One particularly thorny area of the law with respect to insurance providers and brokers is the scope and breadth of any attendant fiduciary duties owed to an insured.
In Ring v Meeker Sharkey Associates LLC, the New Jersey Superior Court Appellate Division recently upheld the trial court’s decision that the Plaintiffs’ homeowners’ insurance brokers did not owe a duty to advise the insureds of vulnerability in their coverage and a need for excess flood insurance.
Ring is another case developing New Jersey’s insurance law following Hurricane Sandy. The Plaintiffs owned two beachfront homes along the Jersey Shore. For more than a decade, they secured both homeowners and flood insurance for the homes through Defendant Meeker Sharkey. In 2008, Plaintiffs moved their insurance accounts to Willis of New Jersey. In 2010, Plaintiffs’ moved their homeowners’ coverage back to Meeker Sharkey, but continued to secure flood insurance through Willis.
In 2012, Hurricane Sandy ravaged Plaintiffs’ properties, causing catastrophic – and largely uncovered – losses to both. The crux of the ensuing litigation was Plaintiffs argument that as part of their transfer of homeowners’ insurance back to Meeker Sharkey in 2010, the firm undertook a review of Plaintiffs’ insurance coverage generally, and therefore owed a duty to alert Plaintiffs to their gap in flood insurance coverage, as well as a duty to affirmatively advise them to obtain excess floor insurance.
The Ring Court decision underscores and reiterates than in New Jersey, the determination of whether a duty exists is a question of law to be determined by the courts, while also noting that there is no bright-line rule and that the inquiry is intensely fact-specific. Here, the Court found that the homeowners’ insurance broker did not have a duty to provide advice about flood insurance where the Plaintiffs engaged a separate entity, Willis, to secure its flood insurance. The fact that Meeker Sharkey knew or should have known of the gap in coverage did not create a duty to Plaintiffs under these circumstances.
Ultimately, the Ring court was not called to determine whether Willis had breached the duty it owed. The question of whether or not that duty was breached is one of fact, for a jury.
Thanks to Vivian Turetsky for her contribution to this post.