Most would agree that forcing a child to simply “say sorry” is an ineffective way to convey a necessary lesson to that child and an equally ineffective way to help the person to whom they are apologizing. In other words, simply saying the word “sorry” does not teach a child how to make amends, understand that they made a mistake, and develop empathy for others. The same holds true later in life. One’s sincerity would certainly be called into question for just “saying sorry” without any apparent recognition of the wrongful conduct. It is for this reason that New York courts can summarily adjudicate a defendant’s liability based on an apology for the damage-causing conduct. The most recent example is Ferguson v. The Whitmore Group, Ltd., Index. No. 15-610192 (Sup. Ct. Suff. Cnty.), involving an insurance broker’s failure to procure flood coverage for certain structures on the insured’s waterfront property.
A. New York Law Governing Insurance Broker Liability
“An insurance agent or broker . . . may be held liable under theories of breach of contract or negligence for failing to procure insurance.” Bedessee Imports, Inc. v. Cook, Hall & Hyde, Inc., 45 A.D.3d 792, 793, 847 N.Y.S.2d 151 (2d Dep’t 2007) (citing cases). To be granted summary judgment against a broker, “[a]n insured must show that the agent or broker failed to discharge the duties imposed by the agreement to obtain insurance, either by proof that it breached the agreement or because it failed to exercise due care in the transaction.” Id. at 793-4 (citing cases). In other words, “insurance agents have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so.” Am. Bldg. Supply Corp. v. Petrocelli Group, Inc., 19 N.Y.3d 730, 955 N.Y.S.2d 854 (2012) (citing Murphy v. Kuhn, 90 N.Y.2d 266, 270, 660 N.Y.S.2d 371 (1997)). There is but one limitation—absent a special relationship, brokers “have no continuing duty to advise, guide or direct a client to obtain additional coverage.” Id.
“When an insurance agent undertakes to obtain a policy of insurance for a client, the agent may be held liable for neglect if it fails to procure such a policy.” Tucci v. Hartford Cas. Ins. Co., 167 A.D.2d 387, 388, 561 N.Y.S.2d 802 (2d Dep’t 1990) (granting summary judgment to insured). See also Alvarez v. Prospect Hospital, 68 N.Y.2d 320, 324, 508 N.Y.S.2d 923 (1986); Brian Fay Constr., Inc. v. Morstan Gen. Agency, Inc., 90 A.D.3d 796, 798, 934 N.Y.S.2d 497 (2d Dep’t 2011) (“an insurance broker who negligently fails to procure requested insurance stands in the shoes of the insurer”).
The existence of a special relationship forms a separate and distinct theory of liability against a broker who fails to procure proper insurance coverage. In other words, “[w]here a special relationship develops between the broker and client, . . . that … broker may be liable, even in the absence of a specific request, for failing to advise or direct the client to obtain additional coverage.” Voss v. Netherlands Ins. Co., 22 N.Y.3d 728, 735, 985 N.Y.S.2d 448, 452 (2014) (citing cases). The Voss court held that the evidence, viewed in the light most favorable to the insured, “suggests that ‘there was some interaction regarding a question of coverage, with the insured relying on the expertise of the agent.’” Id. (citing Murphy, 90 N.Y.2d at 272).
B. The Significance of an Apology in Deciding the Issue of Liability
New York courts have found that an apology can constitute an admission of liability based on which summary judgment can be granted. For example, in Delgado v Martinez Family Auto, 113 A.D.3d 426, 427, 979 N.Y.S.2d 277 (1st Dep’t 2014), the plaintiff submitted an affidavit stating that, after a motor vehicle accident, the defendant driver “apologized to her for partly causing the impact by traveling 50 mph in a 30 mph zone.” The court granted summary judgment, holding that this “statement is admissible as a party admission and is sufficient to establish a [statutory] violation[.]” Id. (citations omitted). See also Cespuglio v. Sinchi, 2016 WL 427714 (Trial Order) (Sup. Ct. N.Y. Cnty. Jan. 29, 2016) (apologizing for an admitted role in causing an accident “clearly indicate that the defendant is conceding liability”); Marotta v. Toyota Motor Credit Corp, Kissler & Co., Inc., 2006 WL 6848975, 2006 N.Y. Slip Op. 30639(U) (Trial Order) (Sup. Ct. Apr. 25, 2006) (apology deemed admissible in support of granting partial summary judgment).
In Ferguson, the insured’s property consisted of a main house as well as numerous other permanent structures including guest houses and a pool house. The insured initially procured a policy of flood insurance through the National Flood Insurance Program (“NFIP”) on the “dwelling” with the $250,000 maximum limit of building coverage. Because the maximum limits under the NFIP were insufficient to cover the main dwelling and because the other permanent structures were not covered by this policy, the broker procured an excess policy under the mistaken belief that it would provide flood coverage for all of the permanent structures on the property.
After Superstorm Sandy damaged all of the structures on the property, the broker first realized that the excess policy it procured only provided coverage for the “main dwelling” and provided no coverage for the other permanent structures. Discovery revealed the brokers’ admitted “goal” to procure flood coverage for all of the permanent structures and its contemporaneous apology for failing to do so. The court granted partial summary judgment on the issue of liability in favor of the insured, in part because the broker “admits defendant’s liability” by stating in an email that “‘words of apology are irrelevant but they are sincere about these circumstances,’ admitting defendant’s liability in both contract and negligence.”
Apologies in the business context are rare. Even settlement agreements executed after the resolution of a business dispute typically provide that no party is admitting any liability or wrongdoing. An “apology” can also be subject to interpretation, thereby creating a fact issue precluding summary adjudication. For example, “I’m sorry for making an error and causing you to sustain damages” can be interpreted very differently than “I’m sorry about what happened.” To be awarded summary judgment, plaintiff’s counsel should secure evidence related to the apology in order to establish that the defendant is, in fact, admitting fault. In contrast, defendant’s counsel should secure evidence that the apology is merely an expression of remorse or regret about the circumstances but not an acknowledgment of wrongdoing.