Selling insurance can be hard, because it can involve making simple statements about complex products. Brokers and agents (as well as insurers) can sometimes be held responsible for their customers’ failure to understand those complexities. A few months ago, New York’s Court of Appeals held that even a corporation’s failure to read its own policy did not bar its claim against its insurance broker for an allegedly negligent failure to obtain certain liability coverage. American Building Supply v. Petrocelli Group, 19 N.Y.3d 730 (2012). Now some agents are trying to make the problem cut both ways. In December, a trade association for property-casualty insurance agents filed an ethics complaint against a consumer law firm, arguing that the firm’s advertisements about business interruptions caused by Superstorm Sandy were “false, deceptive or misleading,” because they “us[ed] professional insurance agents as scapegoats.” A second trade group hired its own lawyers and claims to have persuaded the firm to stop running the ad.
Jacoby & Meyers, the first American law firm to advertise on television, pioneered the practices of mass-marketing and mass-producing legal services for consumers. The firm, whose practice areas include personal injury, mass tort, criminal defense and bankruptcy, now has over 100 offices spread among all 50 states, and it is reported to spend more than $10 million a year on television advertising. The ads used to say “it’s about time” and tout the firm’s entry into the underserved market of middle-class clients. After Sandy, though, the firm ran an ad in New York that said: “If your business lost business due to the storm, your insurance policy should cover it. If it doesn’t, your agent made an error. We’ll work to correct it.”
In a letter dated December 19, 2012, the Professional Insurance Agents of New York State, a membership-based trade association, cited the ad in a complaint to the Disciplinary Committee of New York’s judiciary. The letter explained that New York businesses lacked business interruption coverage for a large number of reasons, some of which are fairly complex. Some insureds simply declined the coverage because of the cost. Others are located in coastal areas that are subject to windstorms, where utility services business interruption coverage is unavailable. Still others obtained business interruption coverage as an enhancement to their policies, and the enhancement coverage specifically excluded power failures caused by flood. Until recently, the letter points out, the risk of flood-induced power failures didn’t keep many New Yorkers awake at night.
For these reasons, the PIA asserted that the law firm’s ad violated Rule 7.1(a)(1) of the Rules of Professional Conduct, which prohibits advertising that contains “false, deceptive or misleading” statements or claims. According to the PIA, the ad “clearly violated this rule by conclusively stating that the only reason an insurance policy would not cover losses as a result of a business interruption is because a professional insurance agent made an error.” Such a statement, the letter asserts, “ignore[d] the realities surrounding the availability and applicability of business interruption coverage,” “us[ed] professional insurance agents as scapegoats,” and thereby “promised victims of . . . Sandy something that [the law firm] cannot legally deliver.”
Separately, the Independent Insurance Agents & Brokers of New York, Inc., engaged a law firm that specializes in representing agents and brokers against professional liability claims. The group’s website reports that its attorney persuaded Jacoby & Meyers to pull the ad, at least temporarily. J&M might consider notifying its own liability carrier about the exchange.