Murphy v. Kuhn

• Decision Date: 27 June 1997
• Citation: 660 N.Y.S.2d 371,90 N.Y.2d 266,682 N.E.2d 972
• Parties: , 682 N.E.2d 972 Thomas MURPHY et al., Appellants, v. Donald C. KUHN, et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

Page 371

660 N.Y.S.2d 371

90 N.Y.2d 266, 682 N.E.2d 972

Thomas MURPHY et al., Appellants, v. Donald C. KUHN, et al., Respondents.

Court of Appeals of New York.

June 27, 1997.

Faraci, Lange, Johns, Regan & Schwarz, L.L.P., Rochester (Paul K. Lange and Matthew F. Belanger, of counsel), for appellants.

Lustig & Brown, L.L.P., Buffalo (Maurice L. Sykes and Katherine A. Fijal, of counsel), for respondents.

OPINION OF THE COURT

BELLACOSA, Judge.

The question for this case is whether an insurance agent should be liable to a former customer for tortious misrepresentation and breach of implied contract. The alleged wrongdoing is a failure of the defendant insurance agent to advise plaintiff Thomas Murphy as to possible additional insurance coverage needs. The theory of the lawsuit and the asserted duty is a special relationship and special level of advisory responsibility.

The Appellate Division affirmed an order of Supreme Court, which granted defendants' motion for summary judgment and dismissed the complaint. Plaintiffs appeal pursuant to leave granted by this Court. We affirm the order of the Appellate Division because no special relationship was established on this record.

Plaintiffs Thomas Murphy and Webster Golf Course, Inc. sued defendants Donald C. Kuhn, Kuhn & Pedulla Agency, Inc., and its predecessor Roman A. Kuhn Agency, alleging professional negligence and breach of implied contract. This dispute originates in a 1991 automobile accident in Florida involving Murphy's son. One person died and several others suffered serious injuries as a result of the accident. At that time, the title to the son's car was in his father's name and the personal insurance was placed under the commercial automobile policy covering Murphy's business, Webster Golf Course, Inc. After exhausting the $500,000 policy limit to settle the car accident claims, Thomas Murphy assertedly paid an additional $194,429.50 plus $7,500 in attorneys' fees. Then, he sued these defendants to recover the additional sums he had to pay personally.

Defendants began providing the property, casualty and liability insurance to plaintiffs in 1973 in connection with their golf business. Beginning in 1977, defendant Donald Kuhn also handled all of Murphy's personal insurance needs, providing him with both homeowners insurance and personal automobile coverage. In 1979, plaintiff Thomas Murphy and his partner, Edward Rieflin, completed their purchase of the Happy Acres Golf Course and formed Webster Golf Course, Inc. Happy Acres had been a client of the Roman A. Kuhn Agency since 1957.

In 1990, Kuhn placed personal automobile coverage for Murphy with The Hartford, as insurer. Later that year, Hartford notified Murphy that his coverage was in danger of cancellation due to the poor driving records of his children. Murphy then transferred the insurance covering his son's car, which was registered and titled in Murphy's name, from Murphy's personal policy to Webster Golf Course's commercial automobile insurance policy. Murphy testified at his deposition that it was his standard arrangement to place title and register his children's cars in his name. From 1984 until the time of the accident, the liability limits on the commercial policy were $250,000 per person and $500,000 total per accident. Murphy never requested higher liability coverage for his personal and family automobile insurance needs, which were subsumed within the commercial automobile liability policy.

Supreme Court concluded that, absent a request by the customer, an insurance agent "owes no continuing duty to advise, guide or direct the customer to obtain additional coverage." ." Therefore, acknowledging that on this record plaintiffs never specifically requested defendants to increase the liability limits on the commercial automobile policy, the court held that defendants owed no special duty of affirmative advisement to plaintiffs. The court also declined to adopt plaintiffs' "special relationship" theory.

Plaintiffs propose that insurance agents can assume or acquire legal duties not existing at common law by entering into a special relationship of trust and confidence with their customers. Specifically, plaintiffs contend that a special relationship developed from a long, continuing course of business between plaintiffs and defendant insurance agent, generating special reliance and an affirmative duty to advise with regard to appropriate or additional coverage.

Generally, the law is reasonably settled on initial principles that 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; however, they have no continuing duty to advise, guide or direct a client to obtain additional coverage (see, Wied v. New York Cent. Mut. Fire Ins. Co., 208 A.D.2d 1132, 1133, 618 N.Y.S.2d 467; Hjemdahl-Monsen v. Faulkner, 204 A.D.2d 516, 517, 611 N.Y.S.2d 309; Rogers v. Urbanke, 194 A.D.2d 1024, 1025, 599 N.Y.S.2d 697; Harnish v. Joseph J. Naples & Assocs., 181 A.D.2d 1012, 1013, 581 N.Y.S.2d 504; Erwig v. Edward F. Cook Agency, 173 A.D.2d 439, 570 N.Y.S.2d 64). Notably, no New York court has applied plaintiffs' proffered "special relationship" analysis to add such continuing duties to the agent-insured relationship (see, Wied v. New York Cent. Mut. Fire Ins. Co., 208 A.D.2d 1132, 1133-1134, 618 N.Y.S.2d 467, supra ).

Recently, however, this Court recognized a special relationship in a commercial controversy, involving no generally recognized professional relationship (see, Kimmell v. Schaefer, 89 N.Y.2d 257, 260, 652 N.Y.S.2d 715, 675 N.E.2d 450). We held that the relationship between the parties "under the circumstances [there] required defendant to speak with care" (id., at 260, 652 N.Y.S.2d 715, 675 N.E.2d 450). Kimmell cautions, however, that "liability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified" (id., at 263, 652 N.Y.S.2d 715, 675 N.E.2d 450). For example, "[p]rofessionals, such as lawyers and engineers, by virtue of their training and expertise, may have special relationships of confidence and trust with their clients, and in certain situations we have imposed liability for negligent misrepresentation when they have failed to speak with care" (id., at 263, 652 N.Y.S.2d 715, 675 N.E.2d 450, citing Ossining Union Free School Dist. v. Anderson LaRocca Anderson, 73 N.Y.2d 417, 541 N.Y.S.2d 335, 539 N.E.2d 91 [engineering consultants]; White v. Guarente, 43 N.Y.2d 356, 401 N.Y.S.2d 474, 372 N.E.2d 315 [accountants]; Ultramares Corp. v. Touche, 255 N.Y. 170, 174 N.E. 441 [accountants]; Glanzer v. Shepard, 233 N.Y. 236, 135 N.E. 275 [public weighers] ).

The Court concluded that given "the absence of obligations arising from the speaker's professional status" in the commercial context, "there must be some identifiable source of a special duty of care" in order to impose tort liability (id., at 264, 652 N.Y.S.2d 715, 675 N.E.2d 450). "The existence of such a special relationship may give rise to an exceptional duty regarding commercial speech and justifiable reliance on such speech" (id.). We determined, to be sure, that "[w]hether the nature and caliber of the relationship between the parties is such that the injured party's reliance on a negligent misrepresentation is justified generally raises an issue of fact" (id.). It is important to note that Kimmell is significantly distinguishable from the instant case, which involves an insurance agent-insured relationship and an alleged failure to speak. We therefore allude to Kimmell for its general relevance and disclaim...