Joinder of Broker malpractice in coverage claim

In an important decision for E&O carriers for insurance brokers, the Appellate Division has held that even where an insured knows it has a potential malpractice action against its broker, that claim will not be barred by the Entire Controversy Doctrine if it is not brought in connection with a declaratory judgment action to deny coverage procured by the negligent broker. In Media Sciences International v. Beckerman & Co., the court, in keeping with New Jersey’s continuing line of cases which limit the Entire Controversy Doctrine, held that the broker is required to establish by specific facts that it was “substantially prejudiced” by the failure of the insured to join it in the underlying coverage action. Prejudice, the court noted, is primarily demonstrated by showing lack of access to relevant information. Delay alone is not sufficient, nor are “faded witness memories.” Therefore, E&O carriers should beware that the the resolution of a coverage action does not necessarily indicate preclusion of a suit against a broker for malpractice.

Tompkins McGuire, regularly represents numerous industries as well as their insurers in professional malpractice claims. For more information on this case as well as other developments in this area, please contact us.

Greg Lois is the managing partner of LOIS LLC and dedicates his practice to defending employers and carriers in New York and New Jersey workers' compensation claims. Greg is the author of a popular series of "Handbooks" on workers' compensation, and is the co-author of the 2016 & 2017 Lexis-Nexis New Jersey Workers' Compensation Practice Guide. Greg can be reached at 201-880-7213 or glois@loisllc.com