In Tiara Condominium Assoc., Inc. v. Marsh & McLennan Co., Inc., 2010 U.S. App. LEXIS 10835 (5th Cir. May 27, 2010), it was unclear whether, under Florida law, the economic loss rule foreclosed claims for negligence and breach of fiduciary duty against the insurance broker. Accordingly, the Fifth Circuit certified the question to the Florida Supreme Court.
In 2002, the Condominium Association retained Marsh & McLennan to procure insurance for its condominium building. As a result, the Association secured a policy with Citizens Property Insurance with a loss limit of nearly $50 million. Two hurricanes caused extensive damage to the condominium in September 2004. The Association began to rebuild, but as costs approached the policy limit, the Association asked March to assure that the policy contained a per-occurrence limit rather than an aggregate limit on the coverage. If the policy was per-occurrence, the limit would apply for each occurrence, increasing the total relief available to the Association to approximately $100 million.
Marsh advised the coverage was per-occurrence. Based on Marsh's assurances, the Association continued its remediation efforts and spent more than $100 million in repairs. When the Association sought payment from Citizens, however, the insurer maintained the policy contained an aggregate limit, not a per-occurrence limit. The Association sued Citizens and eventually settled for about $89 million. No determination was made, however, on whether the policy established a per-occurrence or aggregate limit.
The Association then sued Marsh for failure to procure adequate coverage. The district court granted summary judgment to Marsh on all claims.
On appeal, the Association argued Marsh had breached the contract and made misrepresentations by procuring a policy with an aggregate limit. The Fifth Circuit disagreed, noting that the policy specifically referred to per-occurrence coverage. Accordingly, Marsh neither breached the contract nor negligently misrepresented the coverage because it secured a per-occurrence policy from Citizens.
The Association's additional claims for negligence and breach of fiduciary duty against Marsh, however, turned on an interpretation of Florida law. Florida recognized the economic loss rule as a bar to recovery in tort for economic damages that arise in contract. An exception to the economic loss rule applied, however, where the contract related to the provision of "professional services" because limiting liability for such services violated public policy. The Association cited several collateral failures, including Marsh's failure to advise of its belief that the Association was under-insured. But it was unclear whether an insurance broker provided professional services under Florida law. Consequently, the following was certified to the Florida Supreme Court:
Does an insurance broker provide a "professional service" such that the insurance broker is unable to successfully assert the economic loss rule as a bar to tort claims seeking economic damages that arise from the contractual relationship between the insurance broker and the insured?