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Qp, Inc v. the Flanders Group

December 28, 2012

QP, INC.,
PLAINTIFF-RESPONDENT,
v.
THE FLANDERS GROUP, INC.,
DEFENDANT-APPELLANT.



Appeal from an order of the Supreme Court, Monroe County (Kenneth R. Fisher, J.), dated October 5, 2011 in a breach of contract action.

QP, Inc. v Flanders Group, Inc.

Released on December 28, 2012

Appellate Division, Fourth Department

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

PRESENT: SCUDDER, P.J., CENTRA, CARNI, SCONIERS, AND MARTOCHE, JJ.

The order denied defendant's motion for summary judgment.

It is hereby ORDERED that the order so appealed from is affirmed without costs.

Memorandum: Plaintiff commenced this action alleging that defendant breached a contract pursuant to which defendant became plaintiff's insurance agent, procured insurance for plaintiff and generally assisted and advised plaintiff in regard to insurance matters. Defendant moved for summary judgment dismissing the complaint on the ground that it had fulfilled all of its obligations to plaintiff as required by law. We conclude that Supreme Court properly denied the motion.

In Murphy v Kuhn (90 NY2d 266, 272), the Court of Appeals specifically recognized that there were "[e]xceptional and particularized situations [that] may arise in which insurance agents, through their conduct or by express or implied contract with customers and clients, may assume or acquire duties in addition to those fixed at common law." The determination whether those additional duties arise is governed by the existence of a special relationship between the insured and the insurance agent (see id.). Where such a relationship exists, courts have recognized the viability of a breach of contract cause of action against the insurance agent (see e.g. Sawyer v Rutecki, 92 AD3d 1237, 1237-1238, lv denied 19 NY3d 804; Axis Constr. Corp. v O'Brien Agency, Inc., 87 AD3d 1092, 1093-1094; Hersch v DeWitt Stern Group, Inc., 43 AD3d 644, 644-645).

Even assuming, arguendo, that defendant met its initial burden on the motion, we conclude that plaintiff raised triable issues of fact whether a special relationship existed between the two parties and whether defendant breached the resulting implied contract (see Axis Constr. Corp., 87 AD3d at 1093-1094).

Scudder, P.J., Centra and Martoche, JJ. concur; Carni, J., concurs in the result in the following Memorandum: Although I concur with the conclusion reached by the majority, I write separately to express my view that the viability of plaintiff's breach of contract cause of action is not dependent upon the existence of a "special relationship" between the insured and the insurance agent (see Murphy v Kuhn, 90 NY2d 266, 270-271). In my view, the special relationship identified in Murphy was the recognition of the potential expansion of tort liability of insurance agents beyond their "common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so" (id. at 270). Indeed, Murphy expressly "allude[d] to" Kimmell v Schaefer (89 NY2d 257, 264) for its "general relevance" to the special relationship concept (Murphy, 90 NY2d at 271). Importantly, Kimmell involved a tort-based negligent misrepresentation cause of action.

While I agree that a special relationship is required when a dissatisfied client of an insurance agent advances tort-based theories against the agent beyond the aforementioned common-law duty, in this case plaintiff has not advanced any tort-based causes of action. Instead, the complaint asserts a breach of contract cause of action. Thus, determination of the duties and obligations of the insurance agent in this case are defined by the terms and conditions of the contract, if any, between the parties. Because I agree with the conclusion of the majority that plaintiff raised issues of fact with respect to the terms and conditions of the contract between the parties, and the alleged breach of defendant thereby, I concur only with the result reached by the majority.

Sconiers, J., dissents and votes to reverse in accordance with the following Memorandum: I respectfully dissent because I disagree with my colleagues that there are issues of fact with respect to whether this case presents one of those "[e]xceptional and particularized situations . . . in which insurance agents, through their conduct or by express or implied contract with customers and clients, . . . assume[d] or acquire[d] duties in addition to those fixed at common law" (Murphy v Kuhn, 90 NY2d 266, 272). Defendant is an insurance agency and plaintiff, its client, was in the business of manufacturing machine parts. During the relevant time period, defendant had an ongoing business relationship with plaintiff, for which defendant had procured insurance coverage, namely, as relevant to this appeal, an insurance policy from Great Northern Insurance Company, which is part of the Chubb Group of Insurance Companies (Chubb). Defendant was an authorized agent of and had a written agency agreement with Chubb. In February 2000, plaintiff purchased a machine for the specific purpose of manufacturing products for one of its customers, but plaintiff soon experienced problems with the machine's operation. As early as August 2000, plaintiff's relationship with its customer was being adversely affected by the machine's breakdowns and plaintiff faced losing that customer if it could not remedy the resulting production problems. Despite assistance from the machine's manufacturer and distributor, these problems continued. On or about August 23, 2001, during a meeting between plaintiff's president and a representative of defendant to review plaintiff's insurance needs, an employee of plaintiff came into the meeting to advise that the machine had again broken down. At that point, the parties began discussing available insurance options. This led to a meeting with a representative of Chubb less than a week later, followed by a series of letters and telephone calls in which Chubb continued to seek information from plaintiff regarding its production problems. Chubb eventually hired a technical consultant who prepared a "Loss Analysis" report dated ...


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