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Cohen v. Home Insurance Co.

Decided: January 19, 1989.


On appeal from the Superior Court, Chancery Division, Middlesex County.

Pressler, O'Brien and Stern. The opinion of the court was delivered by Pressler, P.J.A.D.


Public, executive and legislative attention engaged by the escalating automobile insurance crisis in this state over the past decade, see, e.g., Governor's Reconsideration and Recommendation Statement responding to L. 1988, c. 119, has typically been focused on the problems faced by automobile owners seeking to obtain adequate insurance coverage at reasonable premium rates in a viable voluntary market. This appeal implicates another significant aspect of automobile insurance industry dynamics, namely, the relationship between the insurance companies, who are required by law indefinitely to renew the policies of qualified drivers, N.J.S.A. 39:6A-3, and the licensed insurance brokers of this state who, as appointed agents of insurance companies, sell automobile insurance policies to consumers and who service the automobile insurance needs of those consumers, their clients. More specifically, this controversy involves the right of such an agent to payment of commissions by the company after the company has terminated their agency relationship when, because of statutory, economic and contractual compulsions, the company continues to renew the consumer's policy and the terminated agent continues to service it.

Plaintiff I. Meyer Cohen, trading as I. Mike Coen Agency (Cohen), is such a licensed insurance broker selling and servicing casualty and automobile liability policies as agent for various insurance companies licensed to do business in New Jersey, including defendant Home Insurance Company. Home terminated

their agency agreement in 1985, but Cohen, for reasons and under circumstances explained herein, continued to service Home's automobile liability policyholders in respect of renewals, endorsements, claims, premium problems, and the like. Home stopped paying Cohen any commissions on renewals or other remuneration for his services in April 1987, although he continued thereafter to perform those services. Cohen therefore instituted this action seeking such payment from Home on a quasi-contract theory.*fn1 The matter proceeded to trial, and following the close of plaintiff's case, the trial judge granted defendant's motion for involuntary dismissal pursuant to R. 4:37-2. Plaintiff appeals, and we reverse.

The factual and legal issues before us are best explained in light of relevant legislative and judicial history. By L. 1970, c. 217, codified as N.J.S.A. 17:22-6.14a, the Legislature first undertook to regulate the termination of agency agreements between insurance companies and their independent agents, that is, agents paid on a commission rather than a salary basis who represent more than one company and who hold a New Jersey broker's license. As originally enacted, the statute, applicable to all types of insurance, provided that except if the termination were for cause as therein defined, 90 days notice thereof was required to be given by the company to the agent. Although the agent, from the date of notice of termination, could no longer write new business or increase coverage without the company's approval, the company was nevertheless obliged to accept such of the agent's renewal business as complied with its underwriting standards both during that 90-day period and for an additional six-month period thereafter. The original version of the statute did not, however, refer to the terminated agent's right to commissions on this renewal business. By amendment the following year, effected by L. 1971, c.

152, the statute was modified to increase the six-month period to nine months and to provide for payment to the terminated agent of a commission on all renewal business in accordance with the terminated agency contract.

In 1979, by L. 1979, c. 75, § 1, N.J.S.A. 17:22-6.14a was again amended in respect of automobile liability policies renewed by the company pursuant to N.J.S.A. 39:6A-3, that provision of the New Jersey Automobile Reparation Reform Act (No Fault Law), N.J.S.A. 39:6A-1, et seq., which has provided, since 1972, that no insurance carrier shall refuse to renew the coverage required by the No Fault Act without the consent of the Commissioner of Insurance.*fn2 As to such policies, the 1979 amendment required the company to accept the terminated agent's renewal business for a period of three years following the effective date of the termination, and there is no question that the terminated agent's statutory right to commissions on those renewals continued for the full three-year period. Section 2 of L. 1979, c. 75, provided, however, that the Act would expire three years after its date of enactment, namely, on April 10, 1982. By L. 1981, c. 137, effective July 1982, the Legislature extended that three-year period for another three years, section 2, providing that

Notwithstanding the provisions of this act with respect to the period during which a commission is to be paid following the termination of a contract [of agency], commissions shall be paid for a period of 3 years on all business renewed pursuant to * * * [ N.J.S.A. 39:6A-3] * * * before April 10, 1982.

Although the Legislature has not acted on the commission question since then, it did, by L. 1986, c. 211, § 11, again amend N.J.S.A. 17:22-6.14a in two respects. First, as a structural matter, the original unnumbered paragraphs of that statute were given letter designations and the agency termination provisions in issue here were then allocated to subparagraph (d). Second, as a substantive matter, new provisions, denominated

subsections (j) and (k), were added to conform N.J.S.A. 17:22-6.14a to the provisions of the New Jersey Automobile Full Insurance Availability Act, N.J.S.A. 17:30E-1, et seq., first effective in 1984 and extensively amended in 1985 and 1986, creating what is commonly known as the Joint Underwriting Association (JUA).

Thus insofar as N.J.S.A. 17:22-6.14a(d) is concerned, its controlling provision in respect of terminated agents since April 10, 1985 is only the requirement that for a period of 90 days following notice of termination "the company shall not refuse to renew such business from the agent" as would accord with the company's underwriting standards and that for a period of nine months after termination the company shall, provided the former agent has not been replaced as the broker of record by the insured and upon request in writing of the terminated agent, renew all contracts of insurance for ...

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