Many companies affected by Superstorm Sandy, including those in designated flood zones, have since discovered that they did not have flood insurance. In such situations, their insurance broker may have breached its duty to advise the companies of the availability of flood insurance and may therefore be liable for some or all of the flood damage. States offer many different and nuanced approaches regarding the duties of insurance brokers and policyholders, which can be illustrated by looking at case law from New Jersey and New York, two states severely affected by Superstorm Sandy.
In New Jersey, an insurance broker is a fiduciary who owes a duty to the client to exercise good faith and reasonable skill. Aden v. Fortsh, 169 N.J. 64, 78–79 (N.J. 2001). An insurance broker is “expected to possess reasonable knowledge of the types of policies, their different terms, and the coverage available in the area in which his principal seeks to be protected.” Rider v. Lynch, 42 N.J. 465, 476 (N.J. 1964)