From insurance coverage brokers and wholesalers to threat consultants and policyholders, there are various events concerned in industrial insurance coverage transactions. Whereas every has an essential half to play, the policyholder-agent relationship is especially essential to make sure either side perceive their respective roles and obligations when an agent assists in acquiring protection.
The Second Circuit Court docket of Appeals lately supplied essential steerage below New York legislation concerning the scope of an insurance coverage agent’s tasks, significantly when an agent, at a policyholder’s request, expressly takes on duties past merely procuring protection. The choice underscores that an agent’s obligations can prolong past customary procurement duties by categorical settlement, although the result may differ below the legislation of one other jurisdiction.
The Second Circuit Finds That an Agent’s Fundamental Duties Can Be Expanded
In Paro Administration Inc. and J&N Realty Associates LLC v. Willis of New Jersey, No. 25-872-CV, (second Cir. Nov. 5, 2025), former tenants introduced a lawsuit in opposition to a property proprietor and supervisor alleging lead-paint publicity. The policyholder alleged that it instructed its insurance coverage agent to inform a legal responsibility insurer of the lead-paint lawsuit and that the agent expressly agreed to take action however didn’t observe by. The insurer denied protection primarily based on premature discover.
The policyholder sued its agent in New York federal court docket for negligence and negligent misrepresentation. The district court docket dismissed the grievance as unripe and, alternatively, for failing to state a declare in opposition to the agent. However the Second Circuit reversed the dismissal of the negligence declare, offering essential steerage on an agent’s duties to a policyholder.
The Second Circuit reaffirmed that below New York legislation, like many different states, insurance coverage brokers usually owe a restricted “order-taker” responsibility to acquire the insurance coverage protection requested by the insured. An agent, the court docket defined, “usually owes the insured not more than the common-law responsibility to acquire the insurance coverage protection that the insured requests.” In observe, which means an agent’s duty to the policyholder usually begins and ends with acquiring the protection that the policyholder instructs it to acquire.
The court docket, nonetheless, defined that an agent’s primary duties can increase primarily based on the circumstances, together with the place the policyholder requests a selected process and the agent expressly agrees to carry out that process. As a result of the policyholder alleged that it instructed the agent to supply a lead-paint discover to the insurer, and the agent agreed, the court docket held that the allegations have been ample to state a declare for negligence.
In doing so, the court docket rejected the agent’s argument that the policyholder needed to allege a “routine course of enterprise.” Even a one-time settlement can create an enforceable responsibility; an agent needn’t often carry out the duty to be held accountable when it expressly agreed to take action.
Key Takeaways
Insurance coverage brokers’ duties may be expanded past merely procuring protection requested by a policyholder. When a policyholder requests that the agent carry out a selected process, comparable to notifying an insurer of a declare, and the agent expressly agrees, the agent could also be held to an obligation of affordable care in performing the duty.
Setting clear expectations and sustaining ongoing communication and documentation are crucial, as further tasks may be created by a one-time request the place the agent expressly acquiesces. These complexities are compounded as a result of the reply as to if an agent acted appropriately below a specific set of information can range materially throughout jurisdictions. Being proactive and consulting with skilled authorized counsel when obligatory may help navigate these points and keep away from mismatched expectations or obligations that may result in future disputes.