Seven Bridges Foundation v. Wilson Agency Inc.
Evidence that an insurance broker failed to explain the "coinsurance" principle to a client may not be enough to prove that the insurance broker breached its fiduciary duty to the client. Allegedly, the defendant insurance broker knew the plaintiff, Seven Bridges Foundation, was not knowledgeable about insurance, and that the plaintiff relied on the defendant's expertise and knowledge. Seven Bridges entered a construction contract to build a building and requested that the defendant obtain builders' risk insurance. Allegedly, the defendant broker arranged a $6.5 million builders' risk insurance policy from Travelers Insurance Co. and did not request a copy of the plaintiff's construction contract or request additional information about appropriate insurance coverage. In January 2009, the project was finished, and the plaintiff requested a reduction in the amount of coverage. Insurance coverage was reduced to $3 million, which was less than the value of the building. The building was damaged in a fire and repairs cost $5.2 million. As a result of the "coinsurance" principle, Travelers was only required to pay $2.1 million. The plaintiff sued the defendant insurance broker, alleging that, if informed about the "coinsurance" principle, the plaintiff would not have reduced its insurance coverage. The defendant moved to strike the plaintiff's breach-of-fiduciary-duty count. To prevail, the plaintiff must prove: 1.) existence of a fiduciary duty; and 2.) breach of the duty of loyalty and honesty. The court found that the plaintiff's amended complaint failed to adequately allege a cause of action for breach of fiduciary duty. The plaintiff's allegation that the defendant attempted to "curry favor" was insufficient to allege fraudulent or dishonest conduct. The defendant's alleged failure to explain the "coinsurance" principle was not dishonest or disloyal. "Merely pleading the words 'dishonest' and 'disloyal,' " wrote the court, "without alleging facts suggesting fraud, self-dealing, conflict of interest, or other immorality on the defendants' part, fails to state a legally sufficient claim for breach of a fiduciary duty." The court granted the defendant's motion to strike.