On appeal from Superior Court of New Jersey, Law Division, Essex County.
Michels, McElroy and J. H. Coleman. The opinion of the court was delivered by McElroy, J.A.D.
[184 NJSuper Page 133] In this case the trial judge, in a written opinion, held that defendant The Hartford Insurance Company (Hartford) had to defend its putative insured, American Handling Equipment Inc. (American) and to indemnify American against any judgment in a suit brought against it by Leonardo Pringle arising out of accident and injuries occurring September 19, 1975. Hartford, which concededly issued no policy covering Pringle's accident,
was held to be estopped from denying such obligations to American under circumstances where Hartford had inadvertently filed an answer to Pringle's suit but disclaimed upon discovering, four months later, that it had no policy covering Pringle's accident. The trial judge ruled that the principles of Merchants Indem. Corp. v. Eggleston , 37 N.J. 114 (1962), required such a result. We disagree and reverse.
The facts are not complex but were not fully developed at trial. The gaps left in the factual pattern will appear in the following, which represents our best attempt to compile that which transpired. Early in 1975 American, dissatisfied with its insurance costs, requested defendant T.C. Moffatt & Company (Moffatt) to survey its insurance needs and to obtain all necessary coverage at what was hoped would be reduced premiums. Moffatt, through its employee Michael Hayes, arranged to have Hartford cover American for workers' compensation and automobile insurance but also sought a special multi-peril policy (SMP) covering fire, inland marine and comprehensive general liability. For this latter policy Hayes, in June 1975, dealt with William Gillen of Hartford's SMP department. Gillen advised Hayes that Hartford declined to write an SMP for American but that he would submit separate applications to various Hartford departments to see if they would separately underwrite the risks ordinarily covered in an SMP. Hartford did issue an automobile policy and one covering American's workers' compensation liability.
Pringle's accident and resulting suit would have been covered by a general liability policy. Hartford never issued any such policy to American. Moffatt obviously was aware that this was so because it attempted, without success, to obtain such coverage from Monarch Insurance Company in November 1975 and from Crum & Forster Insurance Companies in October 1975. The latter insurer issued a binder on the risk which was cancelled on November 4, 1975. Apparently this binder was not in effect on September 19, 1975, the date of Pringle's accident. The trial judge found as a fact, and we agree, that Moffatt, as
American's broker, did not rely on Hartford to issue a general liability policy. American obviously assumed that Moffatt had obtained all of the requested coverages and Moffatt did nothing to advise it that this was not so.
Pringle's accident of September 19, 1975 was reported to Moffatt by American on November 17, 1975. Moffatt did not report this accident to Hartford. Some time before March 31, 1977 American was served with Pringle's complaint in an action filed in New York. American's operations manager mistakenly forwarded the complaint to a former broker, who returned it to American on March 31, 1977. American then forwarded the complaint to Moffatt who, on April 4, 1977, sent it to Hartford listing a nonexistent policy number of 13C707-467. The complaint was received by Hartford April 8, 1977. Hartford retained New York counsel who, on July 11, 1977, filed an answer and cross-claim for American. There is no evidence as to when Hartford forwarded the matter to its New York attorney or as to what transpired between April 8, 1977 and the first week in August 1977 when Hartford became aware that it had no policy covering the Pringle claim.
In early August 1977 American received a telephone call from Hartford advising that no coverage existed for the Pringle suit. This call was followed by a letter to American, dated August 8, 1977, in which Hartford noted that it had no policy bearing the number 13C707-467, the number used by Moffatt in forwarding the Pringle complaint, and that Pringle's "slip and fall" accident was not covered under the automobile policy it had issued to American. Hartford instructed American to have its proper liability carrier assume the defense of Pringle's suit. American eventually substituted its own attorney on July 17, 1978. There is no evidence that this delay of almost one year from the date of Hartford's disclaimer to the substitution of American's attorney was caused by Hartford or whether it was brought about by agreement between American and Hartford. It is sufficient, in the circumstances, to note that American does not here complain of this passage of time as prejudicial to its interests. The
matter was tried below, and presented here, on the question of whether Hartford was liable to American by reason of its filing of answer and the four-month delay in disclaiming coverage.
In February 1979 American was served with another summons and a third-party complaint in an action pending in the United States District Court for the District of New Jersey. This action arose out of an injury to one J. N. Rush. American forwarded these papers to Moffatt who, in turn, sent them to Hartford. Hartford, now awake to the fact it did not cover, refused to defend and American retained its own counsel to do so.
On May 15, 1978 American sued Moffatt and Hartford, seeking a declaratory judgment. American contended that Hartford was obliged to defend and indemnify it for the Pringle suit. It also asserted that Moffatt undertook, as American's broker, to obtain the necessary insurance coverage but failed to do so and sought to hold Moffatt liable for all losses thereby incurred. Hartford's answer denied coverage and crossclaimed against Moffatt for common law indemnification. Moffatt's answer was in the nature of a denial of fault. Its crossclaim against Hartford asserted that Moffatt was Hartford's agent, that Hartford ...