Law Office of Drew J. Bauman v. Hanover Insurance Company, 2023 WL 2238552 (D.N.J. Feb. 27, 2023)

The plaintiffs had maintained a professional liability insurance policy with Hanover from October 2017 to October 2019. They alleged that the policy was secured through USI, an insurance broker. The dispute pertained to Hanover’s and USI’s response to an underlying action, the “Woerner Action.”

The plaintiffs contend they were named defendants in the Woerner Action, a professional malpractice case, whereby the plaintiff sought damages in a real estate transaction. The plaintiffs purportedly notified Hanover, but Hanover denied coverage and refused to provide the plaintiffs with a defense or indemnification. The plaintiffs contended Hanover breached the contract of insurance by “refusing to satisfy or failing to acknowledge its obligation” under the policy.

The plaintiffs also claimed that USI was liable if the policy does not require Hanover to defend and indemnify the plaintiffs. According to the complaint, USI was “responsible for the procurement of [plaintiffs’] professional liability insurance ... knew the nature of [plaintiffs’] business and knew [their] insurance needs.” The plaintiffs also alleged that USI breached its contract with them to provide the requisite insurance coverage that would have provided coverage.

The District Court granted the defendants’ motions to dismiss. With regard to granting dismissal on the breach of contract cause of action against USI, the District Court held that it is well-settled law in New Jersey that breach of contract is not a recognized claim in actions against an insurance broker for failing to provide adequate coverage (see, e.g., Minnesota Life Ins. Co. v. Cooke, 2021 WL 5122070 (D.N.J. Nov. 4, 2021)(“[U]nder New Jersey law, a claim against insurance agents or brokers for failing to obtain the proper insurance is not recognized as a claim for breach of contract but rather for negligence.”); Luzzi v. HUB Int’l Northeast Ltd., 2018 WL 3993450, at *7 (D.N.J. Aug. 21, 2018) (“New Jersey does not recognize a breach of contract claim in connection with the procurement of insurance.”); Call v. Czaplicki, 2010 WL 3724275, at *11 (D.N.J. Sept. 16, 2010) (“[I]t is well-settled that New Jersey does not recognize a breach of contract claim for the negligent procurement of [ ] insurance.”).