United States Court of Appeals

For the Eighth Circuit

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No. 21-3256

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I Square Management, LLC; Arkansas Knoxville Hotel, LP

lllllllllllllllllllllPlaintiffs - Appellants

v.

McGriff Insurance Services, Inc.

lllllllllllllllllllllDefendant - Appellee

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Appeal from United States District Court 

for the Eastern District of Arkansas - Central

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 Submitted: September 21, 2022

Filed: November 9, 2022

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Before LOKEN, ARNOLD, and KOBES, Circuit Judges. 

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ARNOLD, Circuit Judge.

This case involves a flood that destroyed property stored at a warehouse.

Unfortunately for the companies with an interest in the property, insurance didn't

cover their loss, and so they sued their insurance agent for negligence. The district
court1

 granted summary judgment to the agent on the ground that it had no duty to

give advice about different coverages or to ensure that adequate coverage existed.

The companies appeal, but we affirm.

I Square Management LLC is a hotel management company that, according to

its chairman and CEO Shashwat Goyal, also builds and renovates existing hotels. One

of those hotels was in Knoxville, Tennessee. Goyal helped create Arkansas Knoxville

Hotel, LP (AKH), to purchase the hotel, and AKH and I Square entered into a hotel

management agreement. I Square and AKH planned a significant renovation of the

hotel, and, as part of that renovation, I Square and AKH purchased furniture, fixtures,

and equipment in bulk and stored it all in a warehouse. At one point during the

project their insurance agent, McGriff Insurance Services, Inc., advised the project's

general contractor that a builder's risk policy was unnecessary for the construction.

After a flood damaged or destroyed property in the warehouse, I Square and AKH

filed claims with their insurers, but those claims were denied. They therefore sued

McGriff, alleging that it had negligently advised that they need not purchase a

builder's risk policy for the project.

To prevail on a negligence theory under Arkansas law, which applies in this

diversity case, see Chew v. Am. Greetings Corp., 754 F.3d 632, 635 (8th Cir. 2014),

a plaintiff must prove, among other things, that the defendant owed it a duty. See

Duran v. Sw. Ark. Elec. Coop. Corp., 537 S.W.3d 722, 726 (Ark. 2018). Determining

whether a defendant owed a duty to the plaintiff is a question of law for the court, and

if the court determines that no duty is owed, then summary judgment is appropriate.

See id. at 727. If Arkansas law is unclear on whether a duty is owed, we must do our

best to predict how the Arkansas Supreme Court would rule in the circumstances. See

Cincinnati Ins. Co. v. Rymer Cos., LLC, 41 F.4th 1026, 1029 (8th Cir. 2022); see also

1The Honorable James M. Moody Jr., United States District Judge for the

Eastern District of Arkansas.

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Chew, 754 F.3d at 635. Decisions from the Arkansas Court of Appeals may provide

some evidence of how the Arkansas Supreme Court would rule, but we are not bound

to follow them. See Burger v. Allied Prop. & Cas. Ins. Co., 822 F.3d 445, 447 (8th

Cir. 2016).

In determining the duties an insurance agent owes its clients, the Arkansas

Supreme Court has consistently applied what it described as a "long established rule

placing a responsibility on the insured to educate himself concerning matters of

insurance coverage." See Stokes v. Harrell, 711 S.W.2d 755, 756 (Ark. 1986). That

means that it is the insured's "responsibility to adequately convey, albeit in laymen's

terms, the nature of his wishes, in order to obtain the protection requested," and so

"[a]n agent may point out to him the advantages of additional coverage and may ferret

out additional facts from the insured applicable to such coverage, but he is under no

obligation to do so." See id.

The Stokes court recognized, however, that where an agent and an insured have

a "special relationship," some jurisdictions impose a duty on the agent to advise

clients of appropriate insurance coverage. See id. But the court in that case

immediately signaled that it was skeptical about that rule, and our overall impression

from reading that court's opinions on the subject is that it takes a dim view of what

is called the special-relationship exception, though it has been hesitant to say that it

could never apply. We offer three reasons to support that impression.

First, in the 36 years since the Arkansas Supreme Court decided Stokes, that

court has never applied the exception, as far as we can tell, to impose additional

duties on agents. Nor has the Arkansas Court of Appeals. Not once.

Second, as we've already noted, the court in Stokes didn't seem impressed by

the insured's argument. After noting that "some jurisdictions" had imposed additional

duties thanks to a special relationship, the court immediately said that those decisions

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had "not found a large following among the courts." See id. It did, however, explain

that a special relationship would entail "an established and ongoing relationship

between the insured and the agent over a period of time, with the agent actively

involved in the client's business affairs, and regularly giving advice and assistance in

maintaining the proper coverage for the client." The court stopped short of saying that

the exception was part of Arkansas law and instead held merely that, even if it were,

the facts of that case wouldn't support applying it. See id.

Third, when it seemed that the facts of a case might call for applying the

special-relationship exception, the Arkansas Supreme Court didn't do so. See Mans

v. Peoples Bank of Imboden, 10 S.W.3d 885 (Ark. 2000). There a widow sued an

insurance agent for negligence after it failed to discover that her husband's life

insurance policy had lapsed. See id. at 886. The court expressly held that no special

relationship existed even though the widow had done business with the agent for 23

years, was unsophisticated, and had trusted the agent's advice. See id. at 889–90. And

so the court applied the general rule that the insured "has a duty to educate herself

concerning her insurance." See id. at 888, 890. As in Stokes, the court never expressly

embraced the exception, recognizing merely that "some jurisdictions" have and that

a special relationship "may" be found in certain circumstances. See id. at 888.

I Square and AKH invite us to focus on language from an Arkansas Court of

Appeals opinion that, they say, supports its view. See Buelow v. Madlock, 206 S.W.3d

890 (Ark. Ct. App. 2005). There, the court said that the insured can prove "a special

relationship by showing that there exists something more than the standard insurerinsured relationship," see id. at 893 (quoting Sintros v. Hamon, 810 A.2d 553, 556

(N.H. 2002)), which is something determined on a case-by-case basis and presents a

question of fact. See id. It also explained that a special relationship might exist when

there is an "express agreement, long established relationships of entrustment in which

the agent clearly appreciates the duty of giving advice, additional compensation apart

from premium payments, and the agent holding out as a highly-skilled expert coupled

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with reliance by the insured." See id. (quoting Sintros, 810 A.2d at 556). I Square and

AKH say that "something more" than the ordinary insurance relationship existed here:

it points out that McGriff held itself out as a highly skilled expert and that they relied

on those assurances to their detriment. And, they add, since the presence of a special

relationship is a question of fact, the district court here should not have granted

summary judgment to McGriff.

We are not convinced that the Buelow court's digression into Sintros was meant

to open the door to expanded duties for insurance agents. It would be the rare agent

who does not hold himself out as highly skilled, and the rare insured who doesn't rely

on the agent's skill in making insurance selections. We do not think the Arkansas

Supreme Court, given its skepticism about expanding liability, would now ask merely

for the presence of "something more" than the ordinary relationship to do so;

otherwise the exception would bid fair to swallow the rule. And so we are not

inclined to give this aspect of Buelow much weight. We point out, moreover, that the

Buelow court ultimately declined to find a special relationship and reversed a trial

court decision imposing additional duties on the agent, see id. at 894, adding another

case to the unbroken string of Arkansas appellate decisions rejecting this theory of

liability.

I Square and AKH argue that there is more in this record to support a

conclusion that McGriff had a duty that exceeded that of an ordinary insurance agent.

They first point to how their relationship with McGriff began, explaining that it was

McGriff (or more specifically, its predecessor, but for ease of reference, we will just

use "McGriff") who expressed interest in doing business with I Square and not the

other way around. McGriff then met with I Square at I Square's offices where it gave

a personalized pitch promoting McGriff's insurance prowess and a plan that would

streamline I Square's insurance practices and save it money. McGriff also promised

to service I Square's existing policies for free, and when those policies were due for

renewal, McGriff would recommend a plan whereby I Square would purchase one

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universal policy to cover all its projects rather than obtain multiple policies covering

different projects. So I Square abandoned its existing agent and turned to McGriff.

According to Goyal, over the next months McGriff employees met with

I Square several times to get a better understanding of I Square's business. The

meetings were so frequent, he says, that I Square's staff made sure that at least one

McGriff employee's favorite jellybeans were on hand. At that time I Square was

working on other projects for which it bought furniture, fixtures, and equipment in

bulk and stored them offsite. Goyal says that, at least for some of these projects,

I Square told Nick Hall of McGriff about the offsite storage on those projects and

asked him to obtain additional policies to insure the property stored there, which he

did.

We conclude that the circumstances surrounding the commencement of the

parties' relationship are insufficient to demonstrate a special relationship under

Arkansas Supreme Court precedent. It's unlikely that the Arkansas Supreme Court

would think it unusual that an agent interested in obtaining new business would

promote its expertise to a potential client who then relies on those promotions to

make insurance decisions, see Mans, 10 S.W.3d at 888, even if that agent took steps

to learn how the client's business operated so that it could provide sound advice.

Note, too, that the court in both Stokes and Mans emphasized that a special

relationship would involve "an established and ongoing relationship between the

insured and the agent over a period of time." See Stokes, 711 S.W.2d at 756; see also

Mans, 10 S.W.3d at 888. Here, McGriff's relationship with I Square and AKH existed

for only about two years before the warehouse flooded, and, after what appears to be

a brief honeymoon phase at the beginning of their relationship, McGriff was not

involved in I Square's operations to the extent necessary to make for a special

relationship under Arkansas Supreme Court precedent. Under Arkansas law, it was

still incumbent upon I Square and AKH to ensure that the insurance it obtained

provided adequate coverage for its projects.

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In addition to the parties' early dealings, I Square and AKH point to McGriff's

participation in the Knoxville project itself as evidence that they and McGriff had a

special relationship. For example, they point out that Hall communicated directly with

the mortgage broker involved in the Knoxville project as well as the project's general

contractor and the insurer about insurance coverage on the project.

But those communications don't get I Square and AKH across the line. Hall's

communications to these project participants were isolated and infrequent and appear

to have concerned only the hotel site and not the warehouse where property was

damaged. In fact, Hall's communications with the mortgage broker predate the lease

to the warehouse. The record shows that I Square, AKH, and the project's general

contractor handled the warehouse without McGriff's involvement until well after the

flood. They had obtained separate insurance on the property in the warehouse without

McGriff's assistance, moreover, and after the warehouse flooded, they looked to this

separate coverage first to cover their losses. It appears as well that Goyal asked

McGriff to help file a claim with this separate insurer, and it was only later that

I Square and AKH filed a claim with the insurance that McGriff had obtained on its

behalf. The main point is that McGriff was involved in the Knoxville project only

tangentially, and certainly not to an extent that creates a special relationship under

Arkansas law.

We therefore hold that, whether we consider the circumstances I Square and

AKH highlight in isolation or cumulatively, they have failed to show the existence

of a special relationship between McGriff and the insureds that gave rise to additional

duties on the part of McGriff to ensure that they had adequate coverage.

Finally, I Square and AKH assert that, even if no special relationship existed,

McGriff voluntarily assumed a duty to ensure adequate coverage existed. See Farm

Credit Midsouth, PCA v. Bollinger, 548 S.W.3d 164, 176 (Ark. Ct. App. 2018). They

point to the email Hall sent to the project's general contractor advising that a builder's

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risk policy was unnecessary. But this is far from an assurance like the one in

Bollinger that was a promise to "handle" an insurance difficulty. See id. All Hall did

here was respond to an inquiry from the general contractor. The record simply does

not support a conclusion that McGriff, through Hall, voluntarily assumed additional

duties to I Square and AKH.

But even if it did, we think that any assumed duty to give proper advice would

have been based on the knowledge that McGriff had about the project, and it does not

appear that anyone at I Square or AKH had told McGriff about the warehouse or that

McGriff otherwise knew about it such that it could ensure it was properly covered.

I Square and AKH vigorously contend otherwise, arguing that Hall's knowledge or

lack of knowledge of the warehouse is "the most hotly contested fact there is in this

case." But we don't think the record on this point is sufficient to reach a jury because

no reasonable jury could believe that Hall knew about the warehouse. I Square and

AKH have not identified a single communication to or from Hall or anyone else at

McGriff about the warehouse until after the flood, nor do they point to testimony

from anyone who says that he told Hall or McGriff about the warehouse. Surely Hall

didn't assume a duty to advise about proper coverage for a location he didn't even

know existed.

I Square and AKH argue nonetheless that Hall did know about the warehouse

for a few reasons. First, they say that Hall had participated in three other projects that

entailed storing furniture, fixtures, and equipment offsite and that Hall knew about

the offsite storage and helped insure it. But that doesn't show that Hall knew about

offsite storage here; in fact, two of those other projects apparently involved "groundup" construction projects and not a "floor by floor" renovation where onsite storage

might be more feasible. And according to Goyal, for those other projects in which

offsite storage was used, I Square and AKH specifically told Hall about the

warehouses, but nothing in the record indicates they did so here for the Knoxville

project.

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I Square and AKH also point to a memo created by an insurance investigator

who interviewed Hall after the flood, and they say that the memo shows that Hall

admitted "that he knew about the warehouse's existence when the renovations began"

and "that he just 'assumed'" the other insurance would cover it. We think I Square and

AKH misread the memo. We read it to say merely that Hall, at the time of the

investigation a few months after the flood, had obtained communications from others

about the warehouse that were dated around the time the project began, not that he

personally was involved in conversations about the warehouse before the flood. And

we think the memo quite clearly says that it was I Square and AKH that mistakenly

assumed the property in the warehouse was covered, not that Hall thought that.

And finally, I Square and AKH say that Hall knew about the warehouse

because he obtained a copy of the construction contract that referred to storage of

materials. But this oblique reference to the potential need for warehousing in a

seventeen-page, single-spaced construction contract cannot reasonably be thought to

supply Hall with knowledge of the actual warehouse, especially since the warehouse

had not even been obtained until months after Hall received a copy of the contract.

So even if Hall assumed a duty to give accurate advice when he responded to

the general contractor's insurance inquiry, the scope of the duty assumed could only

reasonably be interpreted to include the giving of advice about circumstances that

Hall actually knew of. And the record won't support a conclusion that he knew about

the warehouse.2

Affirmed.

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2Appellants' motion to supplement the record is denied.

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