HOFFEND SONS INC v. ROSE KIERNAN INC (2005)

Plaintiff commenced this action against defendant Rose & Kiernan, Inc. (R & K), its bonding and insurance broker, and defendant Mark C. Nickel, the senior vice president of R & K.   The amended complaint alleges that defendants failed to procure insurance coverage for damage sustained to the work product of plaintiff during its installation of theatrical stage and rigging equipment in Argentina on October 5, 2000.   Four causes of action concern the alleged failure to procure insurance:  the first and fifth are for negligence, the second is for breach of fiduciary duty, and the third is for breach of contract.   In addition, the amended complaint asserts a cause of action for fraud, based on alleged misrepresentations by defendants that the damage was covered by insurance and that plaintiff would be indemnified for its loss.   Defendants moved for summary judgment dismissing the amended complaint, and plaintiff cross-moved for partial summary judgment on liability on the negligence causes of action.   In addition, plaintiff sought leave to amend the amended complaint by adding a cause of action for negligent misrepresentation with respect to defendants' alleged representations of coverage and pending payment following the loss, and by increasing the ad damnum clause from $1,000,000 to $15,000,000.   Supreme Court denied defendants' motion and granted only that part of plaintiff's cross motion with respect to the ad damnum clause.   We conclude that the court should have granted defendants' motion and properly denied those parts of plaintiff's cross motion for partial summary judgment on liability on the negligence causes of action and for leave to amend the amended complaint to add a cause of action for negligent misrepresentation.   We therefore further conclude that plaintiff's cross motion with respect to the ad damnum clause should be dismissed as moot.   Thus, we modify the order accordingly.

 Addressing first the cause of action for breach of fiduciary duty, we note that, because as a general rule there is no fiduciary relationship between a broker and its customer, that cause of action against Nickel and R & K must be dismissed (see Busker on the Roof Ltd. Partnership v. Warrington, 283 A.D.2d 376, 377, 725 N.Y.S.2d 45;  Barco Auto Leasing Corp. v. Montano, 215 A.D.2d 617, 618, 627 N.Y.S.2d 705;  see generally Chase Scientific Research v. NIA Group, 96 N.Y.2d 20, 30, 725 N.Y.S.2d 592, 749 N.E.2d 161).   With respect to the negligence and breach of contract causes of action, which as previously noted are based on the failure to procure insurance, we conclude that plaintiff raised triable issues of fact whether its Chief Executive Officer, Donald Hoffend (Hoffend), made a specific request for foreign builder's risk coverage with respect to the Argentina project and whether the relationship between the parties and conversations between Hoffend and Nickel gave rise to a special relationship obligating defendants to procure such coverage (see Shenorock Shore Club v. Rollins Agency, 270 A.D.2d 330, 331, 705 N.Y.S.2d 56;  see generally Murphy v. Kuhn, 90 N.Y.2d 266, 660 N.Y.S.2d 371, 682 N.E.2d 972).   Nevertheless, we conclude that the subject causes of action are barred by plaintiff's receipt of the Traveler's Property Casualty inland marine policy in January 2000, nine months before the October 5, 2000 loss.   Pursuant to the terms of that policy, the coverage territory was limited to the United States, Puerto Rico and Canada.   Plaintiff is charged with “ ‘conclusive presumptive knowledge of the terms and limits of [the policy],’ ” thus “defeating [its causes of action for negligence and breach of contract] as a matter of law” (Catalanotto v. Commercial Mut. Ins. Co., 285 A.D.2d 788, 790-791, 729 N.Y.S.2d 199, lv. denied 97 N.Y.2d 604, 736 N.Y.S.2d 308, 761 N.E.2d 1035;  see Laconte v. Bashwinger Ins. Agency, 305 A.D.2d 845, 846, 758 N.Y.S.2d 562;  see also Nicholas J. Masterpol, Inc. v. Travelers Ins. Cos., 273 A.D.2d 817, 818, 711 N.Y.S.2d 88;  M & E Mfg. Co. v. Frank H. Reis, Inc., 258 A.D.2d 9, 12, 692 N.Y.S.2d 191).

 The court properly denied that part of plaintiff's cross motion seeking leave to amend the amended complaint to add a cause of action for negligent misrepresentation on the ground that the proposed cause of action was meritless, but the court erred in failing to grant that part of defendants' motion with respect to the fraud cause of action, which is equally meritless.   “Reasonable reliance on the alleged misrepresentations is a necessary element of both fraudulent and negligent misrepresentation” (Ruffino v. Neiman, 17 A.D.3d 998, 1000, 794 N.Y.S.2d 228;  see Old Clinton Corp. v. 502 Old Country Rd., 5 A.D.3d 363, 365, 773 N.Y.S.2d 410;  H & R Project Assoc. v. City of Syracuse, 289 A.D.2d 967, 969, 737 N.Y.S.2d 712).   Here, neither the Traveler's inland marine policy nor the liability policy issued to and received by plaintiff covered the subject loss.   Moreover, plaintiff received further notice of those facts in the reservation of rights letter issued by the liability insurance carrier in November 2000 with respect to its policy.   Under these circumstances, it cannot be said that plaintiff reasonably relied on the alleged misrepresentations that there was coverage and that payment would be made (see Greater N.Y. Mut. Ins. Co. v. White Knight Restoration, 7 A.D.3d 292, 293, 776 N.Y.S.2d 257;  H & R Project Assoc., 289 A.D.2d at 969, 737 N.Y.S.2d 712;  Prestige Foods v. Whale Sec. Co., 243 A.D.2d 281, 282, 663 N.Y.S.2d 14).

It is hereby ORDERED that the order so appealed from be and the same hereby is unanimously modified on the law by granting the motion, dismissing the amended complaint and dismissing the cross motion insofar as it seeks leave to amend the ad damnum clause and as modified the order is affirmed without costs.

MEMORANDUM: