The New Jersey legislature has recently enacted amendments to N.J.S.A.17L22A-26 and N.J.S.A.2AL53A-27, effective May 13, 2019. These amendments involve an update to the Affidavit of Merit Act as well as an update to language relating to insurance producers. As explained below, however, these updates have very little, if any, impact of broker liability in New Jersey.
First, the Affidavit of Merit (AOM) Act, which requires an affidavit of merit stating that in reasonable probability professional performance fell outside an acceptable standard, was slightly altered. As it relates to brokers, the AOM Act now requires that the affiant be licensed in both the current state and have practiced in the field for the five years immediately preceding the date of the occurrence. This is in direct contrast to the requirements for other categories of licensed persons which only requires an affiant to be licensed (in any state) and have practiced for at least five years (without the requirement of those five years immediately preceding the date of the occurrence). Significantly, this amendment only applies to the author of the affidavit and not the professional expert who is actually testifying at trial.
Second, language relating to insurance producers has been updated to include the following:
[A]n insurance producer shall exercise ordinary and reasonable care and skill in renewing, procuring, binding, or placing property and casualty insurance coverage … requested by an insured or prospective insured … [and] this section shall not limit or exempt an insurance producer from liability for negligence … or limit or prevent an insurance producer from asserting any defenses available at common law.
Prior to this amendment, broker liability standards were set by Aden v. Fortsch, 169 N.J. 64 (2001). Under Aden, the insurance brokers owe a duty or obligation to have and to use a degree of skill and knowledge which insurance brokers of ordinary ability and skill possess and exercise in the representation of a client. This standard should be used to judge insurance brokers in their placement and advise as to insurance policies.
N.J.S.A.2AL53A-27 also stated that if the conduct upon which the cause of action is based involves the wrongful retention or misappropriation of any money that was received by the insurance producer as a premium deposition or as a payment of a claim, that insurance producer is liable under the standard imposed on fiduciaries. However, the responsibility of a fiduciary standard is not new to insurance producers. Rather, the amendment only restates the known legal obligation of a fiduciary and has no impact on the “ordinary and reasonable care and skill” standard, as expressed in Aden. Specifically, Aden states the following:
That rule [that the conduct of a client in a professional malpractice claim is relevant only if the conduct of said client affirmatively impedes the professional in his or her performance] is premised on the heightened responsibilities of professionals in this State. Otherwise, the fiduciary relationship between the professional and the client may be undermined and professionals may be allowed to escape liability for their malpractice.
As such, the inclusion of a “fiduciary standard” more or less reflects the law already set out in Aden. As a result, upon review of these two amendments, it is clear that no real changes have occurred to broker liability law in New Jersey.
Thank you to Zhanna Dubinsky for her contribution to this post. Please email Vito A. Pinto with any questions.