INSURER’S AGENT CAN BE DIRECTLY LIABLE FOR BAD FAITH CONDUCT IN BREACH OF CONTRACT, AND NEGLIGENCE IN CLAIM HANDLING, EVEN IF NOT A PART OF THE INSURANCE AGREEMENT (New Jersey Federal)
The district court allowed the insured to pursue claims against the insurer’s agent, even though the agent was not party to the insurance policy, where the policy was underwritten by Lloyds and effected through the agent.
The complaint alleged there was a delay in payment undisputedly due the insured after the claim was submitted. This unwarranted and unjustified delay allegedly caused the insured to suffer extra-contractual consequential damages. The insured alleged the insurer was liable for breach of contract and bad faith in delaying payment. The claims against the insurer itself, however, were not before the court.
Rather, the insured wanted to bring distinct claims against the insurer’s agent as a claims handler. The insured asserted the agent was independently liable for failing to timely process the claim and for failure to make undisputed payments promptly, leading to the consequential extra-contractual damages. The insured also brought a negligence claim against the agent for failing to meet its duty of care in claims handling. The insured contended the agent’s “conduct contributed to or caused Plaintiff’s damages and therefore, [the agent] is potentially liable to Plaintiff in contract for its bad faith.”
The court permitted all of these claims to proceed.
Citing the New Jersey Supreme Court’s seminal Pickett v. Lloyds opinion, the district court found the insurer’s agent could be “liable to the insured in contract for lack of good faith and fair dealing outside of its agency relationship with Lloyd’s for its role in the claims handling delay that caused consequential damages to the policyholder.” This requires that the agent’s own conduct contributed to the delay causing consequential damages.
Under Pickett, “’agents of an insurance company are obligated to exercise good faith and reasonable skill in advising insureds.’” The district court further observed that “’although the allegation of an agent’s breach of duty of care carries tort overtones, the contractual relationship between the insured and insurer dominates not only the relationship between them, but also that between the insured and the agent.’”
As to the negligence claim, the district court looked again to Pickett, which stated that “’clearly cases may arise in which the insurance company’s conduct in response to an insured’s claim for payment constitutes an independent tort.’” Thus, the district court held the insured could state a negligence claim against the agent, in addition to the contract claim.