When you are dealing with damage to a client’s property and attempting to recover insurance proceeds, one of the first questions raised is in reference to attorneys’ fees. The client wants to know if the party that has wronged them will be responsible for their costs and expenses in recovering the insurance proceeds. Unfortunately, New Jersey’s courts have “embraced that policy by adopting the ‘American Rule,’ which prohibits recovery of counsel fees by the prevailing party against the losing party.”1 But what happens if the defendant in the case is an insurance broker who failed to procure the proper coverage?

When dealing with professional negligence, the law treats different professionals very differently. Insurance brokers do not appear to be required to pay attorney fees to a successful plaintiff in a professional negligence case.2 In Tweer the Court stated

Although the subject matter of this claim involved insurance, it was not founded upon a dispute over payment of a policy. There is no statute which permits the payment of counsel fees to a successful claimant in this type of case founded upon professional negligence.

However, as noted by Plaintiff’s counsel in Tweer:

New Jersey permits the award of attorney’s fees in a legal malpractice action involving the breach of a fiduciary duty, reasoning that the defendant’s former client has suffered damages in the amount of those fees as a consequence of defendant’s breach of a fiduciary duty. See Saffer v. Willoughby,143 N.J. 256, 269-72 (1996).

This begs the question, what is the difference between someone relying upon the advice of an attorney and someone relying upon the advice of an insurance broker? In New Jersey, one pays their own attorneys fee, the other doesn’t….

1 In re Estate of Vayda, 184 N.J. 115, 120 (2005).
2 Tweer v. John Hill Agency, A-1521-04T1, 2005 WL 2446289 (N.J. super. Ct. App. Div. Sept. 21, 2005).