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Warren v. Employers'' Fire Insurance Co.

Decided: April 25, 1968.


Conford, Collester and Labrecque. The opinion of the court was delivered by Labrecque, J.A.D.


Plaintiffs appeal from a judgment of involuntary dismissal of their suit to recover for losses allegedly compensable under a homeowner's insurance policy issued by defendant Employers' Fire Insurance Company, Boston, Massachusetts.

The policy in question covered "all risks" to plaintiffs' home located in Egg Harbor Township, Atlantic County, and certain specified perils including "sudden and accidental damage from smoke" to its contents. It was purchased through plaintiffs' friend and neighbor, one Murray, a New Jersey licensed insurance broker who also was authorized to act as defendant's agent in the Commonwealth of Pennsylvania (his agency was terminated in June 1966). The policy was in a standard form, N.J.S.A. 17:36-5.20, and contained a clause which provided:

"No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within twelve months next after inception of the loss."

On December 26, 1964, when plaintiffs returned to their home after an absence over Christmas, they found that considerable damage, in the form of staining, discoloration and scorching, had been done to the building and its contents by reason of malfunctioning (overheating) of their electric baseboard heating system. Between that time and some time in May 1965 (after which the units were replaced) the heating system allegedly misbehaved in a similar manner some five to seven times.

Plaintiffs testified that upon being notified of the December damage, Murray came to their home and, after inspecting

it, told them "not to worry, that we were covered for this in our policy and he would take care of it." Notice of the loss was thereafter given to defendant (by letter from Murray dated March 6, 1965) and the claim was assigned to one Costan, an employee of General Adjustment Bureau, for investigation on the company's behalf. He made an inspection and Mrs. Warren testified he said that the total damage to the interior and contents was $900 but told her there was no coverage. When the Warrens told Murray of this, he said he would "check" for them. He then telephoned Costan who, he said, called back in early February 1965 to tell him "that he thought he had this matter settled with the Warrens * * * and he said he was offering them $900 and that there was a question about the drapes which he would adjust at a later time." Costan denied making the offer and testified he was not assigned to the case until March 15, 1965. Plaintiffs also consulted one Maguire, another friend, who presumably had a familiarity with insurance matters.

Costan was subsequently transferred to another state and the handling of the claim was turned over to one Baldwin. Estimates of $173.65 for cleaning the walls and $189.60 for cleaning the contents were later obtained, whereupon Baldwin informed the Warrens on April 22, 1965 that he was offering $173.65 in full settlement of the claim for damage to the house but that the damage to the contents was not covered. In response to a later request from Mrs. Warren, Baldwin returned to the premises, but he again allegedly told them that the company would pay only the cleaning cost of $173.65. On August 30, 1965 Baldwin wrote Mrs. Warren, impliedly confirming that offer (plaintiffs contend it was received somewhat later).

In the meantime, Murray had been attempting to induce the company to make an offer satisfactory to plaintiffs but had been unsuccessful. Warren testified that some time in the "middle" of November 1965 (Murray thought it was around Thanksgiving) Murray reported his lack of success

and advised them to secure an attorney. At the end of two or three weeks they retained counsel who wrote the company under date of December 20, 1965 but received no reply. He wrote again on January 13, 1966, after which, at the attorney's request, there was a meeting at his office with Baldwin at which the latter renewed his offer of $173.65 for the damage to the house and again disclaimed liability for the damage to the contents, although indicating that he would discuss the matter again with the company. At no time during the efforts to obtain settlement was there any reference to the 12-month clause.

There was no change in the company's position and plaintiffs filed the present suit on May 24, 1966. Defendant's answer denied coverage for the loss to the contents and pleaded the failure to sue within the 12-month period as a defense to the entire claim. Plaintiffs set up ...

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