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Bates v. Gambino

Decided: March 17, 1975.


Michels, Morgan and Milmed. The opinion of the court was delivered by Morgan, J.A.D.


Plaintiffs, husband and wife, sought money damages from defendant, a licensed insurance broker, as compensation for defendant's alleged lack of diligence in procuring requested insurance coverage for their home which was destroyed by fire on June 16, 1970. The case was tried without a jury and plaintiffs appeal from a judgment entered in defendant's favor.

The business relationship between plaintiffs and defendant broker had its inception in 1964 when defendant served as a real estate agent in connection with plaintiffs' purchase of their home at 1006 Williams Street in Elizabeth, New Jersey. At the time of this purchase defendant, an insurance broker of 20 years experience, secured fire insurance coverage on the premises. That policy, placed with the Firemen's Insurance Company of Newark, expired on February 6, 1967. Coverage with Firemen's was renewed for the period commencing February 6, 1967 and expiring February 6, 1970. Before this second policy was scheduled to expire the carrier notified defendant that it declined to further insure plaintiffs' home. Accordingly, and on January 20, 1970, defendant attempted to obtain other insurance on plaintiffs' behalf with the Motor Club of America. This attempt was unsuccessful,

and when defendant received notice of the rejection of submitted application he wrote plaintiffs on January 27, 1970 to advise them that their homeowner's policy with Firemen's would expire on February 6, 1970 and that he had been unsuccessful in securing replacement coverage with another company. Defendant also advised them to contact another broker.

It was not until May 9, 1970, over three months later, that plaintiff husband met with defendant in an attempt to obtain coverage for his home. He had been without coverage from February 6, 1970, the date his previous policy expired, until the date of the meeting. At the meeting of May 9, 1970 defendant explained to him two alternative methods of obtaining insurance. The first alternative was to procure surplus or excess line insurance, which was rejected as being too costly. Defendant had explained that such insurance would cost him approximately $200 a year, and if he could make a down-payment of a third of that amount, the rest could be financed. Plaintiff did not, however, have the amount of money necessary for the down-payment. The second alternative, accepted by plaintiff, was to make application to the New Jersey Insurance Underwriters Association for coverage. Under that alternative defendant explained that there would be a four to six-week delay before any policy would issue. Plaintiff indicated to defendant that he would accept the delay because by the time the policy issued he would have the money to pay for it.

It should be noted, parenthetically, that money seemed to be a perennial problem in the relationship between plaintiffs and defendant. Plaintiffs would fall behind in their premium payments, and defendant would frequently make payments on their behalf. On two occasions defendant requested cancellation of their policies, only to seek reinstatement after sufficient payment was made. At the meeting of May 9, 1970 plaintiff first paid the $21 balance due on the policy which had expired over three months previously.

At any rate, it is undisputed that defendant submitted plaintiffs' application to the Association and it was received by that organization on May 12, 1970. Plaintiffs' house was destroyed by fire on June 16, 1970 and the application for insurance was approved and notice sent to defendant on June 28, 1970, 12 days after the fire. Plaintiffs were at the time of the fire uninsured.

The New Jersey Insurance Underwriting Association, to which defendant made application on plaintiffs' behalf, is a creature of statute, N.J.S.A. 17:37A-1 et seq., which was designed to insure a market to sorely needed and unavailable fire and extended coverage insurance to urban homeowners, among others. The Commissioner of Banking and Insurance was vested with authority to adopt rules and regulations in implementation of the essential goals of the enactment. N.J.S.A. 17:37A-26; New Jersey Ins. Underwriting Ass'n v. Clifford, 112 N.J. Super. 195, 200-203 (App. Div. 1970).

Pursuant to this rule-making power the Commissioner of Banking and Insurance promulgated a series of rules and regulations which the trial judge found was in defendant's possession at the time application was made to the Association. Among the rules adopted was the following one:

H. Temporary Binder

In the event the applicant is not notified by the Association of the acceptance or declination of the coverage within twenty-five days after receipt of the application by the ...

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