Law Firm Fails to Survive Insurer’s and Agent’s Motions to Dismiss

    Interpreting New Jersey law, the federal district court dismissed without prejudice the law firm’s complaint against its insurer and agent. Law Office of Drew J. Bauman v. Hanover Ins. Co., 2023 U.S. Dist. LEXIS 31844 (D. N. J. Feb. 27, 2023).

    The law firm had a professional liability policy issued by Hanover. The law firm was sued in the underlying case involving a real estate transaction. The law firm tendered the defense and indemnity of the underlying complaint, but coverage was denied. The law firm sued, contending Hanover breached the policy by refusing to abide by its obligations under the policy.

    In the alternative, the law firm alleged that its agent, USI Insurance Services, LLC, was liable if the policy did not require Hanover to defend and indemnify in the underlying case. It was further alleged that USI was responsible for procuring coverage for the law firm and knew of its insurance needs. USI was negligent in securing a policy with inadequate coverage.

    Hanover and USI filed motions to dismiss. The court found that the claim for declaratory relief against Hanover was duplicative of the law firm’s breach of contract claim. The breach of contract claim would resolve the same issue and necessarily decide the question raised by the declaratory judgment claim. Therefore, the claim for declaratory relief was dismissed.

    The breach of contract claim was also dismissed. The law firm did not identify any specific language or provisions of the policy that allegedly were breached by Hanover. Instead, the law firm made conclusory assertions that Hanover breached the contract by refusing to fully perform under it. Therefore, the breach of contract claim against Hanover was also dismissed.

    Turning to the claims against USI, the complaint only alleged that USI was negligent if there was insufficient coverage under the policy. This was inadequate to state a plausible claim of negligence against USI. Therefore, the negligence claim against USI was dismissed.

    Finally, the law firm alleged that USI breached its contract to provide the requisite insurance coverage, Under New Jersey law, breach of contract was not a recognised claim in actions against an insurance broker for failing to provide adequate coverage. Accordingly, the breach of contract claim against USI was also dismissed.