AGENT NOT LIABLE FOR NON-DISCLOSURE:

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 alcohol and had received treatment for substance abuse. This information came to light after her death and the carrier moved to rescind the policy due to a material misrepresentation. The deceased’s husband sued the agent, claiming that he failed to advise her of the importance of providing truthful answers. 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. There is an exception, however, where the agent and the insured had a fiduciary relationship, such as where the agent provides services beyond assisting the applicant in purchasing insurance. This agent had provided the insured 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. 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. The appellate court 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 million.