New York and most states recognize policy reasons for the narrow view of an insurance broker's duty to its client. Brokers are not insurers and earn not premium income, but commissions for connecting insurers and insureds.

The highest court in New York was asked to resolve an insurance dispute that arose from property damage and the consequent business interruption the plaintiff-insureds sustained from water damage that occurred after three separate roof breaches.

The plaintiff, Deborah Voss, began the relationship with CH Insurance Brokerage Services Co. (CHI) in 2004. The plaintiff operated two modeling agencies in Liverpool. Voss met with a representative of CHI, Joe Convertino, Jr., to discuss insurance coverage for the premises and her two companies.

Convertino recommended a comprehensive policy with defendant The Netherlands Insurance Co. that afforded $75,000 per incident in coverage for business interruption losses. When Voss questioned whether the limit was adequate, Convertino allegedly assured her it would suffice based on the condition of the building and the size of her businesses. Voss said Convertino also averred that he calculated the level of coverage at a threshold level and reemphasized that, each year, CHI “would take it up as the business evolved.”

Voss later purchased a new two-story building with more than twice the square footage of the previous location. After she discussed the move with Convertino, CHI renewed the Netherlands policy with the same $75,000 business interruption limit for the new location.

In 2007, Voss discovered multiple leaks in the roof with dripping water. The damage disrupted her business and a roofing contractor, defendant D.R. Casey Construction Corp., was retained to replace the roof. The following month the new roof failed, with more extensive water damage to both floors.

Netherlands treated these two roof breaches as separate occurrences under the business interruption policy (for a maximum potential of $150,000 in coverage) but, according to Voss, delayed payments. She recouped $3,197 for the first loss and $30,000 for the second. In February 2008, the roof failed a third time.

Voss alleged a special relationship with CHI, which had negligently secured inadequate levels of business interruption insurance for all three losses. The court granted CHI's motion for summary judgment and dismissed the complaint; the Appellate Division affirmed. The majority disagreed with the trial court on the special relationship issue. The high court noted that special relationships in the insurance brokerage context are not the norm and that it remains to be determined whether a special relationship existed here. The appellate court order was reversed, with costs, and the broker's motion for summary judgment denied.

The issues raised in this case have not been resolved. The parties must now try the case before a judge or jury. If they find that a special relationship existed and the broker failed to obtain adequate business interruption insurance, they will render a judgment in favor of the plaintiff. If not, the case will be dismissed.

Policy Reduction

While dealing with the roofing issues, Voss met with CHI representative Carrie Allen to discuss renewing the Netherlands policy. When Voss received a proposal indicating the business interruption coverage would be reduced from $75,000 to $30,000, Allen said she “would take a look at it.” Voss did not follow up, however, because she was preoccupied with the building's extensive property damage. When the Netherlands policy was renewed in April 2007, it reflected a per-occurrence limit of $30,000 in business interruption coverage.