[87 NJSuper Page 547] In these consolidated actions State Farm Mutual Automobile Insurance Company (State Farm) seeks rescission of a liability and collision insurance policy issued by it to Lawrence Wall covering a 1962 Pontiac sports coupe.
On August 23, 1962, while the policy was in effect, Wall, driving the automobile on Route 23 in Wayne, New Jersey, collided with an automobile being driven by Leroy Simmons in which Bertha Washington and Ralph P. Phillips were passengers. Both cars were badly damaged and Simmons, Washington and Phillips sustained severe injuries.
On January 21, 1963, five months after the accident, State Farm filed a complaint in the Chancery Division against Wall seeking rescission of the policy and the return of payments which it had made to him under the collision and medical payment provisions of the policy. Although the relief sought would have relieved State Farm of liability to Phillips, Simmons and Washington, they were not joined as parties defendant. They are necessary parties. In re Estate of Gardinier, 40 N.J. 261, 265 (1963); Dransfield v. Citizens Casualty Co., 5 N.J. 190 (1950). Subsequent proceedings have remedied that omission.
On May 21, 1963 Phillips, Simmons and Washington, who in March 1963 had instituted a negligence action against Wall, filed a complaint against State Farm for a declaratory judgment that liability insurance coverage was afforded Wall insofar as their claims are concerned. The declaratory judgment action was thereafter consolidated with the action for rescission instituted by State Farm. The pretrial order entered in the consolidated actions accomplished the necessary joinder of Phillips, Simmons and Washington as parties defendant to the action for rescission.
That equity may grant rescission of an insurance policy upon proof of reliance upon material representations untrue in fact, without proof of conscious or intentional fraud, is settled. Citizens Casualty Co. of New York v. Zambrano Trucking Co., 140 N.J. Eq. 378 (Ch. 1947), affirmed 141 N.J. Eq. 310 (E. & A. 1948).
State Farm charges that it issued its policy in reliance on representations by Wall that his driving privileges had never been suspended or revoked and that he had not had any accidents
or "driver's citations" during the previous three years, all of which representations are alleged to be false.
State Farm's adversaries contend that it has not borne its burden of proving the misrepresentation and reliance claimed. Further, they urge that State Farm has waived any right to rescission it may have had. Phillips, Simmons and Washington also argue that, at least to the extent of $10,000 for injury to one person and $20,000 for injury to more than one person, the policy is subject to the non-cancellation provisions of the Financial Responsibility Act, N.J.S.A. 39:6-46 et seq.
Wall's first meeting with a representative of State Farm was on January 19, 1962, at the Klugetown Shopping Center in Pompton Lakes. Thomas Voelkner, an authorized representative and sales agent of State Farm, was at the shopping center to secure "ex-dates," a method of obtaining leads to new business by approaching autoists entering or leaving the parking areas of the shopping center lot and ascertaining the expiration dates of their existing liability insurance policies. Some 30 days before the ascertained expiration date, Voelkner would communicate with the prospect and seek to convince him that it was advantageous to insure with State Farm instead of renewing his existing policy. Voelkner's conversation with Wall at the shopping center deviated from the usual pattern since Wall did not recall the expiration date of his liability policy. Voelkner gave Wall his phone number and a pamphlet describing State Farm's insurance policy.
Wall was the owner of a 1955 Pontiac automobile and a 1960 Chevrolet pickup truck. There was no insurance on the truck, but the Pontiac automobile, at least since April 2, 1957, had been covered by annually renewed liability insurance policies issued by Fidelity Phoenix Fire Insurance Company, with limits of $10,000-$20,000.
On March 3, 1962, after a telephone conversation setting up the appointment, Voelkner went to Wall's home. Voelkner says he examined Wall's existing policy. The insurance coverage which State Farm would afford was discussed. Then Voelkner completed and Wall signed forms of applications
for two liability insurance policies, to be written for six-month terms. One, covering the 1960 Chevrolet pickup truck, was to be effective March 12, 1962; the other, covering the 1955 Pontiac, was to be effective on April 2, 1962, when the existing Fidelity-Phoenix liability policy would expire.
In July 1962 Wall sold his 1955 Pontiac and purchased a 1962 Pontiac sports coupe. On July 11, 1962 Voelkner prepared and Wall signed an application for an insurance policy on the new automobile. That policy, effective July 11, 1962, was to expire on October 2, 1962, the termination date of the policy on the 1955 Pontiac which it replaced. However, the new policy included, in addition to liability and medical payment coverage, comprehensive and collision insurance coverage.
Among the questions on each application were the following:
(a) "(6) Has any insurer cancelled or refused to issue or renew, or given notice that it intends to cancel or refuse automobile insurance or any other insurance similar to that applied for, to the applicant or any member of his household within the past three years?"
(b) "(7) Has license to drive or registration been suspended, revoked or refused for the applicant or any member of his household within the past five years?"
(c) "Dates of accidents -- unless none give details."
(d) "Driver citations last 3 years"
The answers appearing on the application to each of these questions is "No" or "None," except that the application relating to the Chevrolet pickup truck refers to an accident of February 13, 1962, in which the truck had skidded into a telephone pole, causing damage to the truck's headlight of "under $175" which Wall was "in the process of getting repaired."
The "Declarations" in the State Farm policies contain similar representations, viz: "No insurer has cancelled automobile insurance issued to the named insured or any member of his household within the past three years," and "no license to drive or registration has been suspended, revoked
or refused for the named insured or any member of his household within the past five years." The acceptance of the policies by Wall without protest or correction constituted an adoption of these representations. Citizens Casualty Co. v. Zambrano Trucking Co., Inc., 140 N.J. Eq. 378 (Ch. 1947), affirmed 141 N.J. Eq. 310 (E. & A. 1948); cf. Merchants Indemnity Corp. v. Eggleston, 37 N.J. 114, 121 (1962); Heake v. Atlantic Casualty Ins. Co., 15 N.J. 475 (1954).
The answers which denied that any insurance company had cancelled or refused to issue automobile insurance were true. But the other answers were not true. A "Certified Abstract of Operating Record" of Lawrence Wall, dated October 10, 1962, obtained by State Farm from the New Jersey Division of Motor Vehicles reveals -- and these are the misrepresentations on which State Farm bases its claimed right of rescission -- that (1) on June 21, 1961 Wall had been convicted in the Wayne Municipal Court of speeding, fined $25 and had his license revoked for one month; (2) on August 19, 1961 he had been involved in an accident, and for his failure to deposit security in connection with that accident had had his driving and registration privileges suspended from November 29, 1961 until December 8, 1961, when they were restored, and (3) on February 6, 1962 he was fined $15 in the Wayne Municipal Court for careless driving (Wall testified that this last involved the accident in which his truck had skidded into the telephone pole).
Wall contends that he should not be charged with the representations contained in the writings; that he signed the applications without reading them; that the questions were not read to him; that the only discussion with reference to license revocation was whether Wall's driver's license was then revoked or suspended, and the only reference to accidents related to the damage to the truck resulting from the February 1962 skidding incident.
Wall's testimony is contradicted by Voelkner. Voelkner says that on March 3, 1962, when the first two applications were signed, he had asked ...