On appeal from Superior Court of New Jersey, Law Division, Mercer County.
King, Deighan and Havey. Deighan, J.A.D.
The judgment of the Law Division is affirmed essentially for the reasons set forth by Judge Fox in his oral opinion delivered on October 2, 1985 and in his written letter opinion pursuant to R. 2:5-1(b), dated December 17, 1985.
Plaintiff Guarantee Insurance Company (Guarantee) filed a complaint against defendants-attorneys David A. Saltman, Newman, Herman, Saltman, Levitt & Feinson, P.A. (defendants) to rescind or reform an attorney's malpractice errors and omissions insurance policy and to determine Guarantee's coverage of a malpractice claim against defendants. Guarantee also
sought to have respondent St. Paul Fire & Marine Insurance Company (St. Paul) declared as the primary or co-insurer of defendants.*fn2
In his written letter opinion of December 17, 1985, Judge Fox noted that "[i]n the trial before me the issue of which policy covered the Newman firm was raised and tried." He found as a fact "that Newman in the letter of May 18, 1982 to the Couch Agency, in clear and unequivocal language, cancelled its professional liability insurance coverage with St. Paul, effective May 1, 1982." He then determined that "[o]n May 6, 1982, Guarantee issued a professional liability policy to be effective as of May 1, 1982." As a result, Guarantee's complaint against all defendants was dismissed.
On this appeal Guarantee, in addition to the issues tried before Judge Fox, contends that the St. Paul policy is an "occurrence" policy rather than a "claims made" policy which provides coverage for defendants against the claims by Frederick, Fausti and Meszaros, relying on Sparks v. St. Paul Ins. Co., 100 N.J. 325 (1985). We disagree.
In Zuckerman v. Nat. Union Fire Ins. Co., 100 N.J. 304 (1985), a companion case to Sparks, an attorney instituted an action against National Union for an alleged wrongful refusal to defend. The Court held that a provision in a claims made policy barring coverage for claims reported subsequent to the expiration date of the policy was valid. The Court made a comprehensive analysis concerning the distinction between a "claims made," and a "discovery" policy. Id. at 309-319. The Court, quoting Samuel N. Zarpas, Inc. v. Morrow, 215 F. Supp. 887, 888 (D.N.J.1963), stated: "In a discovery policy the coverage is effective if the negligent or omitted act is discovered and brought to the attention of the insurance company during the
period of the policy, no matter when the act occurred. In an occurrence policy the coverage is effective if the negligent or omitted act occurred during the period of the policy, whatever the date of discovery." Zuckerman, 100 N.J. at 310.
A further distinction between the two types of policies as stated in Brander v. Nabors, 443 F. Supp. 764, 767 (N.D.Miss.), aff'd 579 F.2d 888 (5 Cir.1978), was noted: "Basically, the 'claims made' policy would provide unlimited retroactive coverage and no prospective coverage at all, while the 'occurrence' policy would provide unlimited prospective coverage and no retroactive coverage at all." Zuckerman, 100 N.J. at 310. In other words, in an occurrence policy, the peril insured is the occurrence itself so that once the occurrence takes place, coverage attaches even though the claim is not made for sometime thereafter. In the claims made policy it is the making of the claim which is the event and the peril which is insured regardless of when the occurrence took place. Id. at 310-311, quoting S. Kroll, "The Professional Liability Policy 'Claims Made,'" 13 Forum 842, 843 (1978).
In Sparks v. St. Paul Ins. Co., supra, a professional liability policy in effect from November 1976 was cancelled on January 21, 1980 because of the insured's failure to pay the premium. Id. 100 N.J. at 327-328. Between June and August 1980 the insurance company was notified of a malpractice claim against the insured attorney for failing to answer interrogatories which resulted in a suppression of his client's answer ...