On appeal from the Superior Court of New Jersey, Law Division, Union County.
Michels, Skillman and Landau. The opinion of the court was delivered by Michels, P.J.A.D.
Defendant Lumbermens Mutual Casualty Co. (Lumbermens), individually and as assignee of plaintiff Kende Leasing Corp., d/b/a K.B. Trucking (Kende), appeals from a summary judgment of the Law Division that: (1) declared that the motor truck cargo liability insurance policy issued by it to Kende was in full force and effect; (2) dismissed Kende's claim against defendant A.I. Credit Corp. (Credit); (3) dismissed Lumbermens' claims against Credit other than for the sum of $478.93 in unearned premiums which it had returned to Credit following the alleged cancellation of the policy Lumbermens had issued to Kende, and (4) denied without prejudice Kende's application for damages, counsel fees and costs.
This complex matter arises out of a motor truck cargo liability insurance policy issued to Kende by Lumbermens on June 15, 1982. Under the terms of the policy, Kende was
required to pay an annual premium of $5,000. On June 30, 1982, Kende entered into a premium financing agreement with Credit. Pursuant to the agreement, Credit agreed to pay the $5,000 premium to Lumbermens in return for which Kende agreed to pay Credit $5,310.37 in nine monthly installments of $478.93 plus a $1,000 cash down payment. Kende's repayment period was to commence August 9, 1982, and payments were due on the ninth day of each month through April 9, 1983. Kende was also to assign to Credit as collateral a security interest in "any and all unearned return premiums which may become payable under" the policy. Moreover, in the event that Kende defaulted in its obligations under the agreement, the entire unpaid balance became due and payable and Credit was given power of attorney to cancel Kende's policy "upon expiration of a ten (10) day written notice of intent to cancel, provided said default is not cured within such period."
After making the down payment, Kende paid the first four monthly installments approximately a week to ten days after their respective due dates. According to Kende's president, the payment which was due on December 9, 1982 was not remitted until approximately December 28, 1982. Because Credit had not received the December installment by the nineteenth of that month, a notice of intent to cancel was automatically generated by computer and purportedly sent to Kende on or about December 20, 1982. However, Kende denies receipt or knowledge of said notice.
Still not in receipt of Kende's $478.93 payment for December, on January 2, 1983, Credit generated a notice of cancellation with an effective cancellation date of January 7, 1983. On January 3, 1983, this notice was forwarded to Kende, Lumbermens and the other entities involved in procuring the insurance policy. A certification of mailing from the post office confirmed that this notice was sent, and Kende's president certified that he received it on January 7, 1983.
On January 4, 1983, Credit received Kende's December installment payment and, two days later, sent a notice to Lumbermens requesting that the Kende policy be reinstated. However, Lumbermens did not send Credit any reply correspondence indicating that reinstatement had been effectuated. On or about January 12, 1983, a $478.93 check for January's installment was sent by Kende to Credit and was subsequently cashed. On January 30, 1983, a fire destroyed one of Kende's trucks and $41,517 worth of merchandise in it. All of the property consumed in the fire fell within the coverage of the policy issued to Kende.
Kende reported the loss. By letter dated February 11, 1983, Lumbermens acknowledged receipt of the claim and informed Kende that it would soon be contacted by an adjuster. The adjuster for Lumbermens assessed Kende's damages, and, pursuant to the adjuster's instructions, Kende also inspected the damaged goods, incurring costs of over $2500 in the process. Although not disputing the amount of Kende's claim, Lumbermens refused to pay it. In response to Credit's inquiry on April 1, 1983 as to the status of Kende's policy, Lumbermens replied in a memorandum dated April 4, 1983 that a former employee had inadvertently reinstated the policy and that the most recent notice of cancellation would remain in effect. According to Lumbermens, it had received from other finance companies four prior notices of Kende's nonpayment of premiums, and company policy prohibited reinstatement after just two such notices. Therefore, Lumbermens refused to reinstate the policy.
Kende paid to Credit both the February and March installments under their premium financing agreement. It was not until Credit notified Kende on or about April 18, 1983 that Lumbermens had refused to reinstate the policy or pay the January 30, 1983 loss that Kende became aware that the policy was no longer in effect. On May 3, 1983, Lumbermens returned to Credit the unearned premium of $478.93.
Kende thereupon instituted this suit and subsequently moved for summary judgment against both Lumbermens and Credit. Kende maintained that Credit was unable to prove that it had mailed to Kende a notice of intent to cancel. According to Kende, the only evidence concerning this issue was the deposition testimony of Ms. McCarthy, a collection manager who began working for Credit in March 1983, long after the notice of intent to cancel was purportedly sent. Ms. McCarthy had testified that Credit's records showed that the notice of intent was computer-generated on December 19, 1982 and that she presumed the notice was subsequently mailed. However, she admitted having no personal knowledge as to whether the notice was in fact ever mailed. As N.J.S.A. 17:16D-13 also requires that notice be sent to any broker or agent involved, Kende maintained that Credit's failure to get an affidavit from the broker stating that it had received notice of intent to cancel further proved that the evidence was inadequate to withstand a motion for summary judgment.
Credit's position was that it was entitled to summary judgment whether or not the proofs established that notice of intent to cancel was mailed to Kende. If the evidence showed that notice was sent, Credit argued that both it and Lumbermens would be relieved of all responsibilities to Kende. If, on the other hand, there was insufficient proof of notice, then Kende would be entitled to collect from Lumbermens under the policy. In that case, Credit alleged that its only duty would be to return to Lumbermens the $478.93 in unearned premiums which Lumbermens had remitted to Credit. Although defending its office procedures in light of the mass quantity of mailing that it does, Credit claimed that no matter how the issue of notice was resolved, Credit owed no duty to Lumbermens and should be dismissed from the suit.
Lumbermens, however, maintained that "the motion for summary judgment on all sides must be denied." According to Lumbermens, a factual issue existed concerning the mailing of notice. Lumbermens argued that a jury might conclude that
the statutory notice requirements were met if the broker or agent received notice or if it found that Credit's computerized mailing procedure was commercially reasonable. Although not having asserted a cross-claim against Credit, Lumbermens contended that Credit should not be dismissed from the case because its conduct had prejudiced Lumbermens. Lumbermens argued that Credit's false assertions that it had complied with the statute and thus properly cancelled Kende's policy constituted a breach of warranty, caused Lumbermens not to investigate properly the claim of loss and may have substantially prejudiced it in regard to the issue of reinsurance.
The trial court concluded that the evidence was insufficient to present a jury question of whether or not notice of cancellation had been mailed. Under the statute, actual mailing of the notification is required. The trial court found "that it would be sheer speculation on the part of the jury to attempt to show by some remote inference that [notice] might have been sent to the insured." Therefore, the trial court declared that the policy was in full force and effect and provided coverage for Kende's loss. The trial court also held that, except for the return of the unearned insurance premium which Lumbermens had sent Credit on May 3, 1983, Credit was not liable for any claims asserted by Lumbermens. Kende thereupon settled its claim against Lumbermens for $35,000 and assigned its rights against Credit to Lumbermens. Final judgment dismissing the action with prejudice against Lumbermens was entered and this appeal followed.
Lumbermens contends that by failing properly to cancel Kende's policy pursuant to N.J.S.A. 17:16D-13, Credit is liable to Kende (and thus to Lumbermens as Kende's assignee) for the loss it sustained. Lumbermens argues essentially that whether Credit actually sent Kende a notice of ...