On Wednesday, a New Jersey federal judge ruled that owners of a commercial property damaged by Hurricane Sandy can still bring claims against their insurers.
Chief U.S. District Judge Jerome B. Simandle determined that insurance broker DeMonaco Agency Inc. and its wholesaler, Brooks Insurance Agency, cannot shake off the breach of fiduciary duty and professional negligence accusations brought by the commercial property owners GBW Realty Inc., Grace & The Dudes LLC and Brian McMullin.
The ruling was made despite the property owners failing to provide an expert affidavit verifying that they have made their claims on time. The property owners reasoned that districtwide stay in Hurricane Sandy actions caused the delay.
Judge Simandle also tackled the scope of the indemnification provision in the broker-wholesaler agreement between the companies. According to him, “no reasonable factfinder could find that DeMonaco was entitled to contractual indemnification from Brooks.” Judge Simandle, however, noted that it was too early to tell whether the latter should prevail on its own contractual indemnification claim, explaining that “the applicable provision only mentions that DeMonaco has to provide indemnification for any claims arising from its own conduct.”
“In that way, the provision appears to capture primarily, if not exclusively, claims related to DeMonaco’s conduct, and not any independent (or, potentially negligent) acts by Brooks. In their fiduciary duty claim, however, plaintiffs allege that Brooks owed plaintiffs fiduciary obligations independent from DeMonaco, and breached those obligations through acts unconnected to and separate from DeMonaco,” Simandle said.
“In other words, plaintiffs’ allegations extend far beyond the narrow contours of the indemnification provision.”
It has not yet been confirmed if Brooks owed the property owners a fiduciary duty—and if so, whether the company had breached that duty, which would complicate its right to indemnification. It also remains unclear if DeMonaco’s actions solely breached that duty, which triggers the indemnification provision.
In May 2012, the property owners hired DeMonaco to help secure insurance for a commercial property in in Sea Bright, New Jersey. Through Brooks’ help, DeMonaco managed to get the owners commercial property insurance from Lloyd’s of London underwriters.
Hurricane Sandy then struck the owners’ property in Oct. 2012, causing significant property damage. The owners filed claims with their carriers, but Lloyd’s had cancelled the owners’ policy for premium nonpayment (purportedly without the knowledge of the policyholders) and denied their claim, which led to the lawsuit which began Oct. 2014.
The commercial property owners asserted that Lloyd’s and the other insurance companies involved breached their policies. They also contended that Brooks and DeMonaco breached their fiduciary duty, with the latter additionally accused of professional negligence and fraud.
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