Broker’s Alleged Faulty Advice Not Actionable As Negligence, But Negligent Misrepresentation Claim Is Possible

For an excellent overview of how the economic loss doctrine works in the insured-broker context, read J.F. Meskill Enterprises, LLC v. Acuity, 2006 WL 903207 (N.D. Ohio April 7, 2006).   Meskill bought a $1 million Commercial General Liability policy from Acuity, a broker.  Meskill was then sued for trade dress infringement, but an Acuity representative said the policy didn’t cover the claim, so neither Meskill nor the broker tendered it to the insurer.  Meskill eventually settled the lawsuit for $70,000 and paid $170,000 to defend itself, then brought claims for negligence and negligent misrepresentation against the broker, alleging the claim was covered and Acuity gave negligent advice about the tender. (Some trade dress claims have been found to be covered if they involve use of the infringing trade dress in advertisements).

The court said, in deciding a motion on the pleadings, that the economic loss doctrine barred the negligence claim.  The economic loss doctrine was developed primarily to reign in the scope of products liability, but in recent decades it has been expanding across the spectrum of tort theory.  Essentially, the economic loss doctrine is that recovery is not permitted in tort for losses in which no physical injury or damage to tangible property has occurred, unless there is a special relationship between the parties.  However, the court said, the economic loss doctrine has not been applied in Ohio to claims of negligent misrepresentation, which protects against a harm different from that of a straight negligence claim, and allowed the misrepresentation claim to stand.

UPDATE: Thanks to an alert reader for pointing out that I got the name of the broker and the insurer backwards in this post.  The broker is named Accordia and the insurer is Acuity.  Thanks goodness that is the only mistake I’ve made so far this year!  

1 Comment

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One Response to Broker’s Alleged Faulty Advice Not Actionable As Negligence, But Negligent Misrepresentation Claim Is Possible

  1. Joe Axe

    Your blog is incorrect. The broker was Accordia, and the carrier was Acuity.