This is a suit arising out of an automobile accident in which Charles Baum is the defendant. Insurance carrier Motor Club of America (MCA) was brought in as third-party defendant and disclaimed. The preliminary question is, therefore, whether it is obligated to defend. The legal issue is whether the cancellation requirements of N.J.S.A. 17:29C-7 and 8 apply to a binder in effect more than 60 days.
By agreement, this was tried before me without a jury.
The facts are summarized as follows: Charles Baum ("Charles") operated an automobile covered for automobile liability by a policy issued by MCA to his mother. Late in July or early August 1975 his father Jules Baum ("Jules"), a man experienced in the insurance business and a former insurance broker, asked Mr. Miller, of Philip V. Wilder & Co. Inc., an agent for MCA, to have Charles' automobile taken off his mother's policy and a separate policy issued to him. Charles' application for a one-year policy beginning August 8, 1975, signed by Miller, reads: "Binding Application -- Issue Policy Immediately." Pending the issuance of the separate policy, Wilder issued Binder or Policy No. 3216, which states: "Effective date 8/7/75. This card expires 60 days after the effective date shown above."
Miller encountered difficulty in obtaining insurance for Charles with MCA for unspecified reasons. Under date of August 28, 1975 he wrote Jules:
In accordance with your request, I have requested that the company remove your son Charles form [sic] your policy and issue him his own. However, the company informs me that they are reluctant to do so and suggest that you palce [sic] him in the Assigned Risk Program. The company is proceding [sic] to remove Charles from the policy even though the [sic] cannot issue him a seperate [sic] policy. I would suggest that you place him in Assigned Risk. However,
M?C?A? [sic] will issue a binder on Charles and his car until he can be palced [sic] elswhere. [sic]
Since Jules conducted the entire transaction for Charles, communications to Jules must be considered as notice to Charles. Jules, however, insisted that MCA either put Charles' car back on his wife's policy or write an individual policy. Miller, apparently, agreed with Jules that the binder would continue in force after October 7, its expiration date, and took the binder beyond the 60-day period. However, under date of October 23, 1975 Miller wrote Jules stating that MCA would neither write a policy for Charles nor put him back on his mother's policy, and suggested that Charles' vehicle be put on the "Assigned Risk Plan as soon as possible, since I cannot maintain a binder of coverage longer." Under date of November 5, 1975 Miller again wrote Jules and stated, "I trust you have placed his coverage with the Assigned Risk Plan, since I can no longer bind coverage." During the day of November 28, 1975, Charles came to Miller's office. In the light of the sequel, the interchange between Charles and Miller is dramatic. Miller asked Charles how he got to his office. Charles told him that he had driven to his office. Miller told him that he had no insurance and suggested that Charles leave his automobile where it was and that Miller would drive him home. This Charles refused, but he did pick up an application for the Assigned Risk Plan. It was that night the accident occurred which gives rise to this litigation.
For a time Miller equivocated. Although prior to the expiration of the 60-day period he let it be known that the carrier would not issue a policy, he continued to negotiate with MCA at the request of Jules until the 60-day period had lapsed, assuring Jules that Charles would be covered until he obtained other insurance. Not until November 5, 1975 did he take a definitive position. Nevertheless, it is also the fact that Jules knew prior to the expiration of the 60-day period that MCA would not issue the policy of insurance.
It was conceded that Miller was an agent of MCA. By that was meant that he had authority to issue a binder. It is reasonable to deduce he did not have authority to assign a policy of insurance because the negotiation which ensured after the issuance of the binder concerned the willingness of the carrier to issue the policy.
A "binder" is a temporary policy of insurance, in force until it expires, either by its own terms, by replacement by a permanent policy of insurance, or rejection. Allen v. Metropolitan Life Ins. Co. , 44 N.J. 294, 301 (1965); Smith & Wallace Co. v. Prussian Ins. Co. , 68 N.J.L. 674 (E. & A. 1903); Shannon v. Prudential Ins. Co. , 90 N.J. Super. 592, 599 (Law Div.1966); see Robertson v. Burstein , 104 N.J.L. 218 (Sup.Ct.1928), rev'd o.g. 105 N.J.L. 375 (E. & A.1929); "Temporary Insurance", 14 A.L.R. 3d 568, § 9 at 599. It may be issued for a period in excess of 60 days. Restaurant Enterprises, Inc. v. Sussex Mut. Ins. Co. , 52 N.J. 73 (1968).
A binder is also an agreement that the party covered will accept the insurance policy when issued. Thus, in Smith & Wallace Co., supra , the Court said (68 N.J.L. at 677) "The plaintiff by accepting the binder agreed to be bound by all the terms of the policy, including the rate of premium to be paid * * *." Similarly, in 1 Couch on Insurance (2 ed. 1959), § 14.35, the author says:
Generally speaking, a contract of temporary insurance is subject to the same rules of construction as any ordinary ...