Aug 15, 2017

PIA offers resources to help with duty of care

The standard of care that producers in New Jersey are held to in dealings with their clients has evolved into one of the highest standards in the country over the course of nearly 60 years of case law.

Under the current standard, the obligations of an agent/broker are 1. to procure insurance; 2. to secure a policy that is neither void nor materially deficient; and 3. to provide the coverage he or she undertook to supply. If an agent or broker fails to exercise the requisite skill and diligence when fulfilling those obligations, then there is a breach of the duty of care, and liability arises.

Under certain circumstances, a heightened standard of care may be imposed on an agent/broker. Such a duty arises when there is a "special relationship" between the insurance agent and the client which indicates reliance by the client on the agent. The application of this "special relationship" test appears to be somewhat subjective, one court finding that an insured’s request for the "best available" coverage was sufficient to impose a heightened duty.

The combination of a high "normal" standard and the subjective nature of the "special relationship" heightened standard have created a situation in which producers are facing more errors-and-omission claims. This increase in claims has led to an increase in E&O costs and to some producers being forced out of the business due to the cost of maintaining coverage.

Recognizing the importance of this issue to our members, PIANJ is engaging in a campaign of education and reform. PIANJ has created—and will continue to create—education materials including sample letters and Webinars (i.e., How to Not Get Sued in N.J.: A Look at N.J.’s Producer Duty of Care Standard on Tuesday, Aug. 22), for our members to educate them on the duty of care issue and provide them the tools to protect themselves. In addition PIANJ is exploring the option to reform the duty of care standard through legislation to bring that standard more in line with neighboring states.

Through this dual-pronged approached, PIANJ hopes not only to protect New Jersey producers, but protect consumers by ensuring that they will continue to have the access to the expertise and personal attention of an insurance producer with whom they know and who is familiar with their individual needs.