On March 6, 2024, the Second Department issued a decision in Paraco Gas Corp. v. Jay Z. Gerlitz & Assoc., Inc., 2024 NY Slip Op. 01192, holding that an agreement to manage a company’s healthcare matters created a fiduciary duty, explaining:
The third amended complaint alleged that the defendants acted as both insurance broker and administrator of the plaintiff’s employee healthcare insurance account. In the latter capacity, the defendants allegedly engaged the services of several nonparty entities to assist in the management of the plaintiff’s employee healthcare matters. Those nonparty entities allegedly fraudulently overcharged the plaintiff and retained certain payments, causing losses to the plaintiff in the amount of approximately $2,200,000.
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The Supreme Court erred in granting that branch of the defendants’ motion which was to dismiss the cause of action alleging breach of fiduciary duty. To state a cause of action to recover damages for breach of fiduciary duty, which must be pleaded with the requisite particularity under CPLR 3016(b), a plaintiff must allege: (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant’s misconduct. A fiduciary relationship exists when one party is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relationship. Such a relationship, necessarily fact-specific, is grounded in a higher level of trust than normally present in the marketplace between those involved in arm’s length business transactions. The actual relationship between the parties determines the existence of a fiduciary duty rather than the parties’ contractual agreement.
Here, contrary to the defendants’ contention, the third amended complaint adequately alleged a relationship between the plaintiff and the defendants, in their capacity as administrator of the plaintiff’s employee healthcare matters, that gave rise to a fiduciary duty. While the defendants correctly contend that a fiduciary relationship does not ordinarily arise between an insurance broker and a client absent a special relationship, the third amended complaint does not suggest that the harm to the plaintiff was caused by the defendants’ failure to obtain insurance coverage in their capacity as insurance broker. Rather, the third amended complaint alleged that the defendants were entrusted with overseeing all aspects of the plaintiff’s employee healthcare matters, including the collection of premiums and the processing and payment of claims, that the plaintiff fully relied on the defendants to hire third-party entities to assist with administration, and that the plaintiff and the defendants had a long-standing relationship of trust in that regard.
(Internal quotations and citations omitted).