Case In Point: Protecting Our Client From A Novel Liability Theory
We represented a large insurance agency which bid for and was awarded a contract to
place liability and other insurance coverage for a Central New Jersey municipality. As part
of the coverage package, the agency obtained an umbrella policy from a commercial
liability carrier.
Year later, the municipality had a bodily injury claim brought against it with a value of
nearly $4 million, within the limits of the umbrella policy's coverage. Unfortunately, the
excess carrier had declared insolvency after the policy was written, and after the claim was
presented but before it was resolved.
A claim was asserted against our insurance broker/client contending they were, in effect,
responsible tp provide the coverage the defunct carrier would have provided for placing
the policy with less-than-sound company. The plaintiff contented that it was not enough
for the agency to rely on standard insurance company ratings and that an independent
inquiry into the stability and reliability of the carrier should have been performed. The
plaintiff also argued that our client should have perceived distress signals that the carrier
might become insolvent and that they should have then notified the township of the need
to shift their coverage to another carrier.
We targeted the case at an early stage as one that involved substantial public policy
issues, focusing on whether insurance agencies should be liable at all for the insolvency
of an insurance carrier. We also recognized that the case would likely set a standard for
the conduct of any broker in a similar circumstance.
We assembled a team of lawyers from within our firm to organize the case, work with
insurance experts, and prepare summary judgement, trial and appellate briefs. Given the
sympathetic claimant, we also focused on developing the best possible record for a likely
appeal. Overall, we plotted a strategy ( with the authorization of the broker and their own
insurance carrier ) which was extremely daring. In short , the decision was made to not
present witnesses at trial. Part of the strategy was to avoid having the Appellate Division
review potentially damaging testimony which might have emerged during cross-examination. We tried the case on that basis, focusing on the legal issues and certain
factual weaknesses in the plaintiff's case. And when the plaintiff rested, we rested.
Our approach proved to be highly effective, with the jury finding that our client was not
liable for having placed coverage with a carrier that only later become insolvent. Basically,
we won the case on argument and cross examination.
