But is this a waste of time and money?
Steven D’Agostino appealed against the court’s decision rejecting his complaint Steven D’agostino v. Colony Insurance Company, Lake Poulton, Poulton & Associates, LLC and The Lawyers’ Fund For Client Protection, No. A-5331-18, Superior Court of New Jersey, Appellate Division (May 17, 2022) dealt with the effect of a New Jersey Statute on a lawsuit filed by a debtor against an insured whose claim was denied.
The plaintiff’s complaint alleges the following facts, which, like the trial court, the Court of Appeal accepted as true for the purposes of the motion. In February 2002, plaintiff retained Laurence Hecker, a licensed soloist in New Jersey, to represent him in connection with an employment case. Although he had some initial skepticism about Hecker’s ability to handle the case, the plaintiff claims that he decided to keep Hecker when the lawyer represented “he was” a PC “with” half a million dollars “in malpractice insurance.”
The plaintiff’s employment case went against him and in September 2006 he brought legal action against Hecker, in pro se. In 2009, a jury found that Hecker had been negligent in his representation of the plaintiff and awarded the plaintiff $ 330,000 in damages, along with interest before the verdict. The plaintiff claims that Hecker reportedly told two different pre-trial judges that he did not have an insurance company.
Defendant Colony Insurance Company issued a $ 1,000,000 professional liability policy to Hecker for a one-year period beginning March 16, 2006 – six months before the plaintiff filed the lawsuit. However, the retroactive date for that insurance was March 16, 2006, the first day of the insurance period. Colony declined Hecker’s request for defense and compensation under the policy.
The plaintiff could not recover the $ 330,000 judgment from Hecker. In 2011, the plaintiff filed a lawsuit with the Advocate Fund for Client Protection, which contested the plaintiff’s claim.
Hecker died in May 2017, and over the course of next year, the plaintiff gained access to several boxes with Hecker’s personal and business records. After reviewing the records, the plaintiff claims that he found out that Hecker had malpractice insurance in place during the malpractice trial. The plaintiff then called Poulton, who informed him that Colony had denied Hecker’s claim for coverage “because the retroactive date of Hecker’s policy did not go far enough to cover” the conduct on which the wrongdoing trial was based. Colony refused to provide any information, claiming that it only kept records for ten years.
Colony and Poulton successfully proceeded to dismiss due to failure to file a claim, arguing that the plaintiff lacked status as a third party beneficiary and that all derived claims were statute-barred. Poulton also claimed that the plaintiff had not made a sustainable claim against the company because, as an independent insurance broker, it was not responsible for an insurance company’s coverage decision.
The court found that the plaintiff’s status was more similar to that of a creditor. The trial court found that the plaintiff’s claim was “essentially a bad faith claim against the insurance company and the broker”, which cannot be recognized by an individual or entity that is not the insured or a holder of the insured’s contractual rights.
As a general rule, a person or entity that is foreign to an insurance company has no right to get the insurance income back. However, the Court of Appeal stated that the main rule does not apply here. NJSA 17: 28-2 prescribes that an injured person can maintain an action against an insurer when his judgment against the insured tortfeasor remains unsatisfied due to insolvency, which the plaintiff’s complaint alleges here.
The trial court was correct the plaintiff is not an intended third party beneficiary in the traditional sense. Nor is he a holder of Hecker’s contractual rights that entitles him to sue the insurance company. However, the court concluded that he had clearly stated a claim as a third party beneficiary by virtue of the law of direct action with the right to sue Colony on the policy
Consequently, the Court of Appeal concluded that the judgment dismissing the plaintiff’s complaint due to lack of standing against Colony must be set aside. While Colony has raised potential defenses that it may have against the plaintiff’s claim, provided that the plaintiff can establish Hecker’s insolvency – the plaintiff claims can see to the limit of the insurance income to satisfy his assessment under NJSA 17: 28-2, only if coverage is available, [and] only if the plaintiff does so within the statutory limitation period – the viability of these defenses must await discovery.
Colony’s claim that the plaintiff’s claim is statute barred was not clear to the court in this post when the plaintiff’s claim arose under NJSA 17: 28-2.
The New Jersey Supreme Court has noted that “[w]Even if the injured party has no greater right under the insurance than the insured, he has “an action at the moment he is injured” which matures into a right to bring an action when he recovers a judgment against the insured whose insolvency is proved by returning an execution unsatisfied . ” Dransfield5 NJ at 194 (citing Century Indemnity Co. v. Norbut117 NJ Ekv. 584, 587 (Chapter 1935); aff’d.120 NJ Eq. 337 (E. & A. 1936)).
The plaintiff has only stated a claim against Colony according to NJSA 17: 28-2, he has not come close to proving such. Finally, we also find that the plaintiff has made a claim against Poulton and Poulton & Associates for the broker’s negligent failure to obtain appropriate professional liability protection. A broker has a duty of care towards foreseeable third parties who have been harmed by the broker’s negligence by not ensuring adequate insurance coverage.
While it is certainly possible that the plaintiff will not be able to prove that Poulton failed to secure the coverage Hecker requested or expected, or that any such cause of action comes in a timely manner, the plaintiff has made the claim and should therefore be given the opportunity to try prove it.
Trial and appellate courts tend to take great account of the action brought by the pro se plaintiffs. Although Mr D’Agostino successfully sued his lawyer for misconduct, he could not recover his sentence. Only when the accused lawyer died did he receive information indicating that the lawyer was insured at the time of his trial, even though the insurer denies coverage, he sued the insurer and the insurance broker to try to get his old verdict. He lost on a request to dismiss only to have the Court of Appeal return the case to gather evidence that will most likely result in a judgment in favor of the insurer and the broker’s defendant because the case is old and Hecker, now dead, has no assets. A waste of time for court, lawyer and defendant.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his internship to the position of insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry. He is available at http://www.zalma.com and email@example.com.
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