Lipman v. Arthur J. Gallagher Risk Management Services

Background

The Estate alleged that Gallagher had served as its insurance broker for many years. The Estate claimed that Gallagher previously helped maintain insurance coverage for the Lipman Apartments and that the parties had an ongoing professional-services agreement under which Gallagher would help obtain appropriate coverage in exchange for fees.

The insurance policies covering the Lipman Apartments were allegedly set to expire on February 28, 2023. The Estate alleged that Gallagher proposed a temporary “Desk Binder” providing weekly coverage that could extend for up to 30 days. On February 24, 2023, the Estate responded that the terms were acceptable and instructed Gallagher to proceed with a 30-day extension. The Estate alleged that Gallagher never confirmed the extension, failed to obtain it, and did not tell the Estate that coverage was missing.

On March 15, 2023, a fire on the 18th floor of the Sherry-Netherland building allegedly caused the ceiling above the Lipman Apartments to collapse, sending water, ash, smoke, and debris into the apartments. The Estate alleged that it spent more than $800,000 of its own money on remediation after AIG refused coverage because the requested extension was not in effect.

The Estate asserted seven claims: breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, negligence, negligent misrepresentation, insurance malpractice, and promissory estoppel. Gallagher moved to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. Gallagher also sought limits on damages and moved to strike allegations concerning settlement discussions, although it had received permission to file only a dismissal motion.

Claims That Survived

The court denied dismissal of the negligence claim. Under New York law, an insurance broker has a duty to obtain specifically requested coverage within a reasonable time or tell the client that it cannot do so. The court held that the Estate adequately alleged a specific request for 30 days of coverage, Gallagher’s failure to obtain or report the lack of coverage, and injury caused by that failure.

The court also denied dismissal of the breach-of-contract claim. The Estate adequately alleged an agreement, including that Gallagher would act as its broker, assess its insurance needs, work to obtain appropriate coverage, and receive professional fees. The court held that the agreement could be inferred from the parties’ conduct, including Gallagher’s repeated work to maintain coverage and the Estate’s alleged payment of invoices. The Estate also adequately alleged its own performance, Gallagher’s breach, and resulting damages.

The breach-of-fiduciary-duty claim survived because the Estate plausibly alleged a special relationship with Gallagher. The allegations included payment of professional-service fees, reliance on Gallagher’s expertise concerning interim coverage, and a longstanding course of dealing involving advice about complex insurance needs.

The negligent-misrepresentation claim also survived. Gallagher challenged only whether a special relationship created a duty to provide accurate information. Because the court found that the Estate plausibly alleged such a relationship, and Gallagher did not challenge the other elements in its opening brief, the court allowed the claim to proceed.

The court denied dismissal of the promissory-estoppel claim. Promissory estoppel is a legal theory that may apply when there is no enforceable written contract and a party reasonably relies on a clear promise. The court held that Gallagher’s email about obtaining up to 30 days of coverage, together with the Estate’s acceptance and instruction to proceed, created at least a factual question about whether Gallagher made a sufficiently clear promise. The Estate also plausibly alleged reliance and injury.

Claims Dismissed

The court granted dismissal of the claim for breach of the implied covenant of good faith and fair dealing. The Estate conceded that this claim was based on the same facts and sought the same remedy as its contract claim. The court held that, under New York law, an implied-covenant claim is duplicative and must be dismissed in those circumstances.

The court granted dismissal of the insurance-malpractice claim. It relied on New York decisions holding that claims against insurance brokers and agents do not constitute professional malpractice. The Estate also conceded that the claim would duplicate its negligence claim.

Other Requests

The court did not decide Gallagher’s arguments seeking to limit damages. It held that determining the proper form or amount of damages was premature at the motion-to-dismiss stage.

The court denied Gallagher’s motion to strike allegations about settlement communications because Gallagher had not obtained permission to file a motion to strike and had noticed only a Rule 12(b)(6) dismissal motion. The court also denied Gallagher’s request for oral argument.

Disposition

The court denied in part and granted in part Gallagher’s motion to dismiss. It denied the motion as to the breach-of-contract, breach-of-fiduciary-duty, negligence, negligent-misrepresentation, and promissory-estoppel claims. It granted the motion as to the implied-covenant and insurance-malpractice claims. The motion to strike was denied, and the request for oral argument was denied. Judge Mary Kay Vyskocil directed the Clerk of Court to terminate the motions at docket entries 15 and 17.