New York Court Holds Wholesale Broker Is Insured’s Agent for Delivery of Policy

by Traub Lieberman Straus & Shrewsberry LLP
Contact

In its recent decision in B&A Demolition & Removal Inc. v. Markel Ins. Co., 2013 U.S. Dist. LEXIS 55946 (E.D.N.Y. Apr. 18, 2013), the United States District Court for the Eastern District of New York had occasion to consider when an insurance policy is considered “issued or delivered” for the purpose of the “notice prejudice” rule set forth in New York Insurance Law §3420(a).
Markel Insurance Company insured B&A Demolition & Removal, Inc., a New York company, under a combined general liability and contractors pollution liability policy for the period October 22, 2008 through October 22, 2009. In April 2009, B&A was sued for allegedly having caused property damage to a neighboring building while performing construction work on its own premises. B&A delayed giving notice to Markel for nearly seven months. Markel, as a result, denied coverage to B&A based on its failure to have complied with the policy condition requiring prompt written notice of claim or suit.
At issue in the resulting coverage action was whether B&A’s policy was governed by New York’s “no prejudice” rule, whereby an insurer need not demonstrate prejudice in order to sustain a disclaimer of coverage based on an insured’s delay in providing notice of claim or suit, or whether the policy was governed by the “notice prejudice” standard set forth in New York Insurance Law §3420(a), as amended by the New York legislature effective January 17, 2009. The amended §3420(a) states late notice disclaimers will only be effective if the insurer has been prejudiced by the insured’s delay in providing notice. Importantly, New York’s legislature stated that the changes to §3420(a) only apply to policies “issued or delivered” on or after January 17, 2009, and every court to have since considered the issue has agreed that the prejudice standard set forth in §3420(a) does not apply retroactively to policies issued or delivered prior to that date.
Notwithstanding the October 22, 2008 effective date of the Markel policy, B&A argued that the policy should not be considered “issued or delivered” prior to January 17, 2009 because of a purported delay in when the policy was actually delivered. This alleged delay involved the roles of the retail and wholesale brokers in procuring the policy on behalf of B&A. There was no dispute that the Markel underwriter transmitted a copy of the policy, via email, to the wholesale broker, Gremesco, on December 1, 2008. The Gremesco employee responsible for the account testified that she emailed a copy of the policy to the retail broker, Halland, on the same day. Halland, however, claimed not to have received the email because of an apparent technical problem with its email server. Halland further contended that it did not have actual receipt of a copy of the policy until sometime in February 2009 after having asked Gremesco to resend it. B&A contended that as a result of this delay, the policy could not be considered delivered until after January 17, 2009, and that as such, the policy was necessarily governed by the new late notice rule.
Markel initially moved to dismiss B&A’s complaint, arguing that certain documents referenced in the pleading established that the policy was at the very least issued prior to January 17, 2009. The court denied Markel’s motion on the basis that the documents were not properly considered on motion to dismiss. In dictum, however, the court noted that even if Markel could demonstrate that the policy was issued prior to January 17, 2009, it would still need to establish that delivery did not take place after this date.
Following discovery, Markel moved for summary judgment on the basis that the policy was, in fact, delivered prior to January 17, 2009, notwithstanding the apparent question of fact as to when Halland received a copy of the policy from Gremesco. Markel argued that because Gremesco, as the wholesale broker, was B&A’s agent rather than Markel’s agent, delivery should be considered effected when Markel transmitted a copy of the policy to Gremesco in December 2008, since. In support of this argument, Markel cited to case law holding that wholesale brokers are generally considered the insured’s agent, or sub-agent, and that there was no evidence to support the contention that Gremesco was Markel’s agent. Markel pointed out, among other things, that Gremesco had no authority to bind policies, set premiums, or even collect premiums on behalf of Markel. Markel further pointed to deposition testimony from both the Halland and Gremesco employees evidencing the fact that Halland used Gremesco to “tap into” the wholesale insurance market and that Gremesco, in this role, acted as a mere intermediary between Halland and Markel.
In considering this issue, the court noted that an insurance broker typically will typically be considered the agent of the insured rather than the insurer, absent “exceptional circumstances” demonstrating an agency relationship between the insurer and the broker. The court concluded that based on the evidence before it, no such exceptional circumstances were present. On the contrary, the evidence demonstrated as a matter of law that Gremesco was B&A’s agent rather than Markel’s. Having concluded that Gremesco was B&A’s agent, the court agreed that the policy was delivered on December 1, 2008, and thus governed by New York’s pre-January 17, 2009 “no prejudice” rule. As such, and given B&A’s seven-month delay in giving notice of the underlying suit, the court held that, as a matter of law, Markel’s denial of coverage based on late notice was proper.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Traub Lieberman Straus & Shrewsberry LLP | Attorney Advertising

Written by:

Traub Lieberman Straus & Shrewsberry LLP
Contact
more
less

Traub Lieberman Straus & Shrewsberry LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.