Thought Leadership

In Law Office of Drew J. Bauman v. Hanover Insurance Company, 2023 WL 2238552 (D.N.J. February 27, 2023), the plaintiffs maintained a professional liability insurance policy with the Hanover defendants from October 2017 to October 2019. The plaintiffs allege the policy was secured through USI, an insurance broker defendant. The dispute pertained to the defendants’ response to an underlying action, the “Woerner Action.”

The plaintiffs contend that they were named defendants in the Woerner Action, a professional malpractice case, where the plaintiff sought damages in a real estate transaction. The plaintiffs purportedly notified the Hanover defendants, but Hanover denied coverage and refused to provide the plaintiffs with a defense or indemnification. According to the plaintiffs, Hanover breached the contract of insurance by “refusing to satisfy or failing to acknowledge its obligation” under the policy. 

Also, the plaintiffs claimed that USI was liable should the policy not require Hanover to defend and indemnify them. According to the complaint, USI was “responsible for the procurement of [plaintiffs’] professional liability insurance ... knew the nature of [plaintiffs’] business and knew [their] insurance needs.” The plaintiffs also alleged that USI breached its contract with them to provide the requisite insurance coverage that would have provided coverage.

The District Court granted the motions to dismiss filed by Hanover and USI. With regard to granting dismissal on the breach of contract cause of action against USI, the District Court held that it is well-settled law in New Jersey that breach of contract is not a recognized claim in actions against an insurance broker for failing to provide adequate coverage. See, e.g., Minnesota Life Ins. Co. v. Cooke, 2021 WL 5122070 (D.N.J. November 4, 2021)(“[U]nder New Jersey law, a claim against insurance agents or brokers for failing to obtain the proper insurance is not recognized as a claim for breach of contract but rather for negligence.”); Luzzi v. HUB Int’l Northeast Ltd., 2018 WL 3993450, at *7 (D.N.J. Aug. 21, 2018) (“New Jersey does not recognize a breach of contract claim in connection with the procurement of insurance.”); Call v. Czaplicki, 2010 WL 3724275, at *11 (D.N.J. Sept. 16, 2010) (“[I]t is well-settled that New Jersey does not recognize a breach of contract claim for the negligent procurement of [ ] insurance.”).

^{Legal Update for Lawyers’ Professional Liability – February 2024 is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We would be pleased to provide such legal assistance as you require on these and other subjects when called upon. ATTORNEY ADVERTISING pursuant to New York RPC 7.1 Copyright © 2024 Marshall Dennehey, all rights reserved. No part of this publication may be reprinted without the express written permission of our firm. For reprints or inquiries, or if you wish to be removed from this mailing list, contact tamontemuro@mdwcg.com.}