Brokers Facing Sandy Lawsuits

By: | September 1, 2013 • 2 min read

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]

An inability to collect on insurance claims due to Superstorm Sandy flooding is beginning to spill over into lawsuits against some insurance brokers and agents.

“It’s a viable claim where it can be established the agent or broker failed to place necessary coverage for an insured, but it’s highly fact specific,” said Thomas J. Pryor, a shareholder and member of Stark & Stark’s Litigation, Alternative Dispute Resolution, and Insurance Coverage and Liability groups.

R9-1-13p12_Broker.inddOne recent case involved Landau Holding Inc., which sells Ethan Allen furnishings in New Jersey. In a May 22 lawsuit, Landau claimed it relied on its insurance broker for advice on risk management and mitigation.

That advice was a failure in the wake of Superstorm Sandy, according to a lawsuit, which alleged negligence , breach of contract and professional malpractice by Capitol Risk Management Services (CRMS), its principal Richard Kohlhausen, and Aspen American Insurance Corp.

“Landau specifically asked CRMS to make sure that the inventory stored at [a warehouse owned by MVN Warehousing Inc.] was insured. CRMS represented to Landau that the necessary insurance was in place,” the lawsuit charged.

After the storm flooded the warehouse and damaged $1.5 million worth of furnishings, however, Landau was told its insurance wouldn’t cover the claim, according to the lawsuit.

Landau had asked CRMS to “coordinate MVN’s insurance with Landau’s insurance, to make sure that Landau was fully covered against casualty losses,” according to the lawsuit.

Two other similar claims were made by the Raritan Yacht Club in Perth Amboy, N.J., against its insurance agent, Exemplar International Inc., and carrier, Federal Insurance Co.; and by Cardolite Corp. against its broker, Willis of New Jersey Inc., and carrier, National Union Fire Insurance Co.


“Not everybody who didn’t get flood insurance has a viable claim,” Pryor said. “It’s all about what was the risk and what was the level of communication between the insured and the agent and broker, and what kind of insurance was prudently required for that risk.”

Pryor said he did not expect “a huge wave of these claims, but I think in the right factual circumstances, I wouldn’t be surprised if such claims are being filed.”

According to Robert D. Chesler and Matthew F. Putorti of Anderson Kill, it may be easier to win such a case in New Jersey than in New York, two of the areas hardest hit by Sandy.

New Jersey courts have found insurance brokers to be liable for their failure to procure adequate insurance coverage in a wide variety of circumstances,” they wrote in an article on Law360.

“By contrast, in New York, in order to prevail against a broker for its negligence in procuring coverage, the policyholder must show that it requested a specific type of coverage, that coverage was available and that the broker failed to obtain the requested coverage.”

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]