Fox Paper, Ltd., v. Hanover Insurance Company, et al. MID-L-2818-16 (Trial Court October 6, 2016). A New Jersey Trial Court denied insurance broker Sano Brokerage, Co., Inc.’s (“Sano”) motion for summary judgment, finding that issues of fact exist as to whether Sano had a special position of trust and breached its standard of care owed to its client, Fox Paper, Ltd. (“Fox”).
Fox manufactures items such as paper plates and plastic silverware, and has offices and a warehouse in Brooklyn, New York. Sano procured insurance for Fox’s properties from Hanover Insurance Company (“Hanover”). Fox suffered damage arising from Superstorm Sandy, but Hanover denied coverage on the grounds that its policy did not cover flood-related losses.
The Court held that New York law applied to analyzing Sano’s standard of care. In doing this, the Court highlighted a significant difference between New Jersey and New York law concerning insurance brokers. Under New Jersey law, once a broker agrees to procure insurance for a client, it must carry out is responsibilities in to with its client. Conversely, under New York law, brokers are not held to the standard of a licensed professional fiduciary, and can be held to the standard of a fiduciary only if it can be factually established that the broker is in a special position of trust with the client.
This case will proceed with discovery to determine whether, under New York law, Sano was in a special position of trust with Fox.