First Circuit Affirms Dismissal of Claims Against Marsh
The U.S. Court of Appeals for the First Circuit has affirmed the dismissal of breach of contract, negligence, and fiduciary duty claims against Marsh arising from an alleged gap in excess liability coverage for a Massachusetts client’s yacht.
In its August 21 decision in Galakatos v. Marsh & McLennan Companies, Inc., the First Circuit applied Massachusetts law in finding that the complaint failed to allege that the insured made an “intelligible request” for the disputed insurance coverage. The court also found that Marsh’s statements about advising its client and eliminating potential coverage gaps did not create a contractual obligation or establish a fiduciary relationship.
The decision affirms U.S. District Judge Nathaniel M. Gorton’s February 2025 dismissal of the lawsuit.
Agency Checklists previously reported in detail on the District Court decision dismissing Galakatos’s claims against Marsh and the yacht accident and insurance coverage dispute underlying the case.
Greek Yacht Collision Triggered Coverage Dispute
Nicholas Galakatos had been a Marsh brokerage client since 2006. His complaint alleged that Marsh was retained to advise him concerning insurance needed to protect his assets in the United States and Greece and to place and procure that insurance.
The coverage dispute followed a September 8, 2018 collision in Greece involving Galakatos’s boat, the GALANI. The accident resulted in personal injury and property damage claims against Galakatos.
At the time, Galakatos had a $10 million excess liability policy from AIG providing coverage “anywhere in the world,” a separate $10 million excess policy from Bankers Standard Insurance Co., and a Groupama policy providing third-party liability and other marine coverages for the GALANI.
AIG ultimately denied coverage for the collision because the GALANI Groupama policy had not been added to the AIG excess coverage. Galakatos’s complaint did not disclose the status of the Bankers Standard excess policy.
Galakatos settled the underlying claims and incurred defense costs. The Groupama policy provided personal injury damages capped at €50,000 per person, an amount substantially less than Galakatos’s settlements.
In May 2024, Galakatos sued Marsh, alleging that it had failed to place and procure third-party liability insurance for the GALANI for the 2018-2019 term providing up to $20 million in coverage through primary and excess policies.
Marsh Statement Did Not Create Contractual Obligation
Central to Galakatos’s contract claim was a Marsh communication stating:
“In order for Marsh to thoroughly and appropriately advise you and eliminate potential gaps in coverage, it is very important that all your property and liability exposures be identified and disclosed to us, even those for which we may not be providing coverage.”
Galakatos argued that once he disclosed his ownership of the GALANI, the statement obligated Marsh to eliminate gaps in his excess insurance coverage.
The First Circuit disagreed.
The court noted that a breach of contract claim must identify with substantial certainty the contractual promise allegedly breached. Marsh’s statement did not satisfy that requirement.
Among other deficiencies, the statement was undated, did not specify the duration of any alleged obligation and contained no obligatory language stating that Marsh “will” or “shall” take action after receiving information about an exposure.
“The complaint simply does not assert a promise that Marsh allegedly breached,” the court concluded.
Disclosure Was Not an “Intelligible Request”
The negligence claim presented the issue of greater practical importance for Massachusetts insurance agencies.
Citing the Massachusetts Supreme Judicial Court’s 2022 decision in Masonic Temple Association of Quincy, Inc. v. Patel, the First Circuit stated:
“Brokers have a duty to obtain insurance coverage that their client asks them for, but [brokers] cannot be liable for failing to procure insurance when there was no intelligible request for [them] to do so.”
Under typical circumstances, the court added, brokers are not expected to act proactively in procuring insurance.
Galakatos argued that Marsh owed him a duty to eliminate the excess coverage gap once he informed the broker that he owned the GALANI.
The court distinguished an insured disclosing an exposure from an insured requesting insurance for the exposure.
The complaint alleged that Galakatos had “identified and disclosed” the GALANI to Marsh, but it did not allege an insurance request associated with that disclosure.
“Just because Marsh asked for certain information ‘to thoroughly and appropriately advise [Galakatos] and eliminate potential gaps in coverage’ does not mean that Galakatos requested Marsh do so once he informed Marsh of Galani’s existence,” the court stated.
Because the complaint did not allege that Galakatos requested the relevant insurance or that Marsh promised to obtain it, the First Circuit affirmed dismissal of the negligence claim.
Long Brokerage Relationship Did Not Establish Fiduciary Duty
The First Circuit also rejected Galakatos’s claim that his relationship with Marsh imposed a fiduciary duty on the broker.
Under Massachusetts law, special circumstances can impose a greater duty of investigation, advice and assistance on an insurance agent. Factors include the length of the business relationship, the complexity and comprehensiveness of the customer’s coverage, the frequency of contact between the customer and agent, and the extent to which the customer relies on the agent’s advice because of the policies’ complexity.
An expanded relationship may also arise where an agent holds itself out as an insurance specialist, consultant, or counselor and receives compensation for consultation and advice apart from insurance premiums.
Galakatos had been a Marsh client for more than a decade. But the First Circuit found that the complaint did not allege that his insurance needs were particularly complex, that he paid Marsh separately for advice or services beyond insurance brokerage, or that he communicated frequently with Marsh.
Indeed, the complaint alleged that an October 2018 communication concerning an annual insurance review was the first such communication in more than four years.
The complaint also failed to identify specific advice Marsh provided concerning the GALANI or the insurance coverage the boat required.
The First Circuit therefore found no adequately alleged special circumstances establishing a fiduciary duty.
First Circuit Leaves Engagement-Letter Dispute Unresolved
The appeal also involved documents Marsh submitted with its motion to dismiss, including a client engagement agreement that had generated a dispute over a forum-selection provision and the applicable state law.
The First Circuit did not need those materials to decide the appeal.
The court applied Massachusetts law to the dispositive issues without deciding whether the additional documents required application of New York law or could properly be considered at the motion-to-dismiss stage.
Because the challenged materials had no bearing on its decision, the First Circuit affirmed the District Court’s determination that Galakatos’s motion to strike them was moot and should be denied without prejudice.
What the Decision Means for Massachusetts Agencies
The First Circuit’s decision draws an important distinction for Massachusetts insurance producers between disclosing an exposure and requesting insurance for that exposure.
The complaint alleged that Galakatos disclosed the GALANI to Marsh. That disclosure, however, did not by itself amount to an “intelligible request” that Marsh obtain particular insurance or eliminate any resulting gap in his excess coverage.
The decision also illustrates that the length of an insurance broker-client relationship alone does not establish the special circumstances necessary for a fiduciary duty. The court examined the substance of the relationship—including the complexity of the insurance needs, frequency of contact, separate compensation for advice and actual reliance on specific advice—rather than merely how long Marsh had served the client.
For Massachusetts agencies, that application of the Masonic Temple “intelligible request” standard is the First Circuit’s decision’s principal significance.
Owen Gallagher
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
Interested in connecting with me? Call me directly at 617-598-3801.
