Appellate Court Confirms Insurance Agents Not Liable After Death of Insured for Alleged Misrepresentations in the Absence of a Fiduciary Duty

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Traub Eglin Lieberman Straus won reversal of a $1 million verdict that found an insurance agent responsible for misrepresentations in a life insurance application. Two policies were rescinded when it was discovered, after the insured's death, that the decedant had made material misrepresentations in the life insurance policies. The family sued the insurance agent and won in the lower courts, arguing the insurance agent should have advised her of the importance of providing truthful answers on the policy applications. On appeal before the Supreme Court of the State of New York, County of Nassau, Jonathan Harwood of TELS argued that a fiduciary duty did not exist, and the agent was not the proximate cause of the rescission of the policies. The court agreed with TELS' legal arguments, and overturned the lower court's verdict.

TRAUB EGLIN LIEBERMAN STRAUS LLP (TELS) is pleased to announce that in a recent case argued by Jonathan Harwood before the Supreme Court of the State of New York, County of Nassau, the firm won reversal of 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 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, Mr. Harwood 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. TELS 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)

TELS congratulates Mr. Harwood on his victory. For more information on Mr. Harwood and his C.V., please visit:

http://www.tels.com/profiles/jonathanharwood/

ABOUT TELS

TRAUB EGLIN LIEBERMAN STRAUS LLP (TELS) has achieved a national reputation for excellence in legal representation. Our philosophy is to provide quality legal representation in an expeditious and efficient manner. Our emphasis on client service, as well as our reputation in the legal community, has served our clients and the firm well. TELS has been recognized by many, including Martindale-Hubbell, for outstanding legal ability and ethical standards. For more information, visit us online at http://www.tels.com.

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