Is an insurance agent or broker considered a “professional” for legal purposes?
Is an insurance agent or broker considered a “professional” for legal purposes?05.01.2016
The issue of whether an insurance agent or broker is a “professional” for legal purposes has come to the forefront from time to time. I’ve been involved as defense counsel in such cases where, under New York law, an insurance broker or agent is generally not held to be a “professional” for determining the applicable statute of limitations period. In Chase v. NIA Group (2001), New York’s Court of Appeals found the statute that provides a strict three-year limitation for all claims against nonmedical professionals whether a claim is one for negligence (three years in New York) or breach of contract (six years in New York) to not apply to an insurance broker or agent. As a result, the time to sue an insurance broker or agent in New York can be as long as six years where, in contrast, the claim against an attorney or architect who are considered “professionals” must be brought within three years regardless of whether the claim is labelled “breach of contract” or “negligence”. (Similarly, the Michigan Court of Appeals in Stephens v. Worden Insurance Agency (2014), applied the three year negligence statute of limitations to a failure to procure insurance case and not the two year malpractice statute of limitations pursuant to which the case was dismissed in the lower court.)
New Jersey on the other hand treats insurance brokers and agents as professionals for purposes of evaluating claims against them. In 2002, the New Jersey legislature amended its Affidavit of Merit statute to include “insurance producers”, so that a malpractice or negligence claim must be by an affidavit of an appropriate expert that there exists a reasonable probability that the defendant’s conduct fell outside of acceptable professional standards. The failure to include such an affidavit can be fatal to a claim, and the treatment of an insurance broker or agent as a professional in New Jersey can be a sword to defeat what might otherwise be a viable a negligence claim.
For example, in Galfo v. Cumberland Mutual (2014), a New Jersey Appellate Court dismissed a case against an insurance broker for the plaintiff’s failure to submit such an affidavit. Specifically, the Appellate Court found that “(the brokers) were to provide (the plaintiffs) with the benefit of their training and experience as to what type of … policy served the unique use of this property (a residence and part time farmer’s market)…. These matters are complex and the people authorized to dispense this form of professional advice are licensed and regulated….” (This language is critical as there is an exception to the Affidavit of Merit requirement with “common knowledge cases” when an expert will not be called to testify on whether professional standards were breached.)
It is with this in mind that I bring a May 29, 2016 New Jersey case to your attention. In American Iron & Metal v. John M. Glover Agency, it was alleged that the broker (and a wholesaler Watson Insurance Agency) committed professional malpractice by failing to procure business interruption or extra expense coverage resulting in damage after a fire damaged a business location. The lower court allowed the breach of contract claim to survive a motion to dismiss event though an Affidavit of Merit was never filed. The Appellate Court disagreed and dismissed the breach of contract claim as well since it also required a “duty of care” analysis determined to be “a matter that lies outside the common knowledge of the jury”. This is not surprising given the Galfo decision above, and the issue of how a court treats an insurance broker or agent continues watching depending on the jurisdiction a claim is brought.
By: Dean L. Milber, JD/MA, Director of Claims and Business Development, Lancer Claims Services
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