On appeal from the Superior Court, Law Division, Monmouth County.
Pressler, Bilder and Skillman. The opinion of the court was delivered by Pressler, P.J.A.D.
[223 NJSuper Page 395] This controversy arises out of the unilateral deletion by an automobile liability insurer, defendant Newark Insurance Company/Royal Insurance Company, of the underinsured motorist coverage (UIM) it had theretofore included in the policies it had issued to its insured, plaintiff Leonard Wasserman. The questions raised are whether under the circumstances defendant's notice of deletion of UIM benefits previously afforded was effective to deprive the insured of those benefits and whether
his insurance broker had a duty, with which it failed to comply, to advise him to purchase available optional UIM coverage.
The triggering event occurred on July 16, 1983, when plaintiff Leonard Wasserman, a retired businessman, his wife Miriam, and their grandson Russell Schwartzman were crossing Ocean Avenue in Bradley Beach, where the Wassermans were then living. According to Wasserman, they were forced to step backwards while in the center of the roadway in order to avoid an unidentified speeding vehicle. As they did so, the Wassermans were struck by a taxicab driven by Robert Guy and owned by Louis Robertson. Mrs. Wasserman suffered fatal injuries. Mr. Wasserman was seriously injured. Russell sustained no serious physical injury but did suffer serious emotional injury.
At the time of the accident, Wasserman was insured by defendant Newark/Royal under an automobile liability policy which provided, among other benefits, liability limits of $100,000/300,000, uninsured motorist coverage (UM) in the same amount, and personal injury protection benefits (PIP). That policy, whose effective date was March 25, 1983 was a six-month renewal of a policy which had been originally issued on September 25, 1982. The September policy, like Wasserman's previous policies, had also provided underinsured motorist coverage (UIM) in the amount of $100,000/300,000. The March 1983 renewal purportedly provided no underinsured coverage at all. As we are given to understand, since the March 1983 coverage was a six-month renewal and not issued at the inception of a policy year, no new policy was then sent to the insured. He received only the declaration page and a notice, of which we will say more hereafter, which is alleged by the insurer to have explained the import of UIM coverage, to have advised him of the deletion of that coverage, and to have informed him of the availability of UIM coverage as an option.
Wasserman on his deposition admitted receiving the notice, asserted that he did not understand it, and conceded that he
never discussed it with his insurance broker, defendant Wharton, Lyon & Lyon, either on his or its initiative. It was also his deposition testimony that he had been a client of that broker for some 20 years, that he obtained all of his insurance from it for both his personal and business needs, and that he had always relied on his broker to attend properly to all his insurance requirements. Wasserman had never graduated from high school and had jobs as a factory worker and clerk before he purchased and operated a fish market in Newark, which he sold following the Newark riots when he retired and moved to Bradley Beach.
The July 1983 accident was followed by a multiplicity of legal actions, the first of which was commenced in October 1983 against the owner and driver of the taxicab by Wasserman and Maxine Schwartzman, who sued as executrix of Mrs. Wasserman's estate and as Russell's guardian ad litem. The taxicab was, unfortunately, minimally insured by Aetna Insurance Company under a policy providing for liability limits of $15,000/30,000, which in June 1984 were offered to plaintiffs. The initial offer was refused, and the matter went to arbitration pursuant to N.J.S.A. 39:6A-24 to -35 and the interim rules which preceded the adoption of R. 4:21A. The arbitrator awarded Wasserman $500,000 plus prejudgment interest and awarded the estate of Miriam Wasserman $100,000 plus prejudgment interest. Plaintiffs, unable to locate any other assets of those defendants, finally accepted the policy limits and released them. Of the total policy limit of $30,000, $15,000 was allocated to Wasserman, $14,000 to the estate, and $1,000 to Russell. That action was finally concluded by the entry of a judgment pursuant to R. 4:48A on May 1, 1985.
Two weeks after the institution of this first action, Wasserman and the estate brought a separate action against Newark/Royal and Aetna Insurance Company to recover PIP benefits. While that action was pending, they also sought recovery from Newark/Royal under the uninsured motorist provisions of the policy, claiming that the accident had been caused at least
in part by the phantom vehicle out of whose way the victims were stepping when they were struck by the taxi. In December 1984 summary judgment was entered in the PIP action adjudicating Newark/Royal's liability. Several weeks later, the UM claim was settled by the plaintiffs giving Newark/Royal a release in return for a payment of $30,000. Their release of Newark/Royal was executed on December 31, 1984.
The fourth proceeding, the one before us, was commenced in October 1984 prior to the final disposition of any of the earlier ones. Plaintiffs, Wasserman and the estate, filed a complaint against Wasserman's insurance brokers, defendants Wharton, Lyon & Lyon, claiming that Wasserman's failure to have UIM coverage on the date of the accident resulted from their negligent failure to advise him to purchase it.*fn1 The complaint was served in January 1985, and Wharton responded by the filing of an answer and a third-party complaint against Newark/Royal. The gravamen of the third-party complaint was that the insurance company, not it, had the obligation, with which it failed to comply, properly to advise Wasserman respecting both the deletion of the UIM coverage and its availability as an option. Ultimately, plaintiffs obtained leave to amend their complaint for the purpose of asserting a direct claim against Newark/Royal pursuant to R. 4:8-1(b).*fn2
Following discovery, which, as we understand, included the depositions of both Wasserman and a representative of Wharton, both defendants moved for summary judgment dismissing
the complaint. The trial judge granted Newark/Royal's motion on the ground that its notice annexed to the March 3, 1983 declaration page was adequate to advise Wasserman both of the import of the deletion of UIM coverage and of his option to purchase substitute coverage. He granted Wharton's motion on the ground that a broker has no obligation to advise a client of matters as to which the client is chargeable with knowledge. He concluded further that the notice from Newark/Royal in fact adequately informed plaintiff, placing upon him the burden of affirmatively seeking further action or advice by the broker. Plaintiffs appeal. We disagree with both of these conclusions and accordingly reverse as to both defendants.
We consider first plaintiffs' claim against Newark/Royal. As we have noted, the automobile liability policies it had issued to Wasserman for at least several years prior to the March 1983 renewal provided for UIM coverage in the amount of Wasserman's own bodily injury liability limits, $100,000/300,000. Consequently, in view of the gravity of the consequences of the accident to its three victims, the unilateral deletion of the coverage deprived them of an additional aggregate of $270,000 in compensation. See generally Longworth v. Ohio Casualty Co., 223 N.J. Super. 174 (App.Div.1988), respecting the history, import, and operation of UIM coverage. We surmise that the reason for the deletion of the coverage was the 1983 amendment of N.J.S.A. 17:28-1.1, which constituted the Legislature's first recognition of UIM and required every automobile liability insurer to offer that coverage to its insureds as an option up to the amount of the insured's own liability limits but not exceeding $250,000/500,000. We further surmise that because of this legislative mandate, Newark/Royal reconsidered its prior offering of the coverage and concluded that since the Legislature required it as an option, it should be subject to separate additional premium and hence afforded only if affirmatively requested and paid for by the insured. We were also advised at oral argument that had Wasserman requested the coverage in March 1983, the
premium cost for limits of $100,000/300,000 would have been something under $10.00. The coverage, as we understand it, had been previously included as part of supplemental UM coverage, and no additional or separate premium had been charged.
In any event, having determined to withdraw the UIM coverage unless separately purchased, the insurer attached to the declarations sheet which represented the renewal of the policy the one-page document which is the subject of this controversy. At the top left of the page is the legend, "Important Notice," in ...