United States District Court, S.D. New York
July 22, 2004.
GLOBALNET FINANCIAL COM, INC., Plaintiff,
FRANK CRYSTAL & CO., INC. and A.I. CREDIT CORP., Defendants.
The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge
Defendant Frank Crystal & Co., Inc. ("Crystal") has moved
pursuant to Federal Rule of Civil Procedure 56 for summary
judgment, and/or Rule 12(c) for judgment on the pleadings
dismissing the complaint of Globalnet Financial.com, Inc.
("Globalnet") alleging breach of contract, breach of fiduciary
duty, and negligence on the part of Crystal as the insurance
broker for Globalnet. Globalnet has cross-moved for partial
summary judgment against Crystal. For the reasons set forth
below, Crystal's motion is granted and Globalnet's motion is
This diversity action was initiated by the filing of
Globalnet's complaint on January 31, 2003 in which it alleged
that Crystal, its insurance broker, breached its contract duties,
its fiduciary duty and was negligent in its performance, all
arising out of the failure of Crystal to notify Globalnet that
its directors and officers liability policy was to be cancelled
for premium payment failure.
Discovery proceeded and Crystal moved for summary
judgment on February 4, 2004, and Globalnet cross-moved for
partial summary judgment on March 4, 2004. Both motions were
heard and marked fully submitted on March 24, 2004. Parties
At all relevant times, Globalnet was in the business of
providing on-line news and financial information to private
investors around Europe and the United States, and providing
on-line trading facilities.
Crystal is a commercial insurance broker incorporated and
headquartered in New York. Crystal is also licensed in the State
of New York. Crystal also has offices in various locations in the
United States, including two in Florida.
The facts are set forth in the Local Rule 56.1 Statements of
the parties and affidavits and deposition evidence and are
undisputed except as noted below.
Globalnet is a Delaware company and had an office in Boca
Raton, Florida at the time the relationship with Crystal began.
Globalnet was acquired by London-based investor/shareholder
NewSparkMedia in a tender offer that was finally completed in or
about the fall of 2001.
Crystal as an insurance broker arranged for Globalnet to
purchase directors and officers ("D&O") liability coverage for
the period December 36, 1999 to December 30, 2001. The primary policy
was issued by National Union Fire Insurance Company of PA
("National Union"), an excess D&O policy was issued by Lloyd's of
London, and a second excess D&O policy was issued by Federal
Insurance Company. Crystal also arranged for the financing of the
payment of premiums by AI Credit Group Corp. ("AICCO"), an
affiliated and member of American International Group, through an
agreement between AICCO and Globalnet.
Until about the summer of 2000, the premium payments on
Globalnet's D&O insurance, coverage were handled out of the
Globalnet Florida office, after which responsibility for the
financial affairs of Globalnet shifted from Florida to London.
In or about August 2001, AICCO sent a September 2001 Premium
Finance Statement, which was dated August 1, 2001, to Globalnet
at its 7284 West Palmetto Park Road, Boca Raton, Florida office
which was returned. Globalnet had closed and vacated that address
in late June or early July 2001. The envelope also contained a
new address for Globalnet 225 N.E. Mizner Boulevard, Boca
Raton, Florida (the "Mizner address"). AICCO corrected its
records for Globalnet's new address and resent the September
statement to the Mizner address.
On or about October 10, 2001, AICCO sent an Intent to cancel
notice to Globalnet, indicating that Globalnet's D&O coverage would be cancelled effective October 22, 2001 for
nonpayment of premiums if a premium of $25,052.73 plus a late fee
of $1,252,64 was not paid. On or about October 22, 2001, AICCO
mailed a cancellation notice to Globalnet informing it that its
D&O policies would be canceled effective October 22, 2001 based
upon Globalnet's failure to pay its premiums. Both the Intent to
Cancel notice and the cancellation notice were mailed to the
The Mizner address was occupied by a company called
International Capital Growth ("ICG"), which was a spin-off from
Globalnet prior to the completion of the tender offer, in
approximately July or August 2001. Peter Wallis ("Wallis"), the
associate general counsel for Globalnet, instructed the Boca
Raton Post Office to forward all mail addressed to Globalnet at
7284 West Palmetto Park Road to the Mizner address. When shown
the envelope which was returned to AICCO with the "Return to
Sender" stamp and the Mizner address, Wallis testified that the
Post Office was doing "exactly what I wanted it to do." Wallis
Deposition at 97.
According to Globalnet, "[m]ail intended for Globalnet was
generally supposed to be forwarded to London," Globalnet
Rule 56.1 Counter-statement of Material Facts at ¶ 22. Further, it was
the "custom and practice" of someone at the Mizner address to
forward mail addressed to Globalnet to someone in London.
Deposition of Monique McClaren, at 81-82. However, the Intent to Cancel notice and the cancellation notice which were sent to the
Mizner address were never received by the London office of
Globalnet. Consequently, Globalnet did not become aware of either
the cancellation or the missed premium payments which led to the
cancellation until late February 2002.
Crystal also received the notice of Intent to Cancel and the
cancellation notice in October 2001 and received telephone calls
from AICCO concerning the cancellation.
The D&O policy was canceled on October 22, 2001 and could be
reinstated only by the various insurance carriers, including
On April 16, 2002, coverage counsel to National Union by letter
to Globalnet reserved certain rights relating to the policy and
on May 22, 2002 disclaimed coverage for three separate claims on
the grounds of nonpayment of premium and other grounds as well.
Choice of Law
A federal district court sitting in diversity jurisdiction must
apply the choice of law analysis of the forum state. Klaxon Co.
v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020 (1941);
Gilbert v. Seton Hall University, 332 F.3d 105, 109 (2d Cir.
2003). The New York Court of Appeals has held that "[t]he first step in any case presenting a potential choice of law issue
is to determine whether there is an actual conflict between the
laws of the jurisdictions involved." Matter of Allstate Ins.
Co., (Stolarz), 81 N.Y.2d 219, 223, 597 N.Y.S.2d 904 (1993);
see also Zurich Insurance v. Shearson Lehman & Hutton,
84 N.Y.2d 309, 618 N.Y.S.2d 609 (1994).
Globalnet has alleged three causes of action against Crystal
for professional negligence, breach of fiduciary duty, and breach
of contract arising from Crystal's alleged failure to notify
Globalnet of AICCO's mailing a notice of intent to cancel and a
notice of cancellation to Globalnet for nonpayment of premium
regarding the policy.
Globalnet contends that Florida law governs its complaint
against Crystal. Under Florida law, according to Globalnet, a
broker is in a fiduciary relationship with an insured, and may be
held liable in theories of contract and in tort for violations of
this fiduciary duty. See, e.g., Moss v. Appel,
718 So.2d 199, 201 (Fla. Dist. Ct. App. 1998); Nu-Air Manufacturing
Company v. Frank B. Hall & Co. of New York, 822 F.2d 987, 997
(11th Cir. 1987), without the requirement that the insured
demonstrate the existence of a course of dealing between the
client and broker more extensive than an arm's length
relationship, or a showing that the insured has made requests for
specific services or coverages. See, e.g., Warehouse Foods
Inc. v. Corporate Risk Management Services, 530 So.2d 422, 424 (Fla. Dist. Ct. App. 1988); Moss v. Appel, 718
So.2d at 201.
Under New York substantive law, according to Crystal, it is
entitled to a dismissal of Globalnet's complaint since a broker
is not in a special relationship with an insured such that it
owes the insured more than the common-law duty to procure the
insurance coverage that the insured requests, Murphy v. Kuhn,
90 N.Y.2d 266 (1997), and Crystal contends that the instant
record demonstrates no such special relationship.
A. Contract Claims
The New York Court of Appeals has held that in contraot cases,
the "center of gravity" or "grouping of contacts" analysis as to
be applied in choice of law situations. Matter of Allstate
Ins. Co. (Stolarz), 81 N.Y.2d 219, 226, 597 N.Y.S.2d 904,
613 N.E.2d 936 (1993); Application of Travelers Indemnity Company,
195 A.D. 2d 35, 38-39, 606 N.Y.S.2d 167 (1st Dep't
1993). The "center of gravity" or "grouping of
contacts" choice of law theory allows a court
to consider a "spectrum of significant contacts," beyond the
prior standard of the law of the place where the contract was
made or was to be performed. Matter of Allstate
(Stolarz), 81 N.Y.2d at 225-26. In Stolarz, the
New York Court of Appeals listed several factors which should be
considered in a conflict of law analysis in a contract case.
These include the place of contracting, negotiation and performance; the location of the subject matter
of the contract; and the domicile of the contracting parties." 81
N.Y.2d at 227 (citing Restatement (Second) of Conflict of Laws, §
In conflict of law analyses in insurance litigation, "New York
courts have looked principally to the following facts: location
of the insured risk; the insured's principal place of business;
where the policy was issued and delivered; the location of the
broker or agent placing the policy; where the premiums were paid;
and the insured's place of business." Olin Corp. v. Insurance
Co. of North America, 743 F. Supp. 1044, 1049 (S.D.N.Y. 1991),
aff'd, 966 F.2d 718 (2d Cir. 1992). Where the insured's
interests include a "wide geographical range," New York courts
have applied the law of the state where the policies were
executed, issued and brokered, and where the insured had their
principal place of business. See Avondale Industries, Inc. v.
Travelers Indemnity Co., 774 F. Supp. 1416, 1422-23 (S.D.N.Y.
1991); Olin, 743 F. Supp. at 1049.
Globalnet's causes of action for breach of contract and for
breach of fiduciary duty are contractual in nature, and are
therefore subject to the grouping of contacts choice of law
analysis. Globalnet's complaint alleges that it is a Delaware
corporation with its principal place of business in London,
England Crystal is a New York corporation, that resided in and maintains its principal place of business in New York. The D&O
liability policies obtained by Crystal for Globalnet were
"brokered" in New York. The primary policy was issued by National
Union Fire Insurance Company of PA, whose address on the Schedule
of Policies Addendum to the AICCO-Globalnet Premium Finance
Agreement, and on the Notice of Acceptance is listed as 175 Water
Street, New York, New York. The Premium Finance Agreement between
Globalnet and AICCO was executed in New York. Premium invoices
were sent to Globalnet by AICCO, and the premium payments were
sent by Globalnet to AICCO in Dallas, Texas.
In Avondale Industries, it was held that New York law applied
because the policies at issue were signed in New York, were
"brokered by New York brokers" and covered Delaware corporations
who had operations and insured interests in a wide range of
locations. 774 F. Supp. at 1423. Likewise, in Olin, despite the
fact that the risks covered were not confined to one location,
balancing factors dictated that New York law applied, despite the
fact that the insured had moved its office to Connecticut.
743 F. Supp. at 1049; see also International School Services, Inc.
v. Northwestern National Insurance Co., 710 F. Supp. 86, 88-89
(S.D.N.Y. 1989); American Re-Insurance Co. v. Universal Builders
Supply, Inc., 141 Misc.2d 375, 378-79. 522 N.Y.S.2d 712
(Sup.Ct. N.Y. Co. 1988) (New York law applicable where policy procured
through New York agent, policy issued in New York and risk not
limited to Massachusetts location). The language of the Policy provides coverage for "liability for
any wrongful acts of the individual defendants in their capacity
as directors and officers . . .," without limitation to one
location. Because the risks covered by Globalnet's policy are not
limited to one state, following Avondale Industries, the law of
the state where the policies were executed, issued and brokered
will be applied to the contract claims.
Globalnet has contended that the present litigation does not
involve an insurance dispute. However, Globalnet's D&O carrier
issued both a reservation of rights letter and a disclaimer to
Globalnet. Therefore, the scope of the insurance coverage is at
issue here, and the application of the "grouping of contacts"
test under New York law' is appropriate.
B. Tort Actions
The New York Court of Appeals has held that "the relevant
analytical approach to choice of law in tort actions in New York"
is the "interest analysis." Schultz v. Boy Scouts of America,
Inc., 65 N.Y.2d 189, 197, 491 N.Y.S.2d 90 (1985). The New York
Court of Appeals defined "interest analysis" as requiring that
"the law of the jurisdiction having the greatest interest in the
litigation will be applied and . . . the [only] facts or
contracts which obtain significance in defining State interests
are those which relate to the purpose of the particular law in
conflict." Id. (quoting Miller v. Miller, 22 N.Y.2d 15, 16, 290 N.Y.S.2d 734
(1968)). "Under this formulation, significant contacts are
almost exclusively, the parties' domiciles and locus of the tort
. . ." 65 N.Y.2d at 197.
Under the interest analysis test, torts are divided into two
those involving "the appropriate standards of
conduct, rules of the road, for example" and those
that relate to "allocating loses that result from
admittedly tortious conduct . . . such as those
limiting damages in wrongful death actions, vicarious
liability rules, or immunities from suit."
Mascarella v. Brown, 813 F. Supp. 1015, 1019 (S.D.N.Y. 1993)
(quoting Schultz v. Boy Scouts of America, 65 N.Y.2d at 198).
New York has a greater interest than Florida in this litigation
involving a tort that occurred here and in regulating the conduct
of brokers, insurance agents, premium finance companies and
insurers licensed within the state. "If conflicting
conduct-regulating laws are at issue, the law of the jurisdiction
where the tort allegedly occurred will generally apply because
that jurisdiction has the greatest interest in regulating
behavior within its orders." Cooney v. Osgood Machinery, Inc.,
81 N.Y.2d 66, 72, 595 N.Y.S.2d 919 (1993); Northwestern Mutual
Life Ins. Co. v. Wender, 40 F. Supp. 62, 66 (S.D.N.Y. 1996). Globalnet's cause of action for negligence alleges Crystal's
failure to act in notifying Globalnet of the notice of intent to
cancel and the notice of cancellation of the D&O liability
policies, as well as Crystal's failure to obtain change of
address endorsements for Globalnet. See, e.g., Northwestern
Mutual, 940 F. Supp. at 66 (insurer's failure to honor claim
interpreted as a conduct-regulating tort for choice of law test).
As a conduct-regulating tort, the site of the tort is the
controlling factor in the choice of law analysis. Crystal, a New
York broker, failed to advise Globalnet of the notice of intent
to cancel and notice of cancellation, a failure occurring in New
York. Globalnet's professional negligence cause of action is
therefore subject to the substantive law of New York.
Gebhardt v. Allspect, Inc., 177 F. Supp.2d 267 (S.D.N.Y.
2001), relied upon by Globalnet, does not support its argument
that Florida law should apply to the instant matter. Gebhardt
involved a case where the grouping of contacts test was applied
to an insured's third-party complaint asserting a cause of action
against the broker for negligence, and a cause of action against
the insurer for breach of contract. Second, under the application
of New York's grouping of contact tests, the Gebhardt court
considered such factors as the location of the insured risk, the
residence of the parties, and where the contract was issued and
negotiated again the same quantitative factors considered in
breach of contract grouping of contacts analyses in insurance coverage
In Gebhardt, the choice of law was not between New Jersey and
California. As the Gebhardt court stated, "the instant action
involves the interests of a number of states." 177 F. Supp.2d at
273. In fact, characteristics of four states were considered,
including Florida, California, New York, and New Jersey. Instead
of relying on any one factor, the court merely concluded that
"although there are a number of states with an interest in this
litigation, we find that New Jersey has the most significant
contacts with disputed matters in the third-party complaint."
Summary Judgment Standards
Summary judgment is granted only if there is no genuine issue
of material fact, and the moving party is entitled to judgment as
a matter of law. Fed.R.Civ.P. 56(c); see Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23 1986); Silver v. City Univ.,
947 F.2d 1021, 1022 (2d Cir. 1991). see generally 11 James Wm.
Moore, et al., Moore's Federal Practices § 56.11 (3d ed. 1997 &
Supp. 2004). The court will not try issues of fact on a motion
for summary judgment, but, rather, will determine "whether the
evidence presents a sufficient disagreement to require submission
to a factfinder] or whether it is so one-sided that one party
must prevail as a matter of law." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 251-52 (1986).
"The party seeking summary judgment bears the burden of
establishing that no genuine issue of material fact exists and
that the undisputed facts establish her right to judgment as a
matter of law." Rodriguez v. City of New York, 72 F.3d 1051,
1060-61 (2d Cir. 1995). In determining whether a genuine issue of
material fact exists, a court must resolve all ambiguities and
draw all reasonable inferences against the moving party.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986); Gibbs-Alfano v. Burton, 281 F.3d 12, 18 (2d
Cir. 2002). Thus, "[s]ummary judgment may be granted if, upon
reviewing the evidence in the light most favorable to the
non-movant, the court determines that there is no genuine issue
of material fact and the movant is entitled to judgment as a
matter of law." Richardson v. Selsky, 5 F.3d 616, 621 (2d Cir.
A material fact is one that would "affect the outcome of the
suit under the governing law," and a dispute about a genuine
issue of material fact occurs if the evidence is such that "a
reasonable [factfinder] could return a verdict for the nonmoving
party." Anderson, 477 U.S. at 248; R.B. Ventures, Ltd. v.
Shane, 112 F.3d 54, 57 (2d Cir. 1997). The Court is "to grant
summary judgment where the nonmovant's evidence is merely
colorable, conclusory, speculative or not significantly
probative." Schwimmer v. Kaladjian, 988 F. Supp. 631, 638 (S.D.N.Y. 1997) (citing
Anderson, 477 U.S. at 249-50).
Globalnet Has Failed to State A Claim Against Crystal
To defeat Globalnet's claims, Crystal relies on Murphy v.
Kuhn, 90 N.Y.2d 266, 660 N.Y.S.2d 371 (1997). Murphy held that
"insurance agents or brokers are not personal or financial
counselors and risk managers, approaching guarantor status. . . .
Insureds are in a better position to know their personal assets
and abilities to protect themselves more so than general
insurance agents or brokers, unless the latter are informed and
asked to advise and act . . ." Id. at 273; see also
Fredlund v. Nationwide Mutual Fire Ins. Co., 00-CV-1080E(M),
2000 WL 1773473, at *4 (W.D.N.Y. Nov. 30, 2000). Accordingly,
the insureds are the final decisionmakers in such
risk management determinations. . . . The insurance
agent-insured relationship is not a generally
recognized professional relationship in which
continuing obligations to advise might exist but,
rather, is an ordinary commercial relationship which
does not usually give rise to a duty to provide such
ongoing guidance. Thus, an insurance agent's duty to
its customer is generally defined by the nature of
the customer's request for coverage.
M & E Manufacturing Company, Inc. v. Frank H.
Reis, Inc., 258 A.D.2d at 9, 11 (2d Dep't 1999)
(internal quotations and citations omitted). In Murphy, the Court of Appeals did not entirely preclude a
finding of certain "high level" exceptional circumstances which
might warrant the imposition of liability upon an insurance
broker for breach of a continuing duty to advise. See Murphy,
96 N.Y.2d at 271. However, the Appellate Division, First
Department has noted that "no court in this State has applied
this special relationship analysis to add such continuing
advisement duties to the agent-insured relationship." M & E
Manufacturing, 258 A.D.2d at 12; see also Ambrosio v.
Exchange Ins. Co., 258 A.D.2d 627, 627-28 (3d Dep't 1999). The
First Department has also recently ruled that no claim for
"professional malpractice" may be asserted against insurance
brokers as they are not "professionals." Manes Organization,
Inc. v. Meadowbrook Richman, Inc., 2 A.D.3d 292, 293,
770 N.Y.S.2d 27
(1st Dep't 2003).
Globalnet argues conversely that while a broker may have no
continuing duty to advise or direct its client about future
needs, there is precedent in New York for the proposition that a
broker has a duty to inform its client of an impending
cancellation of the coverage which it obtained.
In Erica Trading Corp. v. Nathan Butwin Co., Inc.,
420 N.Y.S.2d 87, 100 Misc.2d 830 (N.Y.Sup.Ct. N.Y. Co. 1979), a
client sued its insurance broker for defense costs and
indemnification of a product liability action that the client
claimed should have been covered. The claim against the broker
was that it either improperly canceled the policy, or failed to notify the client of
the cancellation. The court denied the broker's motion to dismiss
for failure to state a cause of action, holding that the broker
could be liable if the client could prove that the broker failed
to properly maintain the policy or notify the client of its
Assuming, as alleged, that the defendant failed to
properly maintain the policy or notify the plaintiff
of its cancellation, the defendant would be liable to
provide for plaintiff's defense in the New Jersey
action and to indemnify him for any judgment which
would have been covered by the policy. Thus, the
defendant bears the same liability as the insurer
would bear had the policy been in force. Joseph,
Inc. v. Alberti, Carleton & Co., Inc.,
225 A.D. 115, 232, N.Y.S. 168, aff'd, 251 N.Y. 580,
168 N.E. 434 [1st Dep't 1928]; 16 Appelman, Insurance Law and
Practice, Sections 8841, 8844.
Erica Trading, 420 N.Y.S.2d at 89. The appelman insurance
treatise cited with approval by the court in Erica Trading
similarly states that "[w]here the broker failed to notify the
insured of a cancellation of the policy, he may be held liable
for the loss of the property." 16 Appelman, Insurance Law and
Practice § 8844 1979 Supp., p. 230).
Erica Trading is distinguishable, however, because while
crystal did not notify Globalnet of the cancellation, Crystal was
not the cause of the cancellation. Further, and more importantly,
notice of intent to cancel the D&O policies, as well an actual
cancellation notice, were sent to Globalnet at the address that Globalnet had requested it be sent to, namely the Mizner address.
Globalnet acknowledges that because of the confusion surrounding
the completion of the tender offer, Globalnet "inadvertently
. . . missed premium payments" on its D&O coverage. Affidavit of
Charles Berry, ¶ 4.
In a 1925 case from the First Department, the plaintiff brought
a claim against his insurance broker, alleging that the broker
was liable for damages sustained from a fire because the
plaintiff's fire insurance was canceled and the "defendant did
not transmit this notice to plaintiff." Holskin v. Hurwitz,
211 A.D. 731, 731, 208 N.Y.S. 38 (1st Dep't 1925). Although later in
the opinion the court found that the complaint did not show that
the policy was lawfully canceled, it first dismissed the claim
against the broker because
The terms of the policy were always within the
knowledge of the plaintiff, and if he failed to
remember that the policy expired at a certain time
before the fire, it was his own negligence, and not
defendant's, which prevented plaintiff from renewing
Id. at 733. The instant case involves not the expiration of a
policy but the failure to pay a premium.*fn1
logic of the Holskin decision applies, if anything, more
strongly to the present circumstances, because both notices were sent to
Globalnet indicating that cancellation was imminent or had just
occurred, and thus the information regarding cancellation was
within the knowledge of Globalnet even if, through inadvertence,
it was not brought to the attention of the employees responsible
In another similar case against insurance brokers who were
allegedly negligent for failing to advise the plaintiff insured
that its fire insurance policies had been canceled, the First
Department vacated a jury verdict and ordered a new trial,
a recovery based on negligence must necessarily rest
on a showing that plaintiff did not know of these
cancellations; that defendants negligently failed to
communicate their knowledge of the cancellations to
plaintiff; and the fact plaintiff did not obtain
other insurance was the product of such failure of
communication without any concurring negligence by
Kamen Soap Products Co., Inc. v. Prusansky & Prusansky, Inc.,
5 A.D.2d 620, 623, 173 N.Y.S.2d 706 (1st Dep't 1958).*fn2
Despite their age, neither Kamen Soap nor Holskin have been
overruled, explicitly or otherwise, by subsequent, cases,
including Murphy and Erica Trading. In fact, Crystal has
submitted three unpublished opinions from the New York Supreme
Court in Suffolk, Queens and Nassau Counties in which it has been
held there is "no authority for imposing the duty to advise the
insured that his policy has been canceled for non-payment when
the insurance company has already sent such notice." Makawi v.
Commercial Union Ins. Co., Ind. No. 7938/94 (N.Y.Sup.Ct.
Queens Co. Mar. 23, 1998), slip op. at 2. Two of the opinions
cite to Murphy for this proposition. See Vitrano v. Simon
Cohen-Levin Co., Inc., Ind. No. 1704/02 (N.Y.Sup.Ct. Nassau
Co. May 21, 2002), slip op. at 2 ("Cancellation due to
non-payment of premiums does not impose any duty upon the
broker."); Haddadin v. Troy Savings Bank, Ind. No. 95/19120
(N.Y.Sup.Ct. Suffolk Co. Mar. 2, 1998), slip op. at 2-3
(insurance broker found not to have breached duty to insured to
obtain additional coverage where notice of cancellation sent both
to broker and to address of insured listed on policy); see
also Badio v. Liberty Mutual Fire Ins. Co., Ind. No.
602173/00, 2002 WL 32101993, at *7 (N.Y.Sup.Ct. N.Y. Co. Dec.
30, 2002) (insured did not have "special relationship" with
insurance agent sufficient to impose a "continuing duty" to
advise insured of impending cancellation). Further, Globalnet's
reliance on Blonsky v. Allstate Ins. Co., 491 N.Y.S.2d 895,
128 Misc.2d 981 (N.Y.Sup.Ct. N.Y. Co. 1985) is misplaced, as that
case holds that "an insurance broker, in his capacity as an
insurance broker, may be sued only for failing to do what he is required to do" by the agreement between
the broker and the insured, 491 N.Y.S.2d at 897, and Globalnet
has not shown that Crystal agreed to advise it of non-payment of
premiums or of imminent cancellation.
While Globalnet has stated that it did not have actual notice
of the cancellation and the missed premium payments until
February 2002, it has not disputed that both notices were sent to
the forwarding address requested by Globalnet's associate general
counsel, and has stated that the notices were "directed to
Globalnet in Florida." Berry Affidavit at ¶ 5. Globalnet has
asserted claims against AICCO, the company that mailed out the
notices, but they are statutory and contractual claims, and do
not sound in negligence." See Complaint, ¶¶ 47-57. Finally,
Globalnet has acknowledged that during the course of the tender
offer, its bank accounts in the United States were closed or
nearly emptied, which "inadvertently resulted in some missed
premium payments on Globalnet's Directors and Officers liability
insurance coverage." Id. at ¶ 4; see also Globalnet
Rule 56.1 Counter-statement at ¶ 18 "Globalnet failed to make premium
payments due to administrative confusion surrounding the
completion of the NewSparkMedia tender offer.").
Such conduct constitutes concurring negligence as a matter of
law within the meaning of Kamen Soap and Holskin. Therefore,
assuming without deciding that an insurance broker owes a duty to the insured to notify it of an imminent or recent
cancellation, the broker's liability does not extend to
circumstances in which the insured knew or should have known of
the cancelled coverage. Accordingly, Crystal's motion for summary
judgment is granted, and Globalnet's cross-motion for summary
judgment is denied as moot.
For the reasons stated above, Crystal's motion for summary
judgment is granted, and Globalnet's cross-motion for summary
judgment is denied.
It is so ordered.