Agents’ trade groups in New Jersey are praising a recent Garden State court decision that limits an agent’s duty of care when a client misrepresents himself.
The ruling stems from a suit brought by Harbor Commuter Services, a ferry operator in New York Harbor, against its insurance brokers — Frenkel & Co. Inc., McCue Captains Agency Inc. and AON Risk Services Inc. of Ohio — when it was unable to collect insurance proceeds after one of its vessels was damaged.
According to court documents, Harbor Commuter Services misrepresented the cost of the ship by $3 million when it purchased both hull insurance — which insures both owner and lender — and breach of warranty insurance, which covers just the lender. When the boat was damaged, Harbor’s claims were denied by its insurers.
As a result, the ferry operators sued the brokers for failing to inform them that they would be unable to recover under the lender’s breach of warranty policy if the hull insurance policy was voided.
A jury trial in 2006 awarded a $9.1 million in a verdict against the brokers, implying they breached their duty of care.
However, the ruling last week by the New Jersey Superior Court, Appellate Division overturns that lower court decision.
In a statement, both the Professional Insurance Agents of New Jersey and the Independent Insurance Agents and Brokers of New Jersey applauded that decision as one “which sends a clear message that the courts are not willing to impose an unreasonable, expanded duty of care on insurance brokers and agents” and upholds “the principle that one should not be rewarded for his or her own improper actions.”
Both trade groups had jointly filed a “friend of the court” brief in support of the brokers and agents involved in the case.