Insurance Broker Liability: A Tale of Two States

New York and New Jersey courts have adopted radically different approaches to the liability of insurance brokers to their customers. In New York, a broker is a salesperson who, in the absence of a special relationship, has no obligation to the customer except to sell it the insurance product that the customer requests. Murphy v. Kuhn, 90 N.Y.2d 266, 273 (N.Y. 1997). The special relationship is the exception to the rule—and no reported New York case has ever found a special relationship. The closest that a court ever came was Voss v. Neth Ins. Co., 22 N.Y.3d 728 (N.Y. 2014), where the New York Court of Appeals reversed the lower court’s grant of summary judgment to the insurance broker on the question of whether there was a special relationship. 22 N.Y.3d at 735.

New Jersey has taken the opposite path, holding that an insurance broker is a .duciary with a heightened duty to its customer. Aden v. Fortsh, 169 N.J. 64, 78 (N.J. 2001). Following Aden, numerous New Jersey decisions have held brokers to be liable in a wide variety of circumstances.