This is a lawsuit by insureds against their excess liability carrier, after they paid an injured infant's claim. The insurance company moves for summary judgment to dismiss the complaint because it was prejudiced by receiving notice of the underlying accident 11 years late.
The issue is whether the court must grant summary judgment to the insurer when there is a genuine issue as to a material fact, coverage, because the insurance company has been deprived of the ability to locate any of its files to determine coverage due to the insureds' failure to give notice for 11 years.
The court holds that since no one now has copies of the insurance policies because the insureds failed to comply with the notice provision of the policies, the insurance company was prejudiced as it cannot now dispute by its records the insureds' allegations as to coverage -- both as to the "business activity" exclusion and the amount of the retention by the insureds before there could be liability for excess coverage.
This is an action brought by Harold Peskin, Milton Peskin and Norman Peskin against Liberty Mutual Insurance Company upon policies of umbrella liability insurance known as "personal catastrophe liability policies," issued respectively to Harold, Milton and Norman Peskin (hereinafter "Peskins") by Liberty Mutual Insurance Company (hereinafter "Liberty Mutual").
On February 12, 1972, a fire occurred at an apartment building at 17-19 Seabury Street, Newark, which completely destroyed the building. The property was owned by a real estate partnership, consisting of the Peskins, which was primarily involved with the rental of six-family houses and other multi-family dwellings.
On July 12, 1981, Frances and Jean Wilcher, as guardians ad litem for Robert Wilcher, an infant, filed a complaint against the Peskins, seeking damages for personal injuries allegedly resulting from the fire. The Wilchers were allowed to bring this suit pursuant to N.J.S.A. 2A:14-21, which tolls the statute of limitations for persons injured during infancy, even though the law suit was filed 9 1/2 years after the fire.
The Wilcher suit was settled on June 13, 1983, for $250,000. Peskins' underlying insurer, Progressive Casualty Insurance Company, paid $100,000 to the Wilchers, and the Peskins paid
the remaining $150,000. This suit seeks to recover from Liberty Mutual the $150,000 that the Peskins paid.*fn*
Milton Peskin testified on deposition that, at the time of the fire, a liability insurance policy of $100,000/$300,000 was in effect on the Seabury Street property, issued by Progressive Casualty Insurance Company, effective from March 16, 1970, issued through the Frankel Eisenberg Agency. He learned of the fire the day after it occurred, visited the site and was aware that one person was killed in the fire and six others, including two children, were seriously injured. Thirty persons were left homeless as a result of the fire. Within one week after the fire, he notified the Frankel Eisenberg Agency, through which the primary liability policy had been issued, and the Slapin-Lieb Agency, which had issued the fire insurance policy on the building. Either the Peskins or the agent contacted Progressive, but they did not contact Liberty Mutual after the fire. However, it was Milton's belief and contention that the liability coverage afforded on the Seabury Street property was $100,000/$300,000 with Progressive, plus three $1,000,000 umbrella policies issued by Liberty Mutual.
Because Milton did not recall the existence of the umbrella policies when the Wilcher action was brought, it was not until April 1983 that he contacted his company's accountant, Eugene Feldman, to ask him to search his files to determine whether there was any additional insurance on the Seabury Street property which might cover any claims resulting from the Wilcher suit. Feldman found cancelled premium checks written to Liberty Mutual ($61.97 paid by each brother) and other records which indicated that umbrella policies issued to the Peskins by Liberty Mutual were in effect when the fire occurred.
Upon receipt of this information the Peskins, for the first time, notified Liberty Mutual by letter dated April 23, 1983 that, due to a fire at the Seabury Street property, a claim had arisen under the umbrella policies. This letter also notified Liberty Mutual that the Wilchers had filed suit against the Peskins almost two years earlier. Liberty Mutual immediately disclaimed liability for claims that arose from the fire.
Milton Peskin testified that he and his brother, Norman handled the insurance coverage for their different properties.
George Sudzina has been the assistant underwriting manager for Liberty Mutual since 1977. He deals strictly with personal lines insurance. When he received the telephone call from Liberty Mutual's claims department with the policy numbers set forth in the letter from the Peskins' attorney dated April 23, 1983, he went to the Liberty Mutual policy register and determined that the policies in question were personal catastrophe policies issued to the Peskins and their wives. He tried to locate the underwriting files for these policies but was unable to do so.
Sudzina explained that in 1974 Liberty Mutual began microfilming their paper files for insurance policies that were in force. As the subject policies had previously expired and were not in force, they were not microfilmed. Normally, Liberty Mutual kept expired policies for two or three years in file cabinets after making sure that they were not in force, after which time they would have been destroyed. All three personal catastrophe policies of the Peskins expired on May 10, 1972, and were not renewed thereafter. Thus, when Liberty Mutual received the Peskins' claim in April 1983, they could not locate the policies, declaration sheets or endorsements. The personal catastrophe liability policy jacket that would have been issued for the period in which coverage was asserted by plaintiffs was submitted with this motion. However, the policy jacket would not include whatever declaration sheets or endorsements which would have been part of the original policies.
Robert Heissler, a Liberty Mutual salesman, testified at his deposition that in the spring of 1969, he met Milton Peskin, who inquired about Liberty Mutual automobile insurance. After discussing automobile insurance with Milton, he discussed homeowner's coverage with him as well. Subsequently, Milton called him and asked about umbrella coverage. After Heissler explained the policy to him over the telephone, he went to the S. Peskin store to write the personal catastrophe coverage, as well as homeowner's coverage, for Milton. He also discussed that insurance with Norman and Harold.
The applications from 1969 are no longer available. Among the information which would have been contained in those applications were the underlying policies, their policy numbers and the limits of liability of those underlying policies. Heissler explained to all three Peskins that the personal catastrophe policies would not cover their business pursuits.
On deposition, Milton Peskin insisted that the policies that they purchased from Liberty Mutual were business policies, and not personal policies. He also stated that in their conversations with the Liberty Mutual salesman they discussed their needs for insurance to adequately cover them for excess liability with respect to property owned by the real estate partnership and by S. Peskin & Company. Norman Peskin was not even certain of the Liberty Mutual representative with whom he dealt at the time the personal catastrophe policies were issued. He stated that he thought he dealt with Vincent Colvin, as he had taken out automobile insurance through Colvin, but he was not sure if he had dealt with Colvin prior to that time. He said he told Colvin their requirements and advised him that they wanted to cover their business activities.
Plaintiffs oppose defendant's motion for summary judgment on the ground that they substantially complied with the notice provision of the policies and both parties were equally prejudiced by the lapse of time between the fire and the Wilcher claim.
Standard Provisions of Personal Catastrophe Liability Policies in 1972.
The jacket for the personal catastrophe policy states, in pertinent part:
This policy does not apply:
(c) to personal injury or property damage arising out of business pursuits or business property, except with respect to such coverage therefor as is afforded to the insured under any underlying policy. . . .
The company will pay on behalf of the insured all sums in excess of the retained limit which the insured shall become legally obligated to pay as damages. . . .
The words "retained limit" and "underlying policy" are defined as follows:
"retained limit" means as to each occurrence with respect to which insurance is afforded under this policy the sum of (1) all amounts payable under an applicable underlying policy, if any, or which would be payable under such a policy but for breach of policy conditions, and (2) all amounts payable under any other valid and collectible insurance available to the insured, or which would be payable under such a policy in the absence of this policy, but in no event shall the retained limit be less than the amount stated in the declarations as the insured's retention;
"underlying policy", "underlying insurer" mean, respectively, a policy listed as an underlying policy in the declarations and the insurer ...