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Commercial Insurance Co. v. Apgar

Decided: June 30, 1970.

COMMERCIAL INSURANCE COMPANY OF NEWARK, NEW JERSEY, A CORPORATION, PLAINTIFF,
v.
JOHN APGAR, INDIVIDUALLY AND TRADING AS PARKWOOD COMPANY AND PARKWOOD COMPANY, A CORPORATION, DEFENDANTS



Handler, J.s.c.

Handler

[111 NJSuper Page 111] Plaintiff Commercial Insurance Company of Newark (Commercial) sues John Apgar, individually and trading as Parkwood Company (Apgar), and

Parkwood Company, a corporation (Parkwood). The action is for the wrongful and fraudulent conversion of insurance premiums paid by Seabrook Farms, Inc. (Seabrook) to defendants and not remitted to plaintiff. Defendants do not dispute that collected premiums are owed to Commercial. It is denied, however, that there was a conversion of the premiums involved and that Apgar rather than Parkwood was the insurance agent. They further assert that there is due a commission on the earned premiums.

In some respects this case is a sequel to Seabrook Farms, Inc. v. Commercial Insurance Co. , 104 N.J. Super. 419 (Ch. Div. 1969). Many of the facts determined in that case are consistent with the facts here. Apgar was the principal stockholder and controlling officer of Parkwood, a licensed insurance brokerage company. Over the years he had been associated closely with Seabrook and other Seabrook interests as an employee and as an insurance advisor, representative, consultant and broker. Parkwood had been the broker of record on most of the insurance business involving the Seabrook interests. In the spring of 1966 it became necessary to consider the replacement of a comprehensive business insurance policy for Seabrook. Apgar dealt with Donald G. McAllister of Seabrook. He stated to McAllister that he was having difficulty obtaining insurance coverage and would require monies in advance to apply toward premiums in order to secure insurance on a binder. There were needed, he testified, a "good faith" or "good will" deposit because various prospective insurers expressed concern over the financial position of the Seabrook interests and the types of fire risks involved. As a result of Apgar's explanation, Seabrook on April 28, 1966 issued a check payable to Parkwood for $15,000 which was deposited by Apgar in Parkwood's account. Apgar subsequently told Seabrook that $15,000 was not enough and that the "insurance companies want another good will deposit," an additional $10,000. On June 2, 1966 Seabrook sent another check payable to Parkwood in the amount of $10,000 which was deposited

by Apgar in Parkwood's account. On or about June 3, 1966 Apgar contacted Appleton and Cox, the insurance representatives for the Continental Insurance Group of which Commercial was a member. A representative of Commercial toured the Seabrook properties with Apgar for the purpose of evaluating the risks. Shortly thereafter Commercial's representative advised Apgar that the risk would be accepted subject to underwriter's approval. Apgar did not at that time inform Commercial that he had already received from Seabrook, the prospective insured, a total of $25,000 as a deposit or advance against insurance premiums.

Commercial was described as an "agency company." Commercial was required by law to utilize an insurance agent in order to place and write insurance. On June 10, 1966 Commercial issued a temporary binder. On the same date Commercial designated Apgar, with the trade name Parkwood Company, as an authorized agent for Commercial by filing a certificate of appointment of agent with the New Jersey Commissioner of Banking and Insurance. On June 17, 1966 Commercial was advised by the Commissioner that the designation was improper because John Apgar was licensed as an individual and a corrected certificate of appointment was requested. Such a corrected certificate of appointment designating John Apgar as agent was then filed with the Commissioner on June 29, 1966. Apgar disclaimed any actual knowledge of the fact that he had been designated as an authorized agent for Commercial or that a certificate of his appointment as agent had been filed with the Commissioner. Nevertheless, in view of Apgar's own licensure and experience in the insurance field, he knew that Commercial was an "agency company" required to write insurance through a duly designated agent and that a certificate of appointment of an agent designated by Commercial was requisite for the writing of this policy.

A comprehensive business insurance policy for a three-year term was issued on December 5, 1966. Commercial

sent it by mail to Apgar and he delivered the policy to Seabrook on December 7, 1966, together with an invoice for $60,000 representing the total premiums for three years. A Seabrook check was drawn payable to Parkwood in the amount of $36,603. This included $35,000, which added to the total of $25,000 previously paid by Seabrook, constituted payment of all premiums due. Payment in full was receipted by Apgar.

Apgar and Parkwood failed to remit to Commercial any of the premiums collected from Seabrook and Commercial cancelled the insurance policy for nonpayment of premiums. Seabrook then instituted an action against Commercial for a declaratory judgment, contending that it had paid the full premium and that Commercial was not justified in cancelling the policy. Commercial counterclaimed for $25,000, the portion of the premiums paid by Seabrook as advances. In Seabrook Farms, Inc. v. Commercial Insurance Co., supra , it was held that Apgar and Parkwood were not the agents of Commercial when Seabrook paid its initial premium advances of $25,000 but were in fact at that time the brokers for Seabrook. As a consequence Seabrook had to bear the responsibility of any misappropriation on the part of Apgar or Parkwood with respect to these payments. It was ruled, therefore, that Seabrook was obligated to pay Commercial $25,000 and that Commercial was not entitled to cancel the policy.

With respect to the $35,000 received by Apgar and Parkwood on December 7, 1966, this occurred after Commercial designated Apgar its agent. Defendants do not therefore deny that there is owed to Commercial this sum representing the balance of the premiums collected (less commissions claimed by them), although Apgar disputes that he rather than Parkwood was the agent of Commercial.

Plaintiff's primary thesis is that defendants fraudulently converted the premiums due. The gravamen of the tort of conversion consists of the wrongful exercise of dominion and control over property owned by another in a manner

inconsistent with the owner's rights. McGlynn v. Schultz , 90 N.J. Super. 505 (Ch. Div. 1966), aff'd 95 N.J. Super. 412 (App. Div. 1967), certif. den. 50 N.J. 409 (1967); Prosser, Law of Torts (3rd ed. 1964), ยง 15, at 79. It is essential that the money converted by a tortfeasor must have belonged to the injured party. The tort is not limited, however, to cases where the defendant was obligated to deliver to the owner the identical property, coin, bank notes and the like which he had received. Pearl Assur. Co. v. National Ins. Agency , 151 Pa. Super. 146, 30 A.2d 333 (Super. Ct. ...


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