By Barry Zalma, ESQ., CFE, owner, Zalma Insurance Consultants
The Coventry First case should cause great concern to all insurance agents and brokers. In People ex rel Cuomo v. Coventry First LLC, No. 115 (N.Y. 06/30/2009), New York found, on the basis of a pleading issue where the court was required to take the language pleaded to be true, a fiduciary relationship where one had never existed before. A fiduciary relationship exists between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation, such as a trustee or executor.
Although Coventry First deals with sellers of life settlement contracts, different from viatical contracts, New York has established that a fiduciary relationship exists between the seller and the buyer of a life settlement contract. If courts across the country follow this decision and expand it from its narrow holding to apply to all insurance agents and brokers–imposing on them a fiduciary duty, including the disclosure obligations that go with such duties–it will expand the potential scope of brokers' civil liability for a broader range of conduct.
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