclients did not request, an agent may be liable for failing toprovide appropriate advice in circumstances in which there is a“special relationship.” As pertinent here, such a relationship mayarise when there is a course of dealing over an extended period oftime.

Finch testified that he had purchased his business and personalinsurance from Cardell for at least six years, that he knew littleabout insurance and that he relied upon Cardell to obtain theappropriate coverage for his rodeo operations. He stated that hehad never seen any of the rodeo insurance policies that Cardellprocured on his behalf, that insurance certificates were the onlydocuments ever provided to him, and that “with [Cardell] being myagent for years, I took that as he was representing me and makingsure that I was covered.”

Nothing in Cardell's testimony contradicted Finch's allegationsthat he relied upon defendant to procure adequate coverage, or thatdefendant had not advised him of any need for additional protectionbecause of the auto exclusion.

The evidence raised triable issues of fact as to whether theplaintiff and defendant had a special relationship and, if so,whether the defendant proximately caused Finch's loss bynegligently failing to advise and guide him in obtaining adequateinsurance coverage for all aspects of his rodeo operations,including his trailers. Therefore, Cardell's cross motion forsummary judgment dismissing the complaint should not have beengranted.

Barry Zalma, Esq., CFE, is a California attorney, insuranceconsultant and expert witness specializing in insurance coverage,claims handling, bad faith and fraud. Contact himat [email protected].

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