On appeal from the Superior Court, Law Division, Middlesex County.
Michels, R. S. Cohen and Brochin. The opinion of the court was delivered by Cohen, R. S., J.A.D. Michels, P.J.A.D. (dissenting in part).
Plaintiff was a tenant at premises in Elizabeth owned by defendants Lopez and Alvarino. He started this action against them, charging that their negligence caused him to fall and injure himself on the premises on May 27, 1985. Lopez and Alvarino, in turn, filed a third-party complaint for indemnification and defense against Preferred Mutual Insurance Company (Preferred) and insurance agents Zehner and Chapman. Cross-claims followed among the third-party defendants for indemnification and contribution.
The Law Division ordered Preferred to defend and indemnify defendants Lopez and Alvarino. Preferred undertook the defense and ultimately settled with plaintiff for $50,000. Cross-motions for summary judgment were then made among the third-party defendants. The Law Division dismissed all claims against the agents Chapman and Zehner, with the exception that Zehner was ordered to pay Preferred one-year's premium on the Lopez-Alvarino policy. Zehner was granted summary judgment on its claim against Preferred for indemnification. Preferred appealed from the summary judgments against it.*fn1 We affirm in part and reverse in part.
Lopez and Alvarino were insured by a Preferred policy that ran from April 12, 1982 to April 12, 1985, 45 days before plaintiff's accident. Some months earlier, Preferred had written to Zehner, its own agent, inquiring whether the Lopez-Alvarino policy and seven others should be renewed, since renewal was not automatic. Zehner replied in writing that the Lopez-Alvarino policy should not be renewed. Preferred therefore did not renew, but it did not send notice to the policyholders of its intention not to renew.
It is not clear why Zehner instructed Preferred not to renew. The Chapman Agency, which was acting as broker for Lopez and Alvarino and had obtained the 1982-85 Preferred policy through Zehner, received money from the policyholders for renewal premium payments and, according to Chapman, sent the money to Zehner. Zehner says he received the renewal premium payments, but only after the expiration of the Preferred policy, and he was trying to place the risk with other companies. He ultimately did bind the risk with another insurer, but only after plaintiff's fall. No one at Chapman, according to Zehner's deposition, had specifically told him not to renew the Preferred policy. He was, however, aware that Chapman was placing policies through other agents.
The summary judgment for Lopez and Alvarino against Preferred was squarely and exclusively based on Preferred's failure to give Lopez and Alvarino notice of nonrenewal. It was not based on Preferred's responsibility for Zehner's conduct.
Preferred's policy contained a provision required by statute and regulation obligating Preferred to give its insureds 30 days' written notice of its "intent not to renew." N.J.S.A. 17:29C-1; N.J.A.C. 11:1-5.2. See Barbara Corp. v. Bob Maneely Ins. Agency, 197 N.J. Super. 339, 484 A.2d 1292 (App.Div.1984). Preferred interprets the notice obligation to apply only where it is the insurer that decides not to renew, but not where the insured makes the decision. We need not decide whether the notice obligation exists where the insurer has a direct
communication from the insured telling it not to renew. That is not the case here. Preferred heard only from Zehner, its own agent, who was not even in contact with the insured parties. See Liguori v. Aetna Cas. & Sur. Co., 119 R.I. 875, 384 A.2d 308 (1978). See also Trinity Universal Ins. Co. v. Burnette, 560 S.W.2d 440 (Tex.Civ.App.1977).
If an insurer subject to the provisions of N.J.S.A. 17:29C-1 and N.J.A.C. 11:1-5.2 determines for any reason, including instructions not to renew from any source other than the insured, not to issue a renewal policy it must give the required 30 days' written notice directly to the insured. The purpose of the required notice is to give the insured the opportunity to guard against the peril of noncoverage, a peril which, as this case shows, can arise out of miscommunication among brokers, agents, insureds and carriers. The carrier may not rely on the assurance of its agent or a broker that a policy should not be renewed. Thus, the order requiring defense and coverage was soundly based on Preferred's failure to afford notice.
Some weeks after that order was entered, the cross-motions among the third-party defendants for indemnification were argued. The judge held that Preferred's cross-claim against Zehner was defeated by Regino v. Aetna Cas. & Sur. Co., 200 N.J. Super. 94, 490 A.2d 362 (App.Div.1985). He also ruled that Zehner's sole liability to Preferred was for the omitted premium and granted Zehner's cross-claim for indemnification against Preferred.*fn2
The summary judgment orders did not dispose of the third-party claim of Lopez and Alvarino ...