I recently wrote what I thought was going to be a three-part series on broker negligence here in New Jersey. But on Friday, I talked with a public adjuster and a client concerning a matter we are all working on. The client’s insurance agent provided them with what I consider woefully insufficient advice and service leading to substantial damages. The question that arose was whether the agent would have sufficient errors and omissions insurance to cover the damages.

This raised the question, what are an insurance agent or broker’s insurance requirements? Are they required to carry insurance? If so, do they have mandatory minimum coverage limits? A review of all case law, statutes, and regulations in New Jersey reveals there is absolutely no insurance requirement for insurance brokers or agents. For good measure, this was confirmed in a telephone call to the New Jersey Department of Banking and Insurance.

Given the tendency of New Jersey’s legislature and courts to protect the consumer, this is troublesome. The State should enact legislation that requires brokers to maintain errors and omissions coverage that equals a certain percentage of their book of business. This would make sure that a wholly innocent property owner can be made whole in the end. Unfortunately, this is not going to be the case for all Hurricane Sandy victims. In the end, I fear some may end up with judgments against their brokers that are worth little more than the paper they are written on.

Finally, I wanted to provide an update on the rebuilding efforts here in New Jersey. While the news reports have made it clear the insurance industry’s response to Sandy has been abysmal, it often takes a personal viewing of the situation to bring that point home. I spent some time in Ocean County on Friday, and the evidence of the insurance industry’s failures lies in piles where homes once stood. The photographs below indicate many policyholders are still at war with their carriers and have not begun the rebuilding process.