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Ais Risk Consultants, Inc v. Barry Moffett and Specialty Insurance Agency

November 1, 2011

AIS RISK CONSULTANTS, INC., PLAINTIFF-RESPONDENT,
v.
BARRY MOFFETT AND SPECIALTY INSURANCE AGENCY, INC., DEFENDANTS/THIRD-PARTY PLAINTIFFS-APPELLANTS,
v.
ALLAN I. SCHWARTZ, THIRD-PARTY DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-0513-10.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 21, 2011

Before Judges Cuff, Waugh and St. John.

Defendants Barry Moffett and Specialty Insurance Agency, Inc. (Specialty) appeal the July 9, 2010 order dismissing their counterclaim against plaintiff AIS Risk Consultants, Inc. (AIS) and their third-party complaint against defendant Allan I. Schwartz. They also appeal the January 27, 2011 order denying their motion for reconsideration.

In 2002, Security Indemnity Insurance Company (Security)*fn1 retained AIS to perform actuarial services on its behalf.*fn2

On May 1, 2003, Schwartz, AIS's principal and actuary, issued an actuarial report that outlined Security's reserves as of December 2002. On December 24, 2003, the Attorney General, acting on behalf of New Jersey's Commissioner of Banking and Insurance, issued a report to the General Equity Part stating that Security was insolvent, should be liquidated, and that any attempt to rehabilitate the company would be futile.

On April 8, 2004, AIS entered into a contract with Moffett and Specialty to provide additional actuarial services on behalf of Security in anticipation of the liquidation recommended by the Commissioner. Moffett and Specialty, as the "Managing General Agent" for Security, were named parties to the contract. The terms of the AIS-Moffett/Specialty agreement state, in pertinent part:

This document puts into writing the previous oral agreement wherein Barry Moffett and Specialty Insurance Agency . . . requested that AIS Risk Consultants . . . provide actuarial services in connection with the rehabilitation of Security Indemnity Insurance Company, proposed liquidation of . . . [Security Indemnity Insurance Company,] and related matters.

Attached to the agreement was a fee schedule, pursuant to which defendants made five payments, totaling $70,000, to AIS between March and June 2004.

On June 30, 2004, just one day before defendants were scheduled to make another payment to AIS, the General Equity judge issued a decision finding Security insolvent and subject to imminent liquidation. Defendants made no further payments to AIS after that decision.

AIS asserted in its complaint that it was owed approximately $347,000 (principal and interest) for its actuarial services. Defendants disagreed, arguing that they do not owe AIS the outstanding balance on the contract because AIS and Schwartz were negligent in performing the actuarial services by deviating from the customary standard of care in that profession. In addition to defendants' general denial, they counterclaimed, asserting that AIS is liable for damages as a "direct and proximate result of the negligence of . . . [AIS] in performing its actuarial services . . . [that forced Security] into insolvency."

The thrust of defendants' counterclaim was that Security would have avoided insolvency and subsequent liquidation had there been no actuarial negligence. Specialty and Moffett claim that they sustained losses in excess of $40 million.

Defendants also filed a third-party complaint against Schwartz for the negligent actuarial services provided to Specialty in its capacity of Managing General Agent of Security. Moffett claimed he was "harmed in that he was deprived of the income he was receiving from Security and Specialty, and otherwise sustained damages." In essence, because Moffett personally depended on Security's financial well-being and the money that Specialty earned from serving ...


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