Special Relationship Needed to Hold Insurance Agent For Negligence

Trier of Fact Must Establish Existence of Special Relationship

An insurance agent, typically, need only provide the insurance ordered by the customer unless there is a special relationship between the client and the insurance agent. The determination of the existence of a special relationship is a factual issue that is difficult to prove as a matter of law.

In Finch v. Steve Cardell Agency, — N.Y.S.3d —-,  2016 N.Y. Slip Op. 01231,  2016 WL 634597 Supreme Court, Appellate Division, Third Department, New York (Feb. 18, 2016) the trial court (Supreme Court in New York) found for the agent and the insured appealed.


Plaintiff is a self-employed logger who is also engaged in the business of putting on rodeos. In connection with this business, plaintiff owns bulls and other animals, as well as trucks and trailers. In approximately 2006, plaintiff began obtaining insurance from defendant Steve Cardell Agency, a New York insurance agency of which Steven I. Cardell is president. Plaintiff obtained liability insurance for rodeos by contacting defendant before each show. Defendant would then procure coverage for the event and provide plaintiff with an insurance certificate.

In August 2012, plaintiff contacted defendant to obtain coverage for an upcoming rodeo in Pennsylvania. The transaction was handled by an office assistant. The carrier that had previously provided plaintiff’s rodeo insurance declined to cover the event, apparently due to its location in Pennsylvania, and the assistant instead found what she believed to be equivalent coverage issued by a different carrier, Atlantic Casualty Insurance Company (hereinafter ACIC).

At the conclusion of the Pennsylvania rodeo, four bulls escaped from a group that was being moved from a holding pen through a system of gates immediately prior to loading into plaintiff’s trailer. Several bystanders were injured before the animals were recaptured, and lawsuits were filed against plaintiff as a result. When plaintiff advised defendant of the incident, Cardell reviewed the ACIC policy and discovered that it contained an exclusion for injuries or damage caused by animals. Thereafter, ACIC declined coverage, relying on the animal exclusion and also on a policy exclusion for losses arising out of the use of an “auto” (hereinafter the auto exclusion), which the policy defined to include loading and unloading operations.

Plaintiff commenced this insurance malpractice action alleging that defendant was negligent in procuring a rodeo insurance policy with an animal exclusion.


An insurance agent has a common-law duty to provide requested coverage within a reasonable time and may be held liable for negligence or breach of contract when a client establishes that a specific request was made for coverage that was not provided in the policy. A breach of this duty will give rise to liability if it is shown to be the proximate cause of a client’s loss. The Supreme Court determined that defendant’s potential negligence was not the proximate cause of plaintiff’s loss, as plaintiff’s claim would have been denied, in any event, based upon the auto exclusion. Plaintiff had alleged that defendant negligently failed to advise him of the “gap in coverage” created by the auto exclusion, and that this failure resulted in his lack of coverage.

Although an insurance agent’s common-law duty to his or her clients does not include a continuing duty to advise the clients on appropriate coverage or to recommend additional coverage that the clients did not request, an agent may be liable for failing to provide appropriate advice in circumstances where there is a special relationship. As pertinent here, such a relationship may arise when there is a course of dealing over an extended period of time which would have put objectively reasonable insurance agents on notice that their advice was being sought and that the insured relied on that advice.

The question whether a special relationship exists between an insurance agent and a client giving rise to a duty to guide and advise the client is a factual determination that is governed by the particular relationship between the parties and is best determined on a case-by-case basis.

Plaintiff testified that he had purchased his business and personal insurance from defendant for at least six years, that he knew little about insurance and that he relied upon defendant to obtain the appropriate coverage for his rodeo operations. He stated that he had never seen any of the rodeo insurance policies that defendant procured on his behalf, that insurance certificates were the only documents ever provided to him, and that “with [Cardell] being my agent for years, I took that as he was representing me and making sure that I was covered.”

Cardell testified that defendant had been providing plaintiff with homeowners’ insurance, private automobile insurance and commercial truck insurance since 2006 and had been procuring general liability insurance coverage for plaintiff’s rodeo operations for several years before the Pennsylvania incident. He testified that after the previous carrier declined coverage, the general marketing agency that defendant worked with offered the ACIC policy as a substitute. Importantly, nothing in Cardell’s testimony contradicted plaintiff’s allegations that he relied upon defendant to procure adequate coverage, or that defendant had not advised him of any need for additional protection because of the auto exclusion.

The evidence raises triable issues of fact as to whether plaintiff and defendant had a special relationship and, if so, whether defendant proximately caused plaintiff’s loss by negligently failing to advise and guide him in obtaining adequate insurance coverage for all aspects of his rodeo operations, including his trailers. Therefore, defendant’s cross motion for summary judgment dismissing the complaint should not have been granted.


Insurance agents and brokers can, by silence over a period of time, establish the special relationship that can hold the agent or broker responsible for obtaining appropriate insurance for the insured, especially, when as in this case the insured never ordered specific coverage but relied upon the expertise of the agent to obtain the insurance he needed. The trial will establish whether the silence was sufficient to establish a special relationship.

ZALMA-INS-CONSULT                      © 2016 – Barry Zalma

Barry Zalma, Esq., CFE, practiced law in California for more than 43 years as an insurance coverage and claims handling lawyer.  He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.

He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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