For reversal of main appeal -- Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For affirmance of main appeal -- None. For affirmance of cross-appeal -- Justices Jacobs, Francis, Proctor, Hall Schettino and Haneman. For reversal of cross-appeal -- None. The opinion of the court was delivered by Hall, J.
This is an action against an insurer to recover for water damage to certain business merchandise stored in the basement of plaintiffs' dwelling. Their theory is that, although neither a homeowner's policy nor a fire insurance policy issued by defendant covered the peril causing the loss, the insurer is estopped to deny coverage under the fire policy by reason of a contrary representation made by its agent and relied on by plaintiffs to their detriment.
The trial court, sitting without a jury, granted defendant's motion for involuntary dismissal at the end of plaintiffs' proofs as to liability, holding that in a suit at law, as distinct from an action in equity to reform a policy, statements made by the insurer's agent at the inception of the contract, which had been received in evidence, could not be considered to broaden the coverage of the policy because of the parol evidence rule. The Appellate Division affirmed, 99 N.J. Super. 90 (1968), although on a different basis. It decided that a defense of non-coverage could be barred by the doctrine of equitable estoppel on appropriate facts, in which event the parol evidence rule would be irrelevant. It found, however, upon exercise of its fact-finding appellate jurisdiction, that there was insufficient proof both of representation of coverage by the agent and of reliance by plaintiffs.
We granted both parties' petitions for certification. 52 N.J. 165 (1968). That on behalf of defendant was aimed
not only, out of an excess of caution, to preserve its right to argue against the view of the Appellate Division that an insurer may be estopped to deny coverage, but also to review the affirmance some time ago by the Appellate Division, in an unreported opinion, of an interlocutory ruling of the trial court, granting plaintiffs' motion to strike the defense that the suit was not commenced within the statutory 12 month period of limitation.
The evidence adduced on plaintiffs' behalf consisted of the two insurance policies and the rather sparse testimony of plaintiff Herman Harr. Since the propriety of a judgment of involuntary dismissal is involved, we must accept as true all evidence which supports the position of the party against whom the motion was made and must give him the benefit of all favorable inferences which may logically and legitimately be drawn therefrom. O'Donnell v. Asplundh Tree Expert Co., 13 N.J. 319, 328 (1953). So viewed, we think plaintiffs' proofs, along with stipulations at trial and in the pretrial order, fairly showed the following:
Mr. Harr was in the business of selling and servicing beer and soft drink dispensing equipment and for some years had conducted that business from his home in Essex Fells. In connection with it, he stored in the basement mixing valves, refrigeration equipment, regulators, syrup tanks, cooling plates and the like for replacement parts. In the middle of January 1963, he went to Florida for a vacation and was away from home six or seven weeks. During February a water pipe in the basement of the house burst, cascading some 90,000 gallons of water through that area, and seriously damaging the structure, certain household and personal effects, and the stored merchandise. A claim was made upon the defendant for the entire loss, and it finally paid $12,062.13 under the homeowner's policy for damage to the building and the household and personal effects, but denied liability under either policy for damage to the merchandise on the ground of non-coverage. [54 NJ Page 293] In 1961 Mr. Harr had changed insurance agents and, to replace a homeowner's policy that was expiring in another company, procured a similar contract from defendant through a Mr. Meinsohn, who, it was stipulated, was its agent.*fn1 The policy is in the usual form of such contracts, insuring the dwelling and personal property "usual or incidental to the occupancy of the premises as a dwelling" as to many perils causing physical damage. Included as well is protection against theft, and coverage with respect to comprehensive personal liability and medical payments. The document is an exceedingly complex one comprising many finely printed pages which deal with the perils insured against, limitations and conditions. The policy is so arranged and worded that a homeowner, not expert in insurance matters, could not be expected to appreciate all its provisions. However, we need not be concerned with problems which might conceivably arise in connection with such contracts, since Mr. Harr admitted that he knew the policy did not cover his business merchandise and since it is not claimed that the agent made any contrary representations with respect thereto.*fn2 It is also logically inferable, even though he was not questioned specifically about it, that he knew damage resulting from bursting water pipes, to property covered by the policy, was included in the insured perils.
The day before Mr. Harr left for Florida in January 1963, he telephoned Mr. Meinsohn and asked whether he could "cover" the merchandise in the basement, which he described, in the amount of $15,000. Meinsohn replied that he would find out and would call plaintiff back. He did so the same day and, according to Harr's testimony, Meinsohn said "Mr. Harr, we can cover you for $7,500 and you are fully covered. Go to Florida * * * and have a good time." (Emphasis supplied). Mr. Meinsohn told him the amount of the premium and asked for a check, which was immediately sent. Harr did not receive the contract -- the fire insurance policy previously referred to -- before he left for Florida, but testified that he took Meinsohn's word that he was "fully covered" because "I felt I had confidence in him."
There is nothing in the evidence to indicate that the two men discussed or even mentioned what perils the policy insured against. Mr. Harr was not asked, as he might well have been, what he expected or what he understood was meant by Mr. Meinsohn's assertion that he was "fully covered". We think it a fair inference, however, that he would expect, and reasonably so, coverage for the same perils of physical damage included in the homeowner's policy, and that he could justifiably construe "fully covered" as so indicating.*fn3 We further believe that Mr. Meinsohn should be held to have understood that his use of the phrase "fully covered" would convey that impression to Mr. Harr, in absence of an express statement by him that this peril was not covered, since he had written the homeowner's policy and also must be said to realize that the possibility of water damage from bursting
pipes to personal property in a basement is a common peril against which protection would be desired and expected.
The fire insurance policy, when actually issued, was dated January 30, 1963, effective January 15 of the same year, and was mailed to Mr. Harr at his Essex Fells address on or after the first mentioned date. His mail was forwarded to Florida and he received the policy there sometime later. He testified that he read it subsequently, "but I couldn't tell you offhand what it really said in there." He was not asked whether his reading was before or after he learned of the damage or whether he understood from the reading that damage from bursting water pipes was not covered.
The fire policy, while not as lengthy as the homeowner's contract, would nevertheless be confusing and abstruse to the average person. The heading "Fire Insurance Policy" is itself something of a misnomer these days, when almost all such contracts, including this one, insure against, and are generally known to cover, some additional perils. The general insuring clause on the first page insures "* * * against all Direct Loss by Fire, Lightning and by Removal from Premises Endangered by the Perils Insured Against In this Policy, Except as Hereinafter Provided." Confusion as to coverage begins with the next sentence, which reads
"INSURANCE IS PROVIDED AGAINST ONLY THOSE PERILS AND FOR ONLY THOSE COVERAGES INDICATED BELOW BY A PREMIUM CHARGE AND AGAINST OTHER PERILS AND FOR OTHER COVERAGES ONLY WHEN ENDORSED HEREON OR ADDED HERETO".
There follows a number of lines under the caption "ITEMS INSURED", which here were completed only as to "CONTENTS $7,500", described by the written words "Merchandise in storage". (An enigmatic endorsement affixed to the policy reads "PERMISSION GRANTED TO STORE A SMALL QUANTITY OF MIXING VALVES IN THE
DWELLING, IT BEING AGREED AND UNDERSTOOD THAT THERE IS NO SALES ROOM.") Below the "ITEMS INSURED" lines are another set of lines, captioned "PERIL(S) INSURED AGAINST AND COVERAGE(S) PROVIDED," which reads as follows:
[ ] ADDITIONAL EXTENDED COVERAGE
[ ] BROAD FORM (Other Perils)
SPECIAL FORM (Other Perils)
In this policy, rate and total premium were inserted only with respect to the first two lines, indicating coverage, insofar as premium is concerned, only as to those categories. "EXTENDED COVERAGE" ...