Insurance Agents, Do Not Fail to Read This!
Edited by Timothy G. Ventura, Esq.
Clients will sue their insurance brokers when they find out their business interruption insurance does not cover the losses they incurred when their businesses were forced to close because of the COVID-19 pandemic. Insurance brokers will wonder how it is they can be responsible for the clients’ failure to read their insurance policy. The problem is that New Jersey, like several other states, does not impose that duty on insureds and does not allow the broker to assert a comparative negligence defense based on the client’s failure to read the policy.
The defense of comparative negligence, based on the insured’s failure to read the policy, is generally not available to defendants in professional negligence cases in New Jersey. Aden v. Fortsch, 169 N.J. 64 (2001). In Conklin v. Hannock Weisman, 145 N.J. 395 (1996), a legal malpractice case, the New Jersey Supreme Court held that: “When the duty of the professional encompasses the protection of the client from the self-inflicted harm, the infliction of the harm is not be regarded as contributory negligence on the part of the client.” These holdings are consistent with the trend in New Jersey against allowing the assertion of comparative negligence in professional malpractice cases. See, e.g., Tobia v. Cooper Medical Center, 136 N.J. 335 (1994) (“When a tortfeasor’s duty includes exercise of reasonable care to prevent a party from engaging in self-damaging conduct, contributory negligence is barred as a defense.”); Bryant v. Calantone, 286 N.J. Super. 362 (App. Div. 1996) (plaintiff’s conduct did not constitute negligence in suit against design professionals); Pressler, Current N.J. Court Rules, comment 8.6 on R. 4:5-4 (commenting that comparative negligence defense is “not chargeable where the attorney’s obligation was to protect the client from the self-inflicted harm that ensued.”).
Comparative negligence can be a defense in professional malpractice claims in which the client’s alleged negligence contributed to or affected the professional’s failure to perform according to the standard of care of the profession. Aden v. Fortsch, supra. at 77; See also Scioto Memorial Hospital Association v. Price Waterhouse, 74 Ohio, St. 3d 474 (Ohio 1996) (holding that in accounting malpractice claims, comparative negligence may be applied only to negligent acts of a client that contribute to the accountant’s failure to perform according to the standards of the accounting profession.)
In Aden v. Fortsch, the New Jersey Supreme Court held that a broker could not assert the comparative negligence of the insured for failing to read an insurance policy. The insured admitted, during the trial, that he did not read the policy obtained by the broker. The Supreme Court reasoned that the insured is entitled to assume that the broker obtained the appropriate coverage and had no duty to read the policy. The dissent argued that the holding “relieves an insured from having to take the minimal step of reviewing a policy one- or two-page declaration sheet to avoid the kinds of injuries that occurred here. The majority’s approach also dilutes the significance of a legion of cases in which the courts have stressed the importance of having insurance policies written in clear, straightforward terms to aid policy holders in reading and understanding them.”
The majority in Aden added two caveats. The first is that, unlike a broker, an insurance company can assert the comparative negligence of the insured for not reading the policy. Second, the majority held: “Our disposition does not prevent insurance brokers from contending during trial that an insured’s failure to read the policy severed the causal connection between the broker’s fault and the insured’s harm.” The effect of the holding is that claims against insurance brokers are an all-or-nothing situation. The holding prohibits the jury from allocating fault; the broker either pays everything or nothing, but there is no in between.
Courts in the majority of other states have reached the opposite conclusion. For instance, in Martini v. Beaverton Insurance Agency, 314 Ore. 200 (1992), the Oregon Supreme Court held that a jury should be allowed to consider whether it was unreasonable for the insured not to read its policy.
The lesson is that states differ as to whether comparative negligence can be asserted against the insured for failing to read its policy. Aside from the state in which the suit is filed, the outcome can depend on whether it is the broker or the insurer asserting the comparative negligence of the insured.
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