New York Appellate Division Reports

Dept 11-16-2006] 2006 NY Slip Op 08301 THOMPSON & BAILEY,
LLC, ET AL., Appellants, v. WHITMORE GROUP, LTD.,
Respondent, ET AL., Defendants. 500338. Appellate Division
of the Supreme Court of New York, Third Department. Decided
and Entered: November 16, 2006.

Appeal from an order of the Supreme Court (Hummel, J.),
entered June 28, 2005 in Columbia County, which, inter
alia, granted a motion by defendant Whitmore Group, Ltd.
for summary judgment dismissing the complaint against it.

Connor, Curran & Schram, P.C., Hudson (Paul M. Freeman of
counsel), for appellants.

Kral, Clerkin, Redmond, Ryan, Perry & Girvan, L.L.P.,
Mineola (Michael G. Walker of counsel), for respondent.

Before: Mercure, J.P., Crew III, Carpinello, Rose and Kane,



In November 2001, plaintiff Thompson & Bailey, LLC
(hereinafter plaintiff) purchased a commercial building
located in the Village of Chatham, Columbia County.
Defendant Whitmore Group, Ltd. (hereinafter defendant), a
licensed insurance broker, obtained insurance on the
subject property for plaintiff from defendant CMS, Inc.,
the wholesale producer for defendant Insurance Corporation
of New York (hereinafter Inscorp). The policy provided,
among other things, that an inspection of the property was
required. Although a visual inspection of the exterior of
the property was performed in December 2001, the inspector
could not gain access to the interior of the building. As a
result of the refusal to allow inspection, Inscorp mailed a
notice of cancellation, effective February 6, 2002, to CMS,
defendant and plaintiff, in care of plaintiff’s principal,
James Goldman.

On December 6, 2002, the property suffered water damage
and plaintiff thereafter submitted a claim to Inscorp,
which denied the claim on the ground that the insurance
policy had been canceled. Plaintiffs then commenced this
action against defendant, CMS and Inscorp, alleging, as
relevant here, breach of contract, negligence and that
defendant negligently misrepresented that the policy was in
effect despite the cancellation. Following joinder of
issue, defendant moved for summary judgment dismissing the
complaint and all cross claims against it. As relevant
here, Supreme Court partially granted defendant’s motion to
the extent of dismissing the complaint against it.[fn1]
Plaintiffs now appeal, asserting that defendant stands in
the shoes of Inscorp and is therefore liable for their loss
because defendant negligently failed to procure a policy
and then negligently misrepresented that the insurance
policy was in force when it had, in fact, been canceled. We

As plaintiff asserts, an insurance broker who negligently
fails to procure a policy stands in the shoes of the
insurer and is liable to the insured up to the limit of the
insurance policy had it been in force (see Soho Generation
of N.Y. v. Tri-City Ins. Brokers, 256 AD2d 229, 231
[1998]). Absent a special relationship, however, while
“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

. . ., they have no continuing duty to advise, guide or
direct a client to obtain additional coverage” (Murphy v.
Kuhn, 90 NY2d 266, 270 [1997]). The burden is on the
customer to initiate, seek and obtain appropriate coverage
and, “`[u]nlike a recipient of the services of a doctor,
attorney or architect . . . the recipient of the services
of an insurance broker is not at a substantial
disadvantage to question the actions of the provider of
services'” (id. at 271, 273, quoting Video Corp. of Am.
v. Flatto Assoc., 85 AD2d 448, 456 [1982], mod 58 NY2d
1026 [1983]).

Here, plaintiff sought commercial property insurance
through defendant, which procured an acceptable policy on
plaintiff’s behalf from Inscorp. Thus, despite the
cancellation of the policy due to plaintiff’s subsequent
failure to arrange the inspection required by the policy on
its face, defendant fulfilled its common-law duty to
plaintiff (see Murphy v. Kuhn, supra at 270; Chase’s Cigar
Store v. Stam Agency, 281 AD2d 911, 912 [2001]). Contrary
to plaintiff’s argument that defendant negligently failed
to complete procurement by facilitating the inspection, the
record reveals that defendant and CMS were unable to reach
the contact person to whom plaintiff referred them and
plaintiff took no action despite defendant informing it
twice that the inspection had not been performed. In our
view, even assuming that defendant agreed to undertake
additional duties with respect to the inspection required
of plaintiff by the policy, it was plaintiff’s failure to
act that prevented completion of the inspection and
plaintiff’s “lack of initiative or personal indifference
cannot qualify as legally recognizable or justifiable
reliance” under the circumstances (Murphy v. Kuhn, supra at

Similarly lacking in merit is plaintiff’s argument that it
justifiably relied upon defendant’s misrepresentations that
the policy continued in effect beyond February 6, 2002.
Initially, we note that Inscorp properly notified plaintiff
by mail of the cancellation approximately 11 months prior
to the incident that damaged the property (see Insurance
Law § 3426 [b]). Moreover, defendant notified
plaintiff in November 2002, prior to the loss, that it had
no insurance coverage and provided plaintiff with quotes
for replacement coverage, which plaintiff rejected as too
expensive. Accordingly, any continued reliance by plaintiff
upon defendant’s earlier statements implying that the
policy remained effective was not reasonable and Supreme
Court properly dismissed the complaint as against defendant
(see Murphy v. Kuhn, supra at 271; see generally Zelber v.
Lewoc, 6 AD3d 1043, 1044-1045 [2004]).

We have considered plaintiffs’ remaining arguments and, to
the extent that they are not expressly addressed herein,
reject them as lacking in merit.

Crew III, Carpinello, Rose and Kane, JJ., concur.

ORDERED that the order is affirmed, with costs.

[fn1] Supreme Court also granted motions by CMS and Inscorp
for dismissal of defendant’s cross claims against them. In
addition, as a result of an April 2005 settlement, the
complaint evidently has been discontinued against CMS and