Negligent Misrepresentation as a Cause of Action in New York

Negligent misrepresentation is a legal claim that allows a person or business to recover damages when they suffer a financial loss after relying on false information provided by someone who had a duty to be accurate. In New York, this cause of action is recognized when certain elements are met, distinguishing it from fraud by focusing on carelessness rather than intentional deceit.

A Special or Privity-Like Relationship

The first element of a negligent misrepresentation claim in New York is the existence of a “special” or privity-like relationship between the parties. This means the defendant must have had a close or professional relationship with the plaintiff that created a duty to provide accurate information. This typically arises in business, financial, or advisory relationships—such as those between accountants and clients, real estate agents and buyers, or financial advisors and investors.

What makes the relationship “special” is that the plaintiff is depending on the defendant’s knowledge or expertise, and the defendant knows or should know that their information will be relied upon in making an important decision.

The Information Was Incorrect

The second element is that the information given by the defendant was wrong. This does not mean that the defendant lied, but rather that they failed to exercise reasonable care in verifying the truth of what they said. The misrepresentation must relate to a material fact—something important enough that it could influence the plaintiff’s decision-making process.

For example, if a real estate broker carelessly tells a buyer that a property is zoned for commercial use when it is not, and the buyer goes through with the purchase based on that information, the broker could be liable for negligent misrepresentation.

Reasonable Reliance by the Plaintiff

The third and final element is that the plaintiff reasonably relied on the incorrect information. This means that the plaintiff acted based on what the defendant told them, and their reliance was justifiable under the circumstances. Courts will consider whether a reasonable person in the plaintiff’s position would have relied on the information without further investigation.

The reliance must also be a direct cause of the plaintiff’s financial or business loss. If the plaintiff had other sources of accurate information available or ignored obvious red flags, a court may find the reliance was not reasonable.

Conclusion

Negligent misrepresentation is an important legal tool for holding professionals and advisors accountable when they fail to take proper care in providing information. Unlike fraud, this cause of action does not require intentional wrongdoing—only carelessness within a trusted relationship. In New York, plaintiffs must show a special relationship, that the information given was false, and that they reasonably relied on it to their detriment. This cause of action helps ensure that when people are in a position of trust or expertise, they exercise due care in their communications and decisions.

Find the Law

“The elements of negligent misrepresentation cause of action are: “(1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information” (MatlinPatterson ATA Holdings LLC v Fed. Express Corp., 87 A.D.3d 836, 840 [1st Dept 2011], citing JAO Acquisition Corp. v Stavitsky, 8 N.Y.3d 144, 148 [2007].” Soc. Life Magazine v. Hudson Valley Agency All., 2023 N.Y. Slip Op. 31573, 5 (N.Y. Sup. Ct. 2023).