In my last post, I discussed the standards insurance brokers are held to in New Jersey. Essentially, the law requires brokers to do something more than simply take an order from a potential client. Brokers must use their skills and expertise to advise clients of available policies and what coverage they need to make sure they property is adequately insured. What happens when a broker fails to adhere to these standards? How does a plaintiff prove a breach of duty, and what damages are available?
In order to establish a prima facie case of negligence against an insurance broker, the plaintiff must demonstrate any one of the following:
- the broker neglects to procure the insurance;
- the broker secures a policy that is either void or materially deficient; or
- the policy does not provide the coverage the broker undertook to supply.1
With Hurricane Sandy victims, generally potential breaches involve numbers 2 and 3 of this list. Many victims are finding their coverage limits are insufficient to repair their homes. Still more were never advised by their broker that their homeowner’s policy does not cover flood damage and they needed a separate flood policy. In either event, the insureds have suffered damages at the hands of their brokers.
New Jersey law in professional negligence matters will generally seek to put the plaintiff in the position they would have been in, but for the negligence. This holds true for insurance broker negligence.
The damages which may be recovered for breach of an agreement to furnish an insurance policy is the loss sustained by reason of the breach, ‘the amount that would have been due under the policy provided it had been obtained.’2
Thus, if you asked your broker to procure insurance that would protect your home or business against all perils and the broker failed to offer you adequate policies, the broker may be legally obligated to make up the difference.
One final point: New Jersey’s court rules and procedures can be complicated, especially so in professional negligence actions where experts and additional pleadings are required. If you believe your broker failed to provide you with necessary coverage, you should contact an experienced policyholder attorney to discuss your options.
1 President v. Jenkins, 180 N.J. 550, (2004); See also Rider v. Lynch, 42 N.J. 465, 476, (1964).
2 Robinson v. Janay, 105 N.J. Super. 585, 591 (App. Div. 1969) (quoting 43 Am.Jur.2d, Insurance, § 174, p. 231), cert. denied, 54 N.J. 508, (1969); see also Cromartie v. Carteret Sav. & Loan, 277 N.J. Super. 88, 99 (App.Div.1994).