October 31, 2014

Hurricane damages case focuses on emerging area of potential broker liability.

On October 30 in the U.S. District Court for the Southern District of Florida, a jury returned a unanimous verdict in favor of Willkie client insurance broker Marsh USA Inc. in the first case to go to trial involving an emerging area of potential broker liability called a "special relationship." While there was no claim that Marsh had breached either the terms of its contract or the standard duties owed by brokers, the plaintiffs, the Tiara Condominium Association,  asserted that Marsh should be required to pay roughly $35 million because it had entered into a special relationship with Tiara that obligated Marsh to advise Tiara on the amount of windstorm insurance to buy – a duty typically left to a professional appraiser.

The concept of imposing heightened duties on insurance brokers, often referred to as a special relationship, has been gaining some acceptance in courts across the country.  For example, the New York Court of Appeals recently has recognized that a broker, either expressly or by its conduct, can take on heightened duties to its client through a special relationship. While courts have recognized the concept, it is believed that the claim against Marsh was the first to be tested through trial.

During the trial, Willkie established that for a special relationship to exist, the insurance broker had to agree to perform more than those services regularly performed by commercial insurance brokers in a standard relationship.  Further, Willkie persuaded the court and the jury that the key to finding a special relationship is the transfer of decision making authority; for a special relationship to exist, the insurance broker must be in the “driver's seat” with respect to selecting the types and amounts of insurance the insured will purchase.

After a two-week trial, the nine-person jury returned a unanimous verdict, agreeing that Marsh had not entered into a special relationship with Tiara.  It is expected that the case will set a key precedent for insurance brokers as the "special relationship" doctrine continues to develop across the country. The matter was handled by partners Mitchell Auslander and Christopher St. Jeanos, assisted by special counsel Ian Hochman, associates Frank Scaduto, Jim Fitzmaurice, Jocelyn Sher, and law clerk Le-Anh Bui.