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A Maryland state appeals court reinstated negligence charges against an Arthur J. Gallagher & Co. unit for its alleged failure to procure insurance coverages for a policyholder’s businesses.
Vincent P. Mona was the owner of three businesses — Clinton, Maryland-based Mona Electric Group Inc., Charleston, South Carolina-based Three Palms Design Build LLC and Coral Springs, Florida-based Clinton Investment Group LLC, according to Friday’s ruling by the Court of Special Appeals of Maryland in Annapolis in Vincent P. Monda et al. v. Arthur J. Gallagher Risk Management Services Inc.
Beginning in 2016, Mona Electric hired Gallagher as an insurance broker and reached an agreement that required Gallagher, for $135,000 per year, to provide ongoing advice.
While Mona Electric was the only client listed on the compensation agreement, Gallagher also presented Mr. Mona with a final insurance proposal identifying Three Palms and Clinton Investment Group as additional insureds.
Although Gallagher obtained insurance for Mona Electric from Travelers Property Casualty Co. of America, it failed to do so for Three Palms and Clinton Investment Group.
During the insurance coverage period, a Three Palms and Clinton Investment Group employee stole money belonging to the companies, according to the ruling.
Mr. Mona filed a claim with Travelers for $999,119 under the policy’s crime coverage portion. Travelers refused to pay because they were not insured under the policy.
Subsequently, Mr. Mona sold Mona Electric, but it was agreed any insurance proceeds would be paid to Mr. Mona, Three Palms and Clinton Investment Group.
Gallagher and Gallagher insurance broker Dennis C. Ourand were charged in state court with negligence, misrepresentation, breach of fiduciary duty and breach of contract. The trial court dismissed the case.
The appeals court affirmed the dismissal of the breach of contract and fiduciary claims but reinstated the negligence and negligent misrepresentation claims brought by Three Palms and Clinton Investment Group.
“Gallagher represented that Three Palms and Clinton Investment Group would be insured under ‘all lines’ of coverage but then failed to actually procure the promised insurance fee for these entities. These facts alone would be sufficient to plead a duty,” it said.
“The Amended Complaint, however, goes further,” the ruling said. Gallagher “held themselves out to plaintiffs as having expertise in insurance brokerage and advisory services” and in exchange Gallagher was paid $135,000 per year for these services in addition to the customary commissions, the ruling said in reinstating the negligence claims.
Gallagher had no comment. Information on Mr. Mona’s attorney was not available.