Background: The New Jersey Supreme Court’s Decision in Lowe v. Audet

In a decision that is unfortunate and disappointing to the insurance producer industry, the Supreme Court of New Jersey unanimously decided that insurance brokers, producers, and agents are not exempt from suit under the Consumer Fraud Act (CFA). In Lowe v. Audet et al., Plaintiff James Lowe alleges that Defendants Bernard Audet and Richard Laver, in marketing, selling, producing, and procuring insurance policies to him for himself and his medical practice that covered loss related to disability, negligently failed to obtain sufficient disability insurance for him. Lowe is a neurosurgeon who works at and co-owns a medical practice. In 2021, he was diagnosed with a permanent vision condition which prevented him from performing neurosurgery and subsequently made claims for maximum benefits under the policies he bought from the Defendants. He was paid partial benefits due to his other business interests unrelated to his practice, and claims he was offered insurance without notice of his other business interests interfering in disability coverage.

The Legal Arguments Before the Court

Audet and Laver argued that the case of Plemmons v. Blue Chip Insurance Services, Inc., should apply. Plemmons held that insurance brokers are “semi-professionals” and therefore excluded from liability under the CFA for their services rendered under their professional licenses. Plaintiffs argued Shaw v. Shand should apply, which defined the exception for learned professionals to those professions that have historically been recognized as requiring extensive learning or scholarship. Defendants argued insurance brokers fell under both the learned professional and semi-professional exemptions, and therefore the Plaintiff’s claims under the CFA should be dismissed. The trial court agreed and dismissed the CFA counts, and the Appellate Division affirmed the decision.

Why the New Jersey Supreme Court Rejected the Insurance Producer Exemption

The Supreme Court weighed the arguments from both parties as well as amicus briefs of the New Jersey Attorney General, the New Jersey Association for Justice, and New Jersey Citizen Action. They determined that the semi-professional exception is not supported by the CFA and insurance brokers do not fall under either exception. The Court reasoned that insurance brokers are not traditionally learned professionals like physicians, attorneys, or theologians, and they were permitted to advertise at the time the CFA was adopted, so they could have been regulated by it. Finally, they point to another case, Lemelledo v. Benefit Management Corp. of America, to justify their decision that despite licensing requirements for insurance brokers, licensing and regulation are not sufficient enough bases for exemption and there is no direct conflict between the regulations governing insurance brokers and the CFA. Therefore, they found insurance brokers can be regulated by their own licensing and regulatory scheme in addition to the CFA.

What the Decision Means for New Jersey Insurance Producers

In conclusion, the Court determined that the CFA’s purpose would be undermined by permitting insurance brokers to fall under an exception to the CFA, and reversed the Appellate Division’s affirmation of the trial court’s dismissal of the Plaintiff’s CFA claims, and remanded the case. Additionally, the Court calls on the legislature to clarify what professions are exempt from liability under the CFA. This decision’s implications for the insurance industry are impactful. Post-Plemmons, insurance industry professionals have been operating without fear of liability under the CFA for the work they perform. Lowe changes the landscape and will require insurance professionals to be much more vigilant about their marketing and client interactions to guard against potential claims. 

For additional information and to discuss, please reach out to James M. Burns, Esq. via email here or William F. Megna, Esq. via email here.