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Commercial Union Assurance Companies v. State Farm Mutual Automobile Insurance Co.

Decided: March 9, 1978.


Miller, J.c.c. (temporarily assigned).


This is an action brought by plaintiff Commercial Union Assurance Companies, insurer of plaintiff John Bram, in order to compel defendants, State Farm Mutual Automobile Insurance Company and Barton F. Sharp & Son, to extend primary liability insurance to plaintiff Lawrence Grady, Jr. The matter is before the court for a ruling on the motions for summary judgment filed on behalf of the above-named parties.

In January 1973 plaintiff Lawrence Grady, Jr. made application to the New Jersey Automobile Insurance Plan (AIP), commonly known as the Assigned Risk Plan, for assignment of an automobile liability carrier to provide him with liability insurance coverage on a 1973 Chevrolet pick-up truck. This application was provided by defendant Barton

F. Sharp & Son, who assisted him in completing the form and forwarded the completed application to AIP on January 19, 1973. Thereafter, defendant State Farm Mutual Automobile Insurance Company was assigned by AIP to extend insurance coverage to Grady for his truck.

The initial policy extended by State Farm was for a policy period of February 2, 1973 to February 2, 1974. The effective dates of this policy were later changed to January 20, 1973 through January 20, 1974. Premiums were properly paid on this initial policy, as well as payments on the renewal policy covering the January 20, 1974 to January 20, 1975 policy period.

Toward the end of the policy year State Farm sent to Grady and defendant Barton Sharp a Premium Notice of Renewal to advise of a premium due date of January 20, 1975 for extension of coverage for the forthcoming January 20, 1975-76 policy year. This renewal notice indicated a premium due in the amount of $244. Barton Sharp sent a separate premium notice to Grady on December 10, 1974 indicating an initial installment due of $113.60 to be paid by January 2, 1975.

On February 24, 1975 Anne Marie Grady, wife of Lawrence Grady, went to the office of Barton Sharp to determine the status of coverage on Grady's truck and also on her own 1968 Buick, which was insured under a separate policy issued by State Farm. An employee of Barton Sharp mistakenly referred to the 1974 rather than the 1975 accounts receivable register and informed Mrs. Grady that the Chevrolet truck policy had been paid up and issued a temporary insurance card for that vehicle. Mrs. Grady then made a $60 payment towards her Buick policy.

Immediately following Mrs. Grady's departure from Barton Sharp's office the error was discovered and a letter was written to Grady so advising him and further informing him there had been no renewal of the truck policy. This letter further stated that a down-payment was due immediately in the amount of $114 and that the $60 left by Mrs. Grady

would be applied to his policy, leaving a balance of $54. Finally, the letter advised that the next installment on this vehicle would be due on April 20, 1975, in the amount of $73.

Barton Sharp again wrote to Grady on March 24, 1975 concerning both the Buick and Chevrolet policies and indicating that a balance was due in the amount of $126. Sharp also advised that a Notice of Intent to Cancel had been received regarding the Buick policy.

On April 2, 1975 the Gradys made a payment of $120 to Barton Sharp, who then forwarded a check in the amount of $143.40 to State Farm, indicating premium payments of $64.80 on the Buick policy and $78.60 on the Chevrolet policy.

On April 5, 1975 plaintiff John Bram was involved in an accident while operating Mr. Grady's Chevrolet truck, colliding with a motorcycle driven by Lance DiOrio. This accident was not reported to State Farm until June 4, 1975 when a liability accident notice was forwarded to State Farm by Barton Sharp.

State Farm notified Barton Sharp on April 9, 1975 and advised that payment of April 2, 1975 would not be accepted on the Chevrolet policy due to the fact it had expired for nonrenewal. State Farm at that time suggested that the policy be renewed as of April 9, 1975 with "time out of force."

On April 10, 1975 State Farm again contacted Barton Sharp and advised that they would not renew the policy "time out of force" as of April 9, 1975 but that Mr. Grady should request the truck be added. State Farm also informed that they were returning the money sent for the truck policy.

By letter dated April 10, 1975 Barton Sharp informed Grady that he had no insurance coverage on the truck at the time of the accident. If he desired coverage he was instructed to request it be added and remit an estimated premium from the ...

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