Insurance Agents & Brokers Liability

Johnson v. Northeast Agencies, Inc., 242 A.D.3d 414 (1st Dep’t 2025)

One of the recurring challenges in professional liability litigation—especially in claims against insurance brokers—is determining exactly when a claim “accrues” for purposes of the statute of limitations. The case of Johnson v. Northeast Agencies, Inc., 242 A.D.3d 414 (1st Dep’t 2025), presented a twist on this familiar issue. It raised the question of when the statute of limitations began to run on a negligent‑procurement claim against an insurance broker.

In this case, a claim under a general liability policy was made in March 2018, following the commencement of a personal injury action against the owner of a rental property. A month later, the insurer issued a disclaimer of coverage, explaining that, among other reasons, the property where the injury occurred was not listed as an “insured location” under the policy. Ordinarily, such a disclaimer would start the clock on any negligent‑procurement claim against the broker, but here, despite disclaiming coverage, the insured was not immediately negatively impacted by the coverage disclaimer because the insurer agreed to provide a defense to the insured while the parties litigated the validity of the disclaimer in a separate declaratory judgment action. Eventually, the court in the declaratory judgment action upheld the insurer’s disclaimer, confirming that the property was indeed not an insured location under the policy. Only after that ruling—more than five years after the original disclaimer—did the insured file suit against the broker for negligent failure to procure the requested coverage.  However, the statute of limitations for negligent failure to procure claims in New York State is three years.

The insured argued that the insurer’s continued defense during the declaratory judgment action effectively masked the significance of the disclaimer and should be treated as tolling the statute of limitations. The insured contended that it was reasonable to wait for the outcome of the coverage litigation before pursuing a claim against the broker, because the insurer’s defense created uncertainty about whether the disclaimer would ultimately stand.

Both the trial court and the Appellate Division rejected this argument. The courts held that the claim accrued when the disclaimer letter was issued, because that was the moment the insured was placed on notice of the broker’s alleged negligence. The insurer’s voluntary defense during the declaratory judgment action did not create ambiguity about the disclaimer or delay the accrual of the claim. 

Going forward, insureds will likely not wait for a final coverage determination before pursuing a negligent‑procurement claim against insurance brokers. Insureds who prefer to wait for the outcome of a coverage dispute will need to secure tolling agreements to avoid losing their claims against brokers due to expired statute of limitations periods.