Court Finds No Valid Cause of Action Against Insurance Agent for Negligence

In the case of The Original Apostolic Faith Church v. Geico, No. April Term, 2019 No. 04027 (C.P. Phila. Co. March 23, 2022 Djerassi, J.), the trial court, in a Rule 1925 Opinion, ruled that a Plaintiff could not maintain negligence claims against the retail insurance agent and the wholesale insurance broker that the Plaintiff had used to secure commercial insurance policy as those two parties did not owe the Plaintiff any duty to review or provide advice upon notice of a renewal of the policy.

The court also found that those two Defendants did not owe the Plaintiff any duty to assist the Plaintiff in finding any replacement coverage.

As such, the trial court requested the Superior Court to affirm the trial court’s entry of summary judgment in favor of the Defendants.

Anyone wishing to review a copy of this decision may click this LINK.

Source: “Digest of Recent Opinions.” Pennsylvania Law Weekly (June 7, 2022).

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Daycare and Preschool Loses Bid To Secure Coverage Under Its All-Risk Policy for COVID-19 Losses

In the case of BSD-360, LLC v. Phila. Indem. Ins. Co., No. 20-4719 (E.D. Pa. Jan 13, 2022 Pratter, J.), an insurance carrier’s Motion to Dismiss was granted in a COVID-19 coverage case after the court ruled that the “insured gets what protection he pays for” and found that, while the policy in question covered losses for property damages and contains provisions related to communicable diseases, the Court found that the Plaintiff's claims were not covered.

According to the Opinion, the insured in this case was a daycare and preschool facility.  The court noted that the insured has purchased an “all-risk insurance policy.”

In early 2020, the daycare was forced to suspend operations due to the COVID-19 global pandemic. The insured sought to recovery under its insurance policy and the carrier denied the claim.

When the claim was denied, the insured sued both the insurance company and its insurance broker.

As noted above, the court found that the insured’s claim was not covered under the plain language of the insurance contract.  The Court noted that there was no claim that there was an "outbreak" of a communicable disease on the insured's premises or any "physical loss" of the premises.  As such, the case against the insurance company was dismissed under an application of New Jersey law.

After reviewing the records, the court also found that the Plaintiff had not alleged any negligence on the part of its insurance broker. As such, the broker’s Motion to Dismiss was also granted although this decision was based on an application of Pennsylvania law.

No leave to file an Amended Complaint was granted.

Anyone wishing to review a copy of this decision may click this LINK.  The Court's companion Order can be viewed HERE.


I send thanks to Attorney John Gerard Devlin of the Philadelphia law firm of Devlin Associates, P.C. for bringing this case to my attention.

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Plaintiff Found To have Asserted Valid Cause of Action Against Insurance Agency and Agents for Faulty Advice on Coverage

In the case of Process Technologies and Packaging, LLC v. Agent K. Inc., No. 21-CV-3021 (C.P. Lacka. Co. Nov. 24, 2021 Nealon, J.), address Preliminary Objections in a case in which a cosmetics company being sued for $65 million by L’Oreal asserted that its insurance agents should have warned them and provided them with the appropriate liability coverage. 

The Plaintiffs averred that the insurance agencies at issue allegedly gave the cosmetic company officials faulty advice and left the company with no insurance to coverage against L’Oreal’s claims that the cosmetic company allegedly mishandled production of a certain cosmetic product.

In their Complaint, the cosmetic’s company maintained that the insurance agency failed to exercise the required professional care by recommending and securing readily available liability coverages under a manufacturer’s errors and omissions policy that would cover the claims being asserted by L’Oreal.

The Plaintiffs additionally asserted breach of contract claim against two (2) of the insurance agencies based upon an alleged oral agreement to assess the cosmetic company’s insurance needs on a semi-annual basis, to advise of any gaps in the insurance coverage, to recommend appropriate coverages for its business risk, and to obtain proper coverage for those risks.

Two (2) of the Defendant insurance agencies filed preliminary objections in the form of demurrers to the breach of contract claim on the grounds that there was no consideration to support the allegation of the creation of an enforceable contract. The Defendants also asserted that any contract claim was barred by the “gist of the action” doctrine. One insurance agency additionally challenged the legal sufficiency of the negligence claims against them and asserted that they cannot be liable individually absent an allegation that any of the insurance agents acting outside of the scope of their agency or employment.

Judge Nealon ruled that since the brokers and the agencies received a portion of these insurance premiums that the cosmetic company paid to the insurance company’s procured by the insurance agencies, the cosmetic company was found to have asserted an adequate consideration to sustain its claim of a valid oral contract with the insurance agencies.

Relative to the arguments under the gist of the action doctrine, Judge Nealon noted that that doctrine precludes a party from recasting an ordinary breach of contract claim as a tort claim, not vice-versa. Here, the court ruled that the insurance brokers or agencies could be sued in tort for failing to exercise the ordinary skill and knowledge required in their license profession. These Defendants could also be separately sued in contract for breaching their duty to provide professional services in compliance with the standards of the industry.

In his decision, Judge Nealon additionally held that the agents or employees may be liable for their own torts, even if they were acting within the scope of their employment when they engaged in the tortious conduct, and regardless of whether their principal or employer also may be vicariously liable for that conduct.

As such, Judge Nealon overruled all of the Preliminary Objections in the nature of a demurrer that were asserted and allowed the case to proceed.


Anyone wishing to review a copy of this decision may click this LINK.

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