For affirmance and remandment -- Chief Justice Hughes, Justices Mountain, Sullivan, Pashman, Clifford and Schreiber and Judge Conford. For reversal -- None.
[72 NJ Page 221] Plaintiffs seek damages from defendant, a licensed insurance broker, charging him with breach of contract and negligence in processing an application for fire
and extended coverage insurance for their home. Coverage was applied for through the New Jersey Insurance Underwriting Association (N.J.I.U.A.). The application was in fact approved and the appropriate notice went to plaintiffs on June 28, 1970, twelve days after their home was destroyed by fire. At the time of the disaster there was no fire insurance covering the premises.
The trial judge, sitting without a jury, concluded there was "no breach of duty or contract" and found for defendant. The Appellate Division reversed and remanded the cause, instructing the trial judge to enter judgment in favor of plaintiffs and assess damages. 133 N.J. Super. 162 (1975). We granted certification to review that determination, 68 N.J. 166 (1975), and now affirm substantially for the reasons set forth in Judge Morgan's opinion for the Appellate Division.
Before this Court defendant argues that (1) "the existence of a reliance by plaintiffs on defendant" is not supported by the evidence, (2) the defendant was not negligent as a matter of law in the absence of "proof of a standard of professionalism" alleged to have been violated by defendant, and (3) plaintiffs were contributorily negligent by their "failure to procure insurance through another broker." The Appellate Division opinion's resolution of the last of these issues (133 N.J. Super. at 168) is quite sufficient and requires no further elaboration. As to the first and second grounds of appeal -- no proof of plaintiffs' reliance on defendant, and plaintiffs' failure to establish a standard of professionalism -- we augment the opinion below as follows, taking the points in inverse order.
The specific negligence charged against defendant was his failure to have been aware of the immediate availability of coverage through a temporary binder on June 6, 1970, some ten days prior to the fire, and to have informed plaintiffs of the same. Defendant's position was that he could
not have known such coverage was available since he had not received from N.J.I.U.A. a copy of the rule (Regulation H. -- Temporary Binder), promulgated about a year prior to the application in question by the Commissioner of Banking and Insurance, which provided for issuance of a temporary binder when an applicant was not notified of acceptance or rejection of his application for insurance within 25 days after its receipt.*fn1 Although the trial judge decided this issue adversely to defendant, he went on to hold that absent any indication by the broker that he was effecting or could effect insurance, and absent any reliance by plaintiffs to the contrary, liability could not attach to defendant.
The Appellate Division perceived this holding as erroneous and correctly identified the central issue in the case as whether defendant possessed the necessary skill and knowledge required of one who holds himself out to the public as an insurance broker when he admittedly did not know such temporary coverage as was provided by Regulation H was available. It said:
[D]efendant was under a duty to know the rules governing the Association's issuance of policies which the judge found were in defendant's possession at the time and to advise plaintiffs, whom he then knew were uninsured, that immediate coverage was available. His admitted failure to know and to advise did constitute a breach of duty even though plaintiffs, too, knew they were, at the time, uninsured. They thought they were uninsured because immediate coverage was unavailable. That information was inaccurate insofar as it pertained to the period of time following 25 days of inaction after the Association's receipt of plaintiffs' application.