(Article from Insurance Law Alert, December 2025)
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Holding
A New York district court erred in dismissing a negligence claim against a broker based on lack of ripeness and failure to state a claim. Paro Mgmt. Co., Inc. v. Willis of N.J., 2025 U.S. App. LEXIS 29289 (2d Cir. Nov. 5, 2025).
Background
Paro Management alleged that Willis, its insurance broker, failed to convey notice of the presence of lead paint on its property to Paro’s insurer, despite Paro’s request to do so. When Paro was later sued by tenants, the insurer denied coverage based on untimely notice.
Paro sued Willis, alleging negligence and negligent misrepresentation. The district court dismissed the complaint as unripe based on the tenants’ pending suit against Paro and another pending suit between Paro and its insurer. The district court ruled that dismissal was also warranted based on Paro’s failure to state a claim for relief.
Decision
The Second Circuit reversed the district court’s ruling as to ripeness. The Second Circuit explained that Paro’s claims against Willis presented a “real, substantial controversy” notwithstanding the absence of rulings as to Paro’s liability to the tenants or the insurer’s liability to Paro. The court reasoned that Willis’s failure to convey notice to the insurer led to the coverage denial, which led to the instant lawsuit, prompting Paro to incur litigation costs in bringing a declaratory judgment action against its insurer. Thus, the court concluded, Paro’s injury is “actual,” not “conjectural or hypothetical.”
Turning to the merits of Paro’s suit against Willis, the court ruled that the complaint stated a claim for negligence. Under New York law, a broker’s obligation to an insured is generally limited to the procurement of coverage requested by the insured, but liability may arise where, as here, the insured asks the broker to take on additional responsibilities, such as providing notice to the insurer.
However, the Second Circuit affirmed the dismissal of Paro’s negligent misrepresentation claim. Such claims require representations that are “factual in nature, and not promissory or relating to future events that might never come to fruition.”
Comments
A question may arise as to whether negligence claims and negligent misrepresentation claims against a broker are duplicative. The district court had concluded that the two causes of action were duplicative, but since the Second Circuit dismissed the negligent misrepresentation claim based on the failure to allege the requisite elements, it declined to consider whether the two claims were duplicative. Notably, both causes of action require the policyholder to establish that the broker owed a duty of care and breached that duty.