Recently, the New Jersey Superior Court ruled in favor of an insurance producer when the affidavit of merit filed against the producer was not in compliance with law.
The case of Ganguly’s Taekwondo Academy Inc., etc., v. JAL Insurance Services involved the owner of a taekwondo studio who claimed his insurance broker, JAL Insurance Services, failed to procure requested coverage for the studio. The plaintiff purchased a policy from the defendant in 2010, and he claimed at the time that he told the defendant that he needed coverage for damage to business property. In 2018, a pipe burst at the studio causing damage to the premises and the business’s personal property. When the plaintiff submitted the claim to his carrier it was denied. The carrier stated that the plaintiff’s policy did not cover business property.
Then the plaintiff brought an errors-and-omissions lawsuit against the defendant alleging that the defendant failed to procure the correct coverage. As part of the lawsuit, the plaintiff served an affidavit of merit on the defendant. Under New Jersey Law, an AOM is required for a lawsuit of malpractice by a licensed person in his or her profession or occupation, including an insurance producer. The affidavit is required to be executed by an appropriate licensed person stating that there is a reasonable probability that the defendant breached his or her duty to the plaintiff. However, in this case, the plaintiff’s AOM was completed by an individual whose insurance producer license had lapsed prior to executing the AOM. This led the lower court to hold that the plaintiff failed to comply with the statutory requirements to bring a malpractice suit. As such, the lower court dismissed the case with prejudice. Then the plaintiff appealed the lower court’s dismissal claiming that the mistake was not fatal.
On the appeal, the plaintiff conceded that the AOM was not executed by a licensed insurance producer, but argued that they insurance producers still had complied with the AOM requirements substantially. In particular, the plaintiff argued that while the person who executed the AOM was not licensed, the person did have insurance experience—another requirement of the AOM statute. The court was not persuaded. It held that the person providing the AOM must possess the same category of professional license as the defendant and satisfy the additional criteria of having particular expertise in the general area involved in the action. Just having one was not enough to satisfy the legal requirements for the AOM. The court also found that the plaintiff had knowledge and time to correct the AOM of merit—the defect in the AOM was discovered in October of 2018. The plaintiff had until December 2018 to correct it, but failed to do so. As such, the Superior Court upheld the lower court’s ruling and dismissed the plaintiff’s case with prejudice. New Jersey insurance producers should take note of the court’s ruling that strict compliance with the AOM statute is required. If their agency is ever involved in an E&O lawsuit, producers should check to see if the AOM was executed correctly. If it wasn’t, the producer may be able to get the lawsuit dismissed.