A recent U.S. District Court decision, Galakatos v. Marsh & McLennan, dismissed an insured’s damage suit against their insurance broker. The decision involves some useful points on how courts treat claims of insurance broker liability by insureds.
The case involved a prominent biotech executive whose yacht, located in Greece, rammed and sank another boat, causing serious personal injuries to one of its occupants. In the aftermath of the accident, the Greek police charged the boat’s operator, and the injured person on the sunk boat sued the executive for damages in Boston’s federal court. Although ostensibly covered by insurance, the carriers claimed no coverage, and the executive had to fund his defense and ultimately settle the litigation for a substantial but undisclosed amount after mediation.
After settling the lawsuit against him, the executive sued his insurance broker, Marsh & McLennan, and its affiliated companies, including Marsh Private Client Services (“Marsh”), for breach of contract, negligence, and breach of fiduciary duty.
Judge Nathaniel Gorton’s dismissal effectively established the boundaries for what Massachusetts insurance professionals must—and perhaps more importantly, must not—promise their clients.
For agencies managing high-net-worth clients, this case provides some useful examples of how seemingly routine broker-client communications can become the center of litigation.
Marsh’s private client services and the coverage gap
Nicholas Galakatos, a senior managing director at Blackstone Life Sciences in Cambridge, is a Massachusetts resident of Massachusetts and Vermont who also owns property in Greece.
In 2006, Galakatos became a Marsh customer, being provided with its Private Client Services (PCS). A 2017 PCS engagement letter stated in answering the question “What is Marsh Private Client Services?”
As part of Marsh, Marsh Private Client Services (PCS) provides solutions to help successful individuals and families manage their personal risk so they can have peace of mind knowing the lifestyle they’ve worked so hard to create is protected. Marsh PCS utilizes a unique risk management approach that is designed to help clients protect their personal property and assets through expert insurance counsel, superior risk management solutions, and unparalleled claims advocacy.
In 2015, Galakatos purchased a boat in Greece ( the ‘GALANI’) to use in waters near his Greek property.
Effective February 2018, Marsh placed a $10 million excess liability policy for Galakatos from AIG. Marsh then placed, effective April 2018, a second-layer $10 million excess liability policy from Bankers Standard.
In May 2018, allegedly relying on Marsh’s advice, Galakatos purchased, in Greece, a policy covering the GALANI for marine risks, including third-party liability, with a Greek subsidiary of Groupma, a French insurer. Galakatos alleges that Marsh was advised about Groupma policy placement for the GALANI’s risk.
The GALANI’s collision and the uncovered lawsuit
On September 8, 2018, Cindy Curtis, a resident of New York, was a passenger on a small boat, the MARINA, piloted by her husband, Demetre Cambouris, in the Paros-Antiparos Strait.
Nicholas Galakatos had returned to Boston from his summer residence in Greece by September 8, 2018. However, his gardener, Dimitrios Faroupos, allegedly, with Galakatos’ consent, operated the GALANI into Paros-Antiparos Strait with six persons on board.
Faroupos accidentally caused GALANI to crash into the stern of MARINA, driving the GALANI over the passenger area of MARINA before plunging back into the water. In the collision, GALANI’s hull and propellers struck Curtis.
The MARINA sank, but Curtis was rescued and taken to a local medical center before being transferred to a hospital in Athens. She had ten broken ribs, fractures of her shoulder blade, collarbone, sternum, and lower arm, multiple leg fractures, and deep wounds on her thigh from the GALANI’s propeller blades. After surgeries, she was held in an intensive care unit for almost a month. After further hospitalization in Athens, she returned to the United States and was admitted to New York Presbyterian Hospital in New York City for more surgeries and months of physical therapy. More than a year after the accident, Curtis still required a walker.
Following the crash, Faroupos was arrested for provocation of a shipwreck and causing serious personal injury under the Greek penal code.
The Curtis lawsuit
About six months after the boat wreck, Curtis and Cambouris filed a lawsuit in the United States District Court in Boston against Galakatos, seeking damages for maritime negligence, loss of consortium, and property damage.
Galakatos properly notified Marsh about the boat accident and requested Marsh notify his insurers. When Curtis and Cambouris filed the lawsuit, Galakatos learned that the Groupma liability policy did not bind the company to defend a lawsuit. The policy provided only indemnity and then only after Galakatos had paid damage because “obliged judicially” or “extra-judicially.”
An appeal for defense to Galakatos’ primary excess policy was denied. AIG refused coverage because, according to Galakatos, the Groupma policy had not been identified and scheduled as an underlying policy by Marsh on the AIG policy
As a result, Galakatos had to personally fund his legal defense, which involved the personal injury suit, an unsuccessful appeal to the First Circuit Court of Appeals seeking to send the case to a Greek court, and a second lawsuit seeking to limit Galakatos’ liability to the value of the Galina under a federal maritime statute.
After lengthy and expensive litigation, a federal court-appointed mediator brought the parties together and obtained a confidential settlement amount paid by Galakatos to Curtis and Cambouris.
Galakatos sues Marsh over the coverage gap.
In May 2024, Galakatos filed his lawsuit against Marsh in federal court in Boston. His claims in the suit alleged three counts: breach of contract, negligence, and breach of fiduciary duty. All of the three counts were based on the allegation that “Marsh failed [ed] to place and procure adequate third party liability coverage for GALANI up to $20,000,000.”
Marsh moved to dismiss procedurally, alleging that the November 2017 Client Engagement Letter, which Marsh claimed to apply to the brokerage agreement with Galakatos, had a forum-selection clause stating that:
“any litigation should be brought in the state or federal courts located in the State of New York, County of New York.
Therefore, Marsh argued that Galakatos’ suit in Massachusetts should be dismissed or transferred to New York.
On the merits, Marsh argued, independent of the forum-selection clause requiring a New York proceeding, each count of Galakatos’ complaint failed as a matter of law.
- The breach of contract count failed to identify any contract breached.
- The economic loss doctrine barred the negligence count because it did not allege any personal injury or property damage.
- The fiduciary duty count failed because the CEL explicitly stated that “When performing services, Marsh PCS and its affiliates are not acting as a fiduciary for you, nor acting under any other enhanced duty.”
Galakatos opposed this motion, challenging the enforceability of what he called a “legally opaque” agreement that he claimed never to have received.
Judge Gorton, however, sidestepped the forum selection issue entirely. Instead, he dismissed the complaint on substantive grounds, finding that Galakatos failed to properly state claims for breach of contract, negligence, or breach of fiduciary duty. Also, on Marsh’s claim that the CEL required the application of New York law, the judge stated that, in this case, there was no material difference between Massachusetts law and New York law.
The Three-Strike Dismissal: Some Lessons for Massachusetts Agencies
The court’s summary analysis of why Galakatos had no claims against his insurance broker came on three distinct grounds—each offering guidance for agencies operating in Massachusetts.
Strike One: Insufficient Breach of Contract Claim
The court found that Galakatos failed to identify any specific contractual provision that Marsh allegedly breached. The complaint’s vague assertions about Marsh’s obligation to “eliminate potential gaps in coverage” weren’t tied to any specific contract language.
In a contract dispute, it’s not enough to claim a party didn’t do something the other party thinks they should have. The complaining party has to point to specific terms or understandings requiring performance. Courts want to see that there was an exact clause or agreement that was violated.
Strike Two: No Duty Beyond the Scope of Engagement
On the negligence claim, Judge Gorton emphasized that Galakatos failed to allege that Marsh was “duty-bound to procure insurance in the manner he asserts.” This reinforces the principle that in Massachusetts, absent special circumstances, brokers’ duties are limited to obtaining specifically requested coverage.
On the application of the economic loss doctrine, Judge Gorton found that both New York and Massachusetts recognize that the economic loss doctrine does not apply to the negligence of an insurance agent or broker. However, since each state requires a specific undertaking or a special relationship, neither of which Galakatos adequately alleged, the negligence count fails.
Strike Three: No Fiduciary Relationship
Perhaps most significantly for agencies, the court rejected Galakatos’ claim of a fiduciary relationship with Marsh. Despite the plaintiff’s assertion of a “special, longstanding relationship” since 2006, Judge Gorton found this insufficient to establish a fiduciary duty.
This is in line with Massachusetts precedent, which states that insurance brokers “do not generally owe a fiduciary duty to the insured” absent special circumstances. For agencies, it’s like the difference between a transactional realtor and a contracted fee-only financial advisor with discretionary authority—the roles carry fundamentally different legal obligations.
Practical Takeaways
The lessons, in this case, offer several practical lessons:
- Document the scope of services precisely. Vague promises to “eliminate gaps” or provide “thorough advice” could potentially create exposure if not tied to specific contractual obligations.
- For larger accounts, consider engagement letters regularly. Despite being challenged, Marsh’s engagement letter provided crucial defenses. Ensure your agency’s engagement documentation clearly defines the scope of services, limitations on duty, and appropriate forum-selection provisions.
- Be wary of post-claim communications. Interestingly, Marsh’s post-accident communications offering an “Annual Insurance Review” that “provides the assurance that all coverage needs are met” were cited by Galakatos as evidence of Marsh’s broader duty. While ultimately unsuccessful, these representations complicated the defense.
- Maintain clear documentation of coverage placements. The alleged failure to add the Groupama policy as an underlying policy to the AIG excess coverage formed the core of the damages claim.
- Forum selection clauses. Independent of the issues in this case, agencies entering into any business agreements should be wary of agreements that state the law of another state applies or that any disputes must be adjudicated in a specific state. These are the first things I look for when reviewing a proposed contract from a client to review. In the rare case where a contract dispute arises, you don’t want to be sued in another state. Litigation is costly, but it is twice as costly if you do not have a home-court advantage.
Owen Gallagher
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
Over the course of my legal career, I have argued a number of cases in the Massachusetts Supreme Judicial Court as well as helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth.
Connect with me directly, by calling me at 617-598-3801.
