On February 17, 2011, the New York Court of Appeals issued a unanimous opinion holding that “an insurance broker does not have a common-law fiduciary duty to disclose to its customers ‘incentive’ arrangements that the broker has entered into with insurance companies.” In People ex rel. Cuomo v. Wells Fargo Insurance Services Inc., a case brought by the New York Attorney General, the court refuted the plaintiff’s argument that a fiduciary duty is inherent because brokers maintain a principal-agent relationship with their customers. In dictum, the court stated that this relationship is not so simple because brokers can have a principal-agent relationship with both, the insured and the insurer. The court went on to state that this “dual agency status” removes any inference of undivided loyalty to one side or the other. While the court recognized that fiduciary duties may be imposed on brokers under special circumstances, it did not discuss these exceptions. Instead, the court suggested that the New York State Insurance Department’s Regulation 194 on Producer Compensation Transparency is a better mode of policing broker conduct than common-law rule.

To see a copy of the February 17, 2011 opinion, click here.

To see a copy of New York State Insurance Department’s Regulation 194 on Producer Compensation Transparency, click here.