New Jersey Statute Allows Suit Against Insurer Who Advised its Insured No Coverage Years After Denial
Read the full article at https://lnkd.in/gyWjUVKg and https://zalma.com/blog plus more than 4200 posts.
But, is this a Waste of Time & Money?
Steven D’Agostino appealed from trial court orders dismissing his complaint in 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 suit by a judgment debtor of an insured whose claim was rejected.
FACTS
Plaintiff’s complaint alleges the following facts, which, like the trial court, the appellate court accepted as true for purposes of the motion. In February 2002, plaintiff retained Laurence Hecker, a solo practitioner licensed in New Jersey, to represent him in connection with an employment matter. Despite harboring some initial skepticism as to Hecker’s ability to handle the case, plaintiff claims he decided to retain Hecker once the lawyer represented “he was ‘a PC’ with ‘half a million dollars’ worth of malpractice insurance.”
Plaintiff’s employment matter went against him and, in September 2006, proceeding pro se, he filed a legal malpractice action against Hecker. In 2009, a jury determined Hecker had been negligent in his representation of plaintiff and awarded plaintiff $330,000 in damages, along with pre-judgment interest. Plaintiff claims Hecker reportedly told two different pretrial judges he had no insurance carrier.
Defendant Colony Insurance Company issued a $1,000,000 claims made professional liability policy to Hecker for a one year period beginning March 16, 2006 – six months before plaintiff filed suit. The retroactive date for that policy, however, was March 16, 2006, the first day of the policy period. Colony declined Hecker’s request for defense and indemnification under the policy.
Plaintiff was unable to recover the $330,000 judgment from Hecker. In 2011, plaintiff filed a claim with the Lawyers’ Fund for Client Protection, that denied plaintiff’s claim.
Hecker died in May 2017, and, over the course of the next year, plaintiff obtained access to several boxes of Hecker’s personal and business records. After reviewing the records, plaintiff claims he learned Hecker had malpractice insurance in place during the pendency of the malpractice suit. Plaintiff subsequently called Poulton, which informed him that Colony had denied Hecker’s claim for coverage “because the retroactive date of Hecker’s policy did not go back far enough to cover” the conduct underlying the malpractice suit. Colony refused to provide any information and claimed it only kept records for ten years.
Colony and Poulton successfully moved to dismiss for failure to state a claim, arguing plaintiff lacked standing as a third-party beneficiary and any derivative claims were time-barred. Poulton also argued plaintiff had not stated a viable claim against the company because, as an independent insurance broker, it was not liable for an insurance carrier’s coverage decision.
The court found plaintiff’s status was more akin to a judgment creditor. The trial court found plaintiff’s claim was “essentially a bad faith claim against the insurance carrier and the broker,” which is not cognizable by an individual or entity that is not the insured or an assignee of the insured’s contract rights.
ANALYSIS
As a general rule an individual or entity that is a stranger to an insurance policy has no right to recover the policy proceeds. But, the appellate court concluded, that the general rule does not apply here. N.J.S.A. 17:28-2 provides an injured person may maintain an action against an insurer when his judgment against the insured tortfeasor remains unsatisfied due to insolvency, which plaintiff’s complaint alleges here.
The trial court was correct plaintiff is not an intended third-party beneficiary in the traditional sense. Nor is he an assignee of Hecker’s contract rights entitling him to sue on the policy. But, the court concluded, he has plainly stated a claim as a third-party beneficiary by virtue of the direct action statute with standing to sue Colony on the policy
Accordingly, the appellate court concluded that the judgment dismissing plaintiff’s complaint for lack of standing against Colony must be reversed. While Colony has raised potential defenses it may have to plaintiff’s claim, assuming plaintiff can establish Hecker’s insolvency – asserting plaintiff can look to the limit of the policy proceeds to satisfy his judgment under N.J.S.A. 17:28-2, only if coverage is available, [and] only if plaintiff does so within the statutory limitations period – the viability of those defenses will have to await discovery.
Colony’s assertion that plaintiff’s claim is time-barred was not clear to the court on this record when plaintiff’s claim accrued under N.J.S.A. 17:28-2.
The New Jersey Supreme Court has noted that “[w]hile the injured person has no greater right under the policy than has the assured, he has ‘a cause of action the moment he is injured’ which ripens into a right of action when he recovers a judgment against the assured whose insolvency is proved by the return of an execution unsatisfied.” Dransfield, 5 N.J. at 194 (quoting Century Indemnity Co. v. Norbut, 117 N.J. Eq. 584, 587 (Ch. 1935); aff’d, 120 N.J. Eq. 337 (E. & A. 1936)).
Plaintiff has only stated a claim against Colony under N.J.S.A. 17:28-2, he has come nowhere near proving one. Finally, we likewise find plaintiff has stated a claim against Poulton and Poulton & Associates for the broker’s negligent failure to procure the appropriate professional liability coverage. A broker has a duty of care to foreseeable third parties injured by the broker’s negligence in failing to secure appropriate insurance coverage.
Although it is certainly possible plaintiff will not be able to prove Poulton failed to secure the coverage Hecker asked for or expected, or that any such cause of action is timely, plaintiff has stated the claim and should thus be permitted the opportunity to try to prove it.
ZALMA OPINION
Trial and appellate courts tend to give a great deal of consideration to actions brought by pro se plaintiffs. Although Mr. D’Agostino successfully sued his lawyer for malpractice he was unable to collect on his judgment. Only when the lawyer defendant died did he obtain information that indicated the lawyer was insured at the time of his trial although the insurer disclaimed coverage he sued the insurer and insurance broker to attempt to collect his old judgment. He lost on a motion to dismiss only to have the appellate court send the case back down for gathering evidence which, very probably, will result in a judgment in favor of the insurer and broker defendants because the case is old and Hecker, now dead, has no assets. A waste of court, lawyer, and defendant time.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his practice to service as an 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 an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].
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No Right to Subrogation Against Tenant
Post 5231
Not Fair to Require Tenant to Pay for Damage Insured by LandlordSee the video at https://lnkd.in/gFkrp_6M and at https://lnkd.in/gQdFQBWj and at https://zalma.com/blog plus more than 5200 posts.
See the video at and at
For Insurer to Subrogate Lease Must Require Tenant to Obtain Insurance for the Benefit of the Landlord
In AmGUARD Insurance Co. v. Tyrone Ellis and Shakyra Ellis, U.S. District Court, District of Connecticut Civil No. 3:25-cv-946 (JCH) (November 19, 2025), Judge, Janet C. Hall the defendant’s Motion to Dismiss the Amended Complaint on the basis of Connecticut’s anti-subrogation doctrine required dismissal.
KEY FACTS
Landlord Michael Caldwell, a Connecticut citizen, owned a multi-family building in Windsor, Connecticut. Defendants Tyrone and Shakyra Ellis were residential tenants in the building. On or about March 1, 2025, a fire ...
Debt Resulting from Fraud is Not Dischargeable in Bankruptcy
Post 5230
Read the full article at https://lnkd.in/gpF3y7Vd, see the video at https://lnkd.in/gR5cVcbY and at https://lnkd.in/gch6Q4_V, and at https://zalma.com/blog plus more than 5200 posts.
Knowing Misappropriation and Conversion of Funds is Fraud
In re Matthew Jene Tubbs (Bankr. N.D. Tex., Fort Worth Div., No. 22-42728-MXM-7; Adv. No. 23-04019-mxm), October 15, 2025 .
Key Facts
Plaintiffs (Robles) and Defendant (Tubbs) met through their church; both held leadership roles. In Feb 2021 Robles home suffered major water damage from Winter Storm Uri and insurance paid $173,000.
In the Fall of 2021: Tubbs represented to Mr. Robles that he personally built a newer house and large barn on his parents’ property “with his own hands” (except foundation/insulation). That he had 10 years’ experience overseeing window/door installations at a major home-improvement chain, was a licensed contractor (false) and carried general contractor liability insurance.
Relying on ...
See full video at https://lnkd.in/gtnsH3SW and at https://lnkd.in/geJ4FseF, and at https://zalma.com/ and at https://lnkd.in/gC2wmzqZ.
ZIFL-Volume 29 Number 22
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
Post 5228
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/
Read the full 20 page issue of ZIFL at http://zalma.com/blog/wp-content/uploads/2025/11/ZIFL-11-15-2025-1.pdf
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The Professional Claims Handler
Post 5219
Posted on October 31, 2025 by Barry Zalma
An Insurance claims professionals should be a person who:
Can read and understand the insurance policies issued by the insurer.
Understands the promises made by the policy.
Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
Are competent investigators.
Have empathy and recognize the difference between empathy and sympathy.
Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
Understand how to repair damage to real and personal property and the value of the repairs or the property.
Understand how to negotiate a fair and reasonable settlement with the insured that is fair and reasonable to both the insured and the insurer.
How to Create Claims Professionals
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The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail
Post 5210
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster
When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
I was initially sat at a desk reading a text-book on insurance ...
The History Behind the Creation of a Claims Handling Expert
The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail
Post 5210
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster
When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
I was initially sat at a desk reading a text-book on insurance ...