Professional Liability

In Mohanan, et al. v. Liberty Mutual Personal Insurance Company, 2023 WL 8026106 (E.D. Pa. Nov. 20, 2023), the United States District Court for the Eastern District of Pennsylvania reiterated the prevailing standard in Pennsylvania for establishing the existence of a “special relationship” between an insurance customer and an insurance broker, i.e. “ced[ing of] decision-making control or surrend[ing] substantial control.”

The court granted defendant Liberty Mutual’s motion to dismiss to strike references to a “special relationship” owed to plaintiffs premised on Liberty Mutual’s purported “cultivat[ion of] a relationship of trust and confidence.” The court agreed with Liberty Mutual’s position that the relationship between an insurance broker and an insured is an arm’s length business relationship; a fiduciary duty does not arise simply because the insurance agent or broker possesses superior knowledge or skill as compared to a lack of sophistication of the insured. 

In Pennsylvania, an insurance agent or broker is under a general duty to procure the coverage requested by a customer and has no duty to advise or recommend as to the types of amounts of coverage available, to obtain total or full coverage, or explain the policy and its coverages and/or exclusions absent evidence of a “special relationship.” Wisniski v. Brown & Brown Ins. Co., 906 A.2d 571, 577-78 (Pa. Super. 2006); Stern Family Real Estate Partnership v. Pharmacists Mut. Ins. Co., 2007 U.S. Dist. LEXIS 22296 (W.D. Pa. March 27, 2007); Yenchi v. Ameriprise Fin., Inc., 161 A.3d 811, 820 (Pa. 2017).

The analysis of the existence of a special relationship is an important one with respect to the standard of care applied. If an insured can establish a special relationship--for example, as analyzed here, through overmastering influence and/or final decision-making power ceded to the insurance agent or broker--the insurance agent or broker is assumed to have undertaken additional, fiduciary duties. In other words, the existence of a special relationship elevates the duty owed from a duty to procure to a duty to advise or recommend. Accordingly, a viable special relationship or fiduciary duty claim asserted against an insurance producer can significantly narrow the defenses available in a professional liability lawsuit.

The Mohanan decision is a welcome addition to the existing precedent in Pennsylvania limiting the imposition of a fiduciary duty on an insurance agent or broker. Consistent with the Pennsylvania Supreme Court’s 2017 decision in Yenchi, supra, the bar remains high to establish a confidential or fiduciary duty between an insurance producer and an insurance customer. 

 

 

_{Legal Update for Insurance Agents & Brokers - November 30, 2023, has been prepared for our readers by Marshall Dennehey. It is solely intended to provide information on recent legal developments and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. If you receive the alerts in error, please send a note tgventura@mdwcg.com. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2023 Marshall Dennehey. All Rights Reserved.}