Goldmann, Freund and Conford. The opinion of the court was delivered by Freund, J.A.D.
[44 NJSuper Page 464] The plaintiff brought this suit against his insurance broker for its negligent failure to obtain adequate workmen's compensation insurance coverage, as a
result of which the plaintiff had no insurance protection on an employee's claim. The issues framed by the pretrial order were negligence and contributory negligence.
The plaintiff, a trucker of garments in the New Jersey and New York area, maintains terminals in Jersey City and New York City. The defendant, Binder Agency, has been his insurance broker for about 15 years and effected workmen's compensation insurance covering plaintiff's employees under the statutes of both states. In March, 1953 Binder informed the plaintiff that it was unable to procure renewal or replacement of the plaintiff's policy and advised him to apply for coverage under the New Jersey assigned risk plan. The broker prepared the application which recites the plaintiff's locations in both states, had it signed by the plaintiff, and then filed it with the Compensation Rating and Inspection Bureau of New Jersey. In due course, assigned coverage was furnished by the Globe Indemnity Co. of New York and the policy was mailed directly to the plaintiff, who upon receipt filed it without reading it. In August 1953 one of plaintiff's employees, who was a resident of and had been hired in New York, was injured in that state and the plaintiff then learned that the policy did not cover his New York employees. In an action before the Workmen's Compensation Bureau of the State of New York, the insurance company, disclaiming liability, refused to defend or thereafter to pay the award made to the injured employee.
The complaint filed in this proceeding contained a first cause of action against the insurance company which was dismissed by stipulation. The trial proceeded on the second cause of action against the broker.
The court submitted five special inquiries to the jury, four of which pertained to defendant's negligence and one to plaintiff's contributory negligence. The jury found specifically that the defendant, by reason of his general employment as plaintiff's broker, obligated himself to obtain complete coverage; that the plaintiff had a right to rely thereon; and that the defendant's negligence in the performance
of its undertaking was the proximate cause of plaintiff's loss. However, the jury also found that the plaintiff was contributorily negligent "in failing to examine the policy or take other reasonable steps to ascertain" the scope of its coverage, and that such negligence did "join in proximately causing loss." Accordingly, the court entered judgment in favor of the defendant and subsequently denied plaintiff's motion for a new trial. This appeal ensued.
An insurance broker is one engaged in the business of "procuring insurance for such persons as may apply to him for that purpose." He is a specialist holding himself out to the world as possessing the skill requisite to his calling, and acts as a middleman between the insured and the insurance company. He is usually the agent of the insured, although his commission is generally paid by the company with which the insurance is placed. Milliken v. Woodward , 64 N.J.L. 444 (Sup. Ct. 1900). If he fails to exercise reasonable skill, care and diligence in effecting the insurance or performing his undertaking, he renders himself liable in damages either for breach of contract or in tort for breach of duty. Marano v. Sabbio , 26 N.J. Super. 201 (App. Div. 1953); Annotation, "Insurance Broker or Agent -- Liability ," 29 A.L.R. 2 d 171.
The liability of an agent to his principal may be avoided by the principal's contributory fault. Restatement, Agency , § 415, Comment (b), p. 956. "An agent against whom a principal brings an action of tort for negligence has the defense of contributory negligence in accordance with the rules stated in the Restatement of Torts."
In this State it has been held that the failure of an insured to apprise himself of the terms of a policy which he has had an opportunity to read, may operate to prevent recovery against the company on the policy or in an action for reformation thereof. But where the insurer has been guilty of fraud or other unconscionable conduct, it cannot be pleaded that if the insured had exercised reasonable care he would not have been defrauded. Crescent Ring Co. v.
Travelers' Indemnity Co. , 102 N.J.L. 85 (E. & A. 1926); Heake v. Atlantic Casualty Ins. Co. , 29 N.J. Super. 242 (App. Div. ...