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It’s Not Your Fault! Insured’s Failure to Comply with Policy Terms Does Not Support Malpractice Action Against Broker (NJ)

June 13, 2019

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<p style="text-align: justify;">In<em> <a href="https://www.wcmlaw.com/wp-content/uploads/2019/06/Old-Republic-Ins-Co-v.-Eastern-King-Air-Serv-LLC.pdf">Old Republic Ins Co v. Eastern King Air Serv LLC</a></em>, the District of New Jersey recently granted a motion to dismiss filed by an insurance broker-defendant finding that the plaintiff-insured could not adequately allege any claims for broker malpractice or negligence where the policy procured was not itself void or materially deficient.</p>
<p style="text-align: justify;">Specifically, Old Republic, the insurer, disclaimed coverage to its insured, Eastern King, for an airplane accident, because Eastern King’s pilots were not in compliance with flight training requirements written into the policy of insurance.  Eastern King therefore brought an action against its broker for failure to obtain adequate insurance following the disclaimer.</p>
<p style="text-align: justify;">The Court agreed with the broker, who argued that the insured’s failure to comply with all policy terms was the cause of the coverage denial, and that this failure was directly tied to the insured’s failure to read its own policy.    Specifically, the Court articulated that a broker owes the insured absolutely no post-procurement duty, and therefore Eastern King’s claim for malpractice was deficient as a matter of law, warranting dismissal.</p>
<p style="text-align: justify;">This decision is a reminder to insureds to properly assert broker malpractice claims, setting forth and demonstrating that the policy provided is materially deficient, and deviates from the coverage the broker undertook to supply in the first instance.</p>
<p style="text-align: justify;">Thank you to Vivian Turetsky for her contribution to this post.  Please email <a href="mailto:chayes@wcmlaw.com">Colleen E. Hayes</a> with any questions.</p>

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