Insured Survives Agent’s Motion to Dismiss Complaint Alleging Failure to Provide Coverage for COVID-19

    The agent’s motion to dismiss the insured’s suit for failure to provide adequate coverage for business interruption due to catastrophic events was denied. Social Life Magazine, Inc. v. Hudson Valley Agency Alliance, LLC, 2023 N.Y. Misc. LEXIS 2351 (N.Y. Sup. Ct. May 10, 2023). 

    Plaintiff had used defendants Hudson Valley and Kathryn E. Murphy Insurance Agency, Inc. as its agents beginning in 2009. In 2019, plaintiff alleged it worked with defendants to secure a policy that would cover “all risks that were beyond its control including business interruption from any and all catastrophic events.” Plaintiff claimed that defemdants did not inform it about coverage deficiencies related to the pandemic. 

    Defendants informed plaintiff that it had procured the best possible available policy in August 2019. Plaintiff alleged it was informed by defendants that the policy included complete coverage for business interruption resulting from any and all catastrophic events. Based upon this representation, plaintiff purchased a policy issued by Sentinel Insurance Company. 

    Plaintiff alleged that in 2020 its business activities were disrupted by the COVID-19 pandemic and resulting public health measures, causing it damages. Sentinel denied coverage. Plaintiff sued the agents for negligence and negligent misrepresentation. Murphy moved to dismiss

    The court found that plaintiff sufficiently alleged that Murphy breached its duty of care by failing to procure a policy “with complete coverage for business interruption resulting from any and all catastrophic events.” This breach caused damages to plaintiff when its business activities were interrupted by the COVID-19 pandemic. 

    The complaint sufficiently alleged the elements of negligent misrepresentation. The complaint adequately pled a special relationship existed between plaintiff and Murphy based on their ten years of prior dealings during which plaintiff purportedly consulted with Murphy “on multiple occasions regarding the adequacy of its insurance coverage.” Murphy’s knowledge that plaintiff was relying on it to protect against business risks was based on “express conversations and past course of dealings.” Plaintiff adequately pled a special relationship with Murphy by specifically alleging that it regularly consulted with Murphy about its insurance needs during their decade-long relationship.

    Taking the allegations in the complaint as true, the court found that plaintiff adequately stated a cause of action for negligence and negligent misrepresentation. The motion to dismiss was denied.