NJ Agent Group Files In Broker's Duty Case

By Daniel Hays

NU Online News Service, Dec. 12, 12:35 p.m.EST?The Professional Insurance Agents of New Jersey Inc.has filed a brief in a case before the New Jersey Supreme Courtthat they said threatens to put unreasonable and burdensomerequirements on its members.[@@]

Jill Muratori, PIANJ, government affairs counsel, explaining thedecision to file a friend of court brief in the President v.Jenkins, said if the plaintiff's position were upheld "inessence brokers and agents would become guarantors against gaps inclients' coverage."

The policyholder in the case has sued his broker alleging thatthe broker breached a professional duty of care by failing tobridge a gap in his medical malpractice coverage.

"In this case, the insured told his broker he needed coverage asof February 1 and that was not the case. He really needed coverageearlier than that. So the gap in coverage was caused by theinsured's own intentional act in not paying his premium, whichcaused his policy to cancel--and then by not telling his brokerthat his policy had been canceled prior to February first," Ms.Muratori said.

Two of the three New Jersey Appellate Division justices whoheard the case in Trenton found the broker did not breach any legalduty and the coverage gap was created solely by the intentionalactions of the policyholder of which the broker was notnotified.

The court held that a broker breaches no duty to an insured toaffirmatively ascertain the existence of gaps in the insured'scoverage and to advise him accordingly. However, one judgedissented, bringing the matter before the Supreme Court.

Ms. Muratori said if the high court were to rule against thebroker in the case producers "legal obligations would be extendedbeyond the boundaries established through years of legalprecedent."

She said if agents and brokers could not continue to rely onrepresentations by the insured, it would mean they would have tomake their customers come in and prove that what they are saying istrue.

Such a requirement, said Ms. Muratori, would be "extremelyburdensome and unfair."

PIANJ President John D'Agostino Jr. said in a statement that hisgroup's legal action came because "PIANJ realized the far-reachingimplications this case could have on producers and asked to beheard by the high court. In the amicus brief, PIANJ asserts thatthe appellate division appropriately declined to extend the legalobligation of agents and brokers beyond the boundaries establishedthrough years of precedent."

PIANJ said it supports the appellate court's finding that,absent notice or a specific initiating inquiry from the client, aproducer has no affirmative duty to advise an insured of gaps inhis insurance coverage.

PIANJ told the high court in its brief that an extension of theexisting legal duty is unwarranted and would make agents and brokerguarantors against coverage gaps. The case is expected to be heardby the Supreme Court in early 2004.

PIANJ is a trade association representing professional,independent insurance agencies, brokerages and their employeesthroughout the state.