A New York federal court has granted an insurance broker’s motion for a new trial, which vacates a jury verdict and judgment of over $23 million on the ground that an erroneous jury instruction was given to the jury. Wiley Rein represented the insurance broker for purposes of post-trial motions and possible appeal. Cammeby’s Mgmt. Co., LLC v. Affiliated FM Ins. Co., 2016 WL 316023 (S.D.N.Y. Jan 26, 2016).

The plaintiff real estate management company hired an insurance broker to procure a property insurance policy with $30 million in flood insurance coverage. Three weeks later, the broker arranged to reduce the limits of flood insurance coverage from $30 million to $10 million.

After Hurricane Sandy damaged property owned by the real estate management company, the insurance broker was sued for negligence in arranging for the reduction in flood coverage. The real estate management company argued that it never wanted the limits reduced from $30 million to $10 million. Among other things, the broker argued that it was asked to reduce the limits and, in any event, the real estate management company ratified the reduction in flood limits given that it was aware of the reduced limits and accepted a substantial amount in returned premium.

During deliberations following an eight-day trial, the jury sent out two notes relevant to the insurance broker’s ratification defense. The court’s response to the jury indicated that the real estate management company could ratify the reduced premium only through “some writing or conversation or other conduct that [an employee or agent of the real estate management company] intentionally approved of what [the insurance broker] had done in obtaining a reduction.” The jury found the broker liable on the negligence claim, meaning that it did not credit the broker’s ratification defense.

The insurance broker filed a motion for judgment and for a new trial, arguing in relevant part that the court gave erroneous instructions to the jury with regard to the insurance broker’s defense of ratification of the reduction in limits of flood coverage. The trial court agreed that an erroneous instruction was given, holding that the most reasonable inference to the trial court’s response to the jury’s questions was that ratification could be demonstrated only if the real estate management company took an affirmative step to communicate its intent to ratify. However, the court determined that, under New York law, ratification may result from silence or inaction. Because an erroneous response was given to the jury, the court ordered a new trial.