The Supreme Court of the State of New York, County of Nassau, has reversed a lower court decision that found an insurance agent could potentially be held responsible for misrepresentations in a life insurance application.
In applications for two $500,000 life insurance policies, an insured failed to disclose that she regularly consumed large amounts of alcohol and had recently received treatment at a residential substance abuse facility. This information came to light after her death and the carrier commenced an action to rescind the policy due to a material misrepresentation.
The deceased’s husband commenced a third-party action against the agent, claiming that he failed to advise her of the importance of providing truthful answers to all the questions on the policy applications.
Under New York law, insurance agents are not held responsible for misrepresentations in insurance applications signed by the insured and which clearly state that the insured is attesting to the truthfulness of the information provided. Both of these elements existed in this case.
There is an exception, however, where the agent and the insured had a fiduciary relationship. Such a relationship can exist where the agent provides services beyond assisting the applicant in purchasing insurance. Here, in addition to providing insurance services, the agent had provided the insured and her husband with financial advice.
The trial court found that this financial advice role raised a question of fact as to whether he owed the insured a fiduciary duty and denied the motion for summary judgment filed on behalf of the agent.
On appeal, attorney Jonathan Harwood, of Traub Eglin Lieberman Straus LLP, demonstrated to the court that there was not sufficient evidence to establish that a fiduciary duty did exist, as any financial services provided to the insured were distinct from the insurance services.
Harwood was also able to convince the appellate court that plaintiff failed to provide any evidence that the insured could have obtained life insurance if she had been advised to disclose her full history of alcoholism and treatment. Without this, the appellate court found, plaintiff could not establish that any actions of the agent were the proximate cause of the rescission of the policies.
The appellate court thus reversed the decision of the trial court, granted summary judgment in favor of the agent and dismissed all claims with prejudice. As a result, the agent no longer faces potential liability of up to $1,000,000.
The case was MONY Life Insurance Company v. Angel Cordero, Jr. v. Neal Hayias. (Trial court index number 01-01327, appellate division docket number 2004-10549).
Source: Traub Eglin Lieberman Straus LLP
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