The New Jersey Supreme Court ruled that a respondent insurance broker was required to advise LLC members that they were entitled to workers’ compensation coverage, but that the broker could not be held liable for breach of that duty except for the alleged damages were caused by a “deliberate, willful or grossly negligent act or omission”.
According to the report, two brothers, Robert and Walter Friedauer, owned Holmdel Nurseries and formed an LLC in which each owned 50%. Since 1978, the brothers have been running the company, which was initially founded by their father. Robert Friedauer’s sons Michael and Christopher started at Holmdel as teenagers and were both full-time employees. Daniel Purdy, an insurance broker with decades of experience in commercial insurance for agricultural companies, began acting as an insurance broker for Holmdel in 2002.
A year after workers’ compensation insurance became available to members of New Jersey LLC, Holmdel decided to take out this coverage for Robert and Walter Friedauer, the two LLC members. But given the high cost of coverage, the brothers decided to drop that coverage. According to the statement, Purdy’s original proposal for Holmdel’s workers’ compensation policy was: “LLC members barred.”
From 2002 to 2012 Holmdel covered Christopher and Michael Friedauer as employees. In 2012, Christopher and Michael Friedauer then bought their uncle Walter Friedauer’s 50 percent stake in Holmdel. A few months later, Purdy held its annual meeting with Holmdel management to discuss insurance needs. It was at this meeting that Purdy learned of the change in membership of the LLC.
“It is undisputed that during the July 12, 2012 meeting, the Defendant failed to notify Christopher Friedauer and Michael Friedauer that they were no longer covered by Holmdel Nurseries’ Workers’ Compensation Insurance because they were LLC members and not employees, or that the LLC may elect to purchase workers’ compensation insurance to cover them in the event of a work-related accident,” Judge Anne M. Patterson wrote in her opinion for the court.
According to the report, Robert Friedauer testified that after that 2012 meeting he had “no reason to believe” that his sons were not covered by Holmdel workers’ compensation insurance and “never signed anything saying they were on or off.” “. the cover.
On the morning of February 15, 2015, Christopher Friedauer was working at Holmdel when Michael Friedauer saw him, covered in snow and “completely dazed,” the statement said. Michael Friedauer said Christopher Friedauer told him that he fell while trying to get his truck to run and hit his head. Later in the day, Michael Friedauer did not see Christopher Friedauer in Holmdel and went in search of his brother. Michael Friedauer found Christopher “dead in a truck” at another location where employees were clearing snow.
Christopher Friedauer was taken to the hospital, where he was pronounced dead.
Purdy filed a claim for workers’ compensation for Christopher’s wife, Nancy Holm, the plaintiff in the matter and executor of her husband’s estate, and their two minor children. According to the report, Purdy stated that he had no reason to believe that the claim would be covered by workers’ compensation because the LLC members did not elect to have coverage.
Holm filed a lawsuit with the Legal Department alleging professional negligence and breach of fiduciary duty. After the discovery was completed, the trial court denied a motion for summary judgment from Purdy and a counter-motion for partial summary judgment from Holm. According to the report, the case was heard before a jury.
At the hearing, an expert witness for the plaintiff testified that Holm suffered damages ranging from $570,272 to $858,099, the present value of a worker’s death benefit that would have been awarded to his dependents. Holm also attempted to produce a medical report to prove Christopher Friedauer’s death was work-related. The trial court dismissed the report, finding “that the plaintiff failed to provide a medical certificate of cause of death or other medical evidence to establish that the next of kin would be entitled to worker’s compensation in the event of death if Christopher Friedauer was covered by the LLC’s policy.” would have been covered. ”
“The trial court ruled that an insurance broker has an obligation to an LLC to notify it of the availability of workers’ compensation insurance for its members and their ability to elect such insurance,” Patterson explained. “Regarding the issue of immediate cause, the court found no evidence that Christopher Friedauer would have ruled that the LLC should provide workers’ compensation insurance to its members if he had known such compensation was available.”
The trial court granted Purdy’s motion for summary release and sentencing.
The Appellate Division upheld the trial court’s decision denying Holm’s countermotion for summary judgment, but the expert opinion overturned the approval of Purdy’s motion for incarceration and trial. The Court of Appeals ruled that NJSA 34:15-36 imposes an indispensable duty to advise new members of an LLC that workers’ compensation insurance is available to them if all members elect such insurance, the opinion found.
The Appellate Division did not find that the plaintiff had to prove “a willful, willful or grossly negligent act or omission” in order to claim damages.
“Instead, the appeals court concluded that the plaintiff presented sufficient evidence to warrant a jury determination as to whether the defendant had failed in a duty to notify Christopher Friedauer that he could obtain workers’ compensation insurance if all LLC members would choose such insurance,” explained Patterson. “The Appellate Division further found that the plaintiff had presented sufficient circumstantial evidence that the death of Christopher Friedauer was compensable to warrant a jury decision on this issue.”
“Here it was foreseeable that if the defendant did not inform the members of Holmdel Nurseries’ LLC that the LLC could obtain work injury coverage for Christopher Friedauer, his family could be harmed if Christopher died in an accident at work without such reporting,” Patterson said. “Thus, the threshold test in our decision to impose a duty has been met and we next examine the fairness and policy considerations identified in Hopkins and his descendants”.
Next, Patterson weighed the four fairness and policy considerations outlined Hopkins vs. Fox & Lazo Realtors: “Relationship of the parties, nature of risk, opportunity and ability to exercise due diligence, and public interest.” On each of the four counts, Patterson stated that the imposition of a levy is preferred, and therefore determined that the Appellate Division was right in anticipating that the trial court erred.
Regarding proximate cause, Patterson explained that since there had been no industrial injury case, the court would not rule on what an industrial injury judge would have required to find that Christopher Friedauer’s death was due to an “accident” outside and in the frame of gainful employment.”
“We merely state that we do not agree with the trial court’s conclusion that the plaintiff did not present any evidence that Christopher Friedauer died in an occupational accident and that therefore the question of proximate cause need not be raised ‘ Patterson said.
Because the trial court did not recognize the insurance broker’s obligation to an LLC member to report worker’s compensation insurance, Patterson referred this matter to the trial court over Holm’s claims under the “willful, willful or grossly negligent” standard. Patterson upheld the appeals division’s ruling and remanded the matter back to the trial court for further hearing.
Chief Justice Stuart Rabner, Justice Lee A. Solomon, Justice Fabiana Pierre-Louis, Justice Douglas M. Fasciale and Justice Jack M. Sabatino, who were assigned on a temporary basis, echoed Patterson’s opinion.
“My client and I are very pleased that the Supreme Court upheld the appeals division’s finding of an undelegable duty of the insurance broker,” said Ryan Milun of The Milun Law Firm, counsel for Holm.
Purdy’s attorney, Michael J. Dunn of the Michael J. Dunn Law Offices, did not immediately respond to a request for comment.