On appeal from Superior Court, Law Division, Morris County.
Bischoff, Botter and Dwyer. The opinion of the court was delivered by Bischoff, P.J.A.D.
This suit for personal injury protection (PIP) benefits arises from a one-car accident which occurred in Stamford, Connecticut, on October 9, 1975. Plaintiff Frank Fellippello was a passenger in the car and incurred extensive personal injuries as a result of the accident. Medical expenses, including doctors, nurses and hospital bills, total over $50,000 and continue to accumulate. Plaintiffs Frank Fellippello and Nancy Fellippello, individually and as guardian for her son Frank, a minor, instituted this action and sought (in addition to other relief) a declaratory judgment against Allstate Insurance Company (All-state), an automobile liability insurance carrier that had issued a policy of liability insurance to Nancy Fellippello, mother of Frank Fellippello, and against Kemper Insurance Company (Kemper), the automobile liability insurance carrier covering the vehicle in which Frank was injured, declaring plaintiff to be beneficiary and entitled to PIP benefits pursuant to N.J.S.A. 39:6A-4 under the provisions of both policies.
At the conclusion of trial the judge entered a judgment declaring: (1) the policy issued by Allstate to Nancy Fellippello void ab initio , and (2) that Kemper was liable to Nancy as guardian of Frank for all medical expenses incurred and to be incurred by Frank under the policy it issued covering the car involved in the accident.
Kemper appeals from the whole of the judgment and plaintiffs appeal from that portion of the judgment declaring the policy of Allstate void ab initio.
The factual background is lengthy and complex but must be stated. Robert C. Frank, 17 years of age in the summer of 1975, purchased a car and had title placed in the name of Robert H. Frank, his father. The car was added as an insured vehicle to the automobile policy issued by Kemper to Robert H. Frank. Robert attended high school in Chatham, New Jersey. Frank Fellippello had attended Chatham High School, where the two boys became friends and they remained friends after Frank Fellippello moved to Brooklyn, New York. On Friday, October 17, 1975, Robert drove his car to a college in Keene, New Hampshire, for the weekend. Frank and John, another friend, accompanied him. On Sunday, October 19, 1975, while driving his car home on the Connecticut Thruway, Robert struck a bridge abutment. John was killed, Frank was severely injured and Robert fractured his leg. Claims for PIP benefits were then asserted under the two insurance policies.
The Allstate policy was issued under the following circumstances. Nancy Fellippello and her late husband Frank resided with their three children at 84 Kings Road, Chatham, New Jersey, through September 27, 1971, when her husband died. At this time she became the sole owner of the house and began to receive Social Security benefits. She later remarried. Before doing so, and on the advice of counsel, she transferred title to the Chatham property to her two oldest sons to prevent her new husband from acquiring an interest in the property. When this marriage failed, Nancy Fellippello moved to Brooklyn to be close to her family and to conceal her new address from her husband. Nancy leased the house in Chatham in January 1974 to obtain some income, and it was still leased in October 1975, when the accident occurred. Nancy signed a two-year lease for an apartment in Brooklyn running from February 1974 to February 1976, rented space in a garage and enrolled Frank in a Brooklyn high school. She returned to New Jersey in February 1976 when she moved in with her oldest son and, in May 1976, returned to live in her home in Chatham.
Concurrent with those events Nancy purchased certain insurance policies which are the subject of this litigation. After moving to Brooklyn Nancy applied to Allstate for insurance coverage on her 1972 Plymouth Scamp. This car was at all times registered in New Jersey. She made her application for insurance at an Allstate office in Livingston, New Jersey. When asked her address, Nancy answered, "84 Kings Road in Chatham," even though she was then living in Brooklyn. It is not clear whether she was asked or volunteered information as to where the car was garaged. At any rate, Allstate's file does not contain this information.
In June 1975 Nancy went to the same office in the Livingston Mall and purchased homeowner's insurance from Allstate, though from a different agent. The insurance was to cover the Chatham property and at this time she informed the agent she did not live in the house. On September 19, 1975 Nancy paid Allstate a premium for renewal of the automobile policy so as to provide coverage from October 4, 1975 to October 4, 1976.
After the occurrence of the accident Nancy submitted medical bills to Allstate and was initially reimbursed for approximately $1,900. Allstate then refused to pay any additional bills and plaintiffs instituted this declaratory action seeking a judgment:
(1) directing Allstate to pay benefits under the PIP coverage of Allstate's policy;
(2) for the same relief as to Kemper;
(3) awarding damages against Kemper for its refusal to assure the Kessler Institute for Rehabilitation that it would pay charges incurred for treating Frank, as a result of which Kessler refused Frank admission to the institute;
(4) against Kemper because that company improperly charged advance payments it had made to liability coverage rather than PIP coverage, and
(5) other relief not involved in this appeal.
We shall discuss the defenses, the rulings of the trial judge and the issues raised on appeal by each insurance company separately.
In ruling that the policy issued by Allstate was void ab initio , the trial judge held:
(1) The representations made by Nancy as to address and the garaging of the vehicle were material to the risk, were false and were relied upon by Allstate in issuing the New Jersey policy;
(2) Even though the misrepresentations were made to obtain coverage required by statute, Allstate was entitled to rescission;
(3) Allstate did not waive its right to rescind "through lack of diligence in acquiring information, or unreasonable delay after acquiring knowledge of misrepresentation;"
(4) Allstate did not waive its right to rescind by not acting promptly to cancel the automobile policy after learning the true facts concerning residence through the subsequent application ...