Melissa Brown, Managing Partner of GRSM’s South Jersey office, secured a significant victory for the firm’s client, an insurance broker, in a malpractice lawsuit. The New Jersey Appellate Division reversed a trial court ruling and granted summary judgment in favor of the broker, who had been accused of negligence in a high-stakes case involving a doctor and obstetrics practice.
The case involved allegations that the broker’s failure to secure insurance left the medical practice vulnerable to financial risk. When the doctor and the practice—referred to as the “Medical Defendants”—were sued for medical negligence, they claimed they were uninsured due to the broker’s negligence. The Medical Defendants vigorously denied any wrongdoing in the underlying medical negligence case and ultimately reached a settlement, which included consent judgments. A key provision of the settlement was a “covenant not to execute,” which prevented the plaintiff from directly collecting any money from the Medical Defendants. Instead, the settlement allowed the plaintiffs to collect their judgments against the Medical Defendants from the broker.
Brown argued that the covenant not to execute extinguished any claim for damages that could form the basis of a broker malpractice case, as there were no actual damages sustained by the Medical Defendants. In response, the plaintiffs sought to expand bad faith case law to allow the assignments of such settlements and judgments to professionals like brokers. The trial court sided with the plaintiffs. Brown appealed, asserting that the trial court had applied the law incorrectly, and warned that allowing such settlements could set a dangerous precedent for the legal and professional communities.
The Appellate Division reversed the trial court’s decision, agreeing with Brown that the consent judgments did not constitute damages and thus could not support a malpractice claim. The ruling protects brokers from liability for non-existent damages and protects the integrity of settlement agreements from being manipulated for strategic, and potentially harmful, purposes. Additionally, the Appellate Division rejected the plaintiffs’ attempt to expand bad faith case law. This ruling is a significant victory for GRSM’s client and sets an important precedent for future broker malpractice claims.
Learn more about the capabilities of GRSM’s Appellate and Professional Liability Defense groups.