On appeal from the Superior Court of New Jersey, Law Division, Cape May County.
King, Dreier and Brochin. The opinion of the court was delivered by Brochin, J.A.D. Dreier, J.A.D., Dissenting.
Pursuant to statute, defendant New Jersey Insurance Underwriting Association, whose membership consists of insurance companies writing property insurance in New Jersey, provides basic fire insurance and extended coverage for insurable property in this State whose owners are unable to obtain property insurance from the usual commercial sources. N.J.S.A. 17:37A-1 et seq.; see Needham v. N.J. Ins. Underwriting, 230 N.J. Super. 358, 365, 553 A.2d 821 (App.Div.1989). Plaintiffs Paul Rugala, Anna Rugala, and Anthony J. Polakas own a frame building in Vineland, New Jersey. From August 27, 1987 through August 27, 1988, their property was insured against fire and other perils under a policy issued by the Association. Defendant National Associates is the insurance broker that procured that insurance.
On June 30, 1988, the Association and National both notified the property owners by mail that their policy would expire on August 28, 1988. National reminded them again several times by telephone. The property owners submitted the renewal application and a check for their renewal premium to National on Friday, August 26, 1988.
That same day, National endorsed the property owners' premium check and mailed it to the Association, by regular mail, for a renewal policy to become effective on Saturday, August 27, 1988. At approximately 4 a.m. on Sunday, August 28, 1988, the property owners' building was destroyed by fire. Their check for the renewal premium arrived in the Association's office on Monday, August 29, 1988.
The property owners demanded reimbursement for their loss in accordance with the terms of their renewal policy. The Association refused payment, claiming that when the fire occurred, the original policy had already expired and the renewal policy had not yet become effective because the premium not been received.
The property owners sued the Association and National. National crossclaimed against the Association, claiming that as a broker, it was entitled to indemnification from the Association as a matter of contract and of decisional law. All of the parties moved for summary judgment. On the basis of N.J.S.A. 17:37A-8, the New Jersey Insurance Underwriting Association's plan of operation, and Millner v. New Jersey Ins. Underwriting Ass'n, 193 N.J. Super. 653, 475 A.2d 653 (App.Div.1984), the Law Division Judge entered judgment in favor of the Association, dismissing both the property owners' complaint and National's crossclaim.
Only National has appealed from the dismissal of its cross-claim against the Association.
National contends that, pursuant to N.J.S.A. 17:22-6.2a, it accepted the renewal premium in advance of the fire as the Association's agent and that the property was therefore insured against the fire damage under the renewal policy. It asserts that the regulations on which the court and the Association rely, contained in the Association's plan of operation, are applicable only to the original issuance, and not to the renewal of an insurance policy. It argues that Millner is distinguishable on its facts or, if it is indistinguishable, that we should recognize that Millner was wrongly decided and refuse to follow it. Alternatively, National asserts that summary judgment should have been denied because discovery had not yet been completed.
For the following reasons, we disagree with National and therefore affirm.
N.J.S.A. 17:22-6.2a, upon which National relies for its claim that it received the renewal premium before the fire as the Association's agent, reads in part as follows:
Any insurer which delivers in this State to any insurance broker a contract of insurance . . . pursuant to the application or request of such broker . . . shall be deemed to have authorized such broker to receive on its behalf payment of any premium which is due on such contract at the time of its issuance or delivery . . . .
As Judge Antell explained in Global American Ins. Managers v. Perera Co., Inc., 137 N.J. Super. 377, 385-386, 349 A.2d 108 (Ch.Div.1975), aff'd o.b. 144 N.J. Super. 24, 364 A.2d 546 (App.Div.1976), that statute codifies the common law principle, accepted in New Jersey and rooted in considerations of apparent authority, that "where the broker has been entrusted to deliver the policy, the insured may justifiably believe that his broker is authorized to receive payment of premium therefor on the insurer's behalf." (Emphasis added.)
N.J.S.A. 17:37A-7 directs the New Jersey Insurance Underwriting Association to adopt a "plan of operation. . . . [which] shall provide for economical, fair and non-discriminatory administration, and for the prompt and efficient provision of essential property insurance to promote orderly community development." N.J.S.A. 17:37A-7. The provisions of the plan which has been adopted in accordance with that statute affect the significance of N.J.S.A. 17:22-6.2a for the present case. That plan of operation, part of which is referred to as the FAIR Plan in the Association's manual, states:
3. Authority of Agents and Brokers (Producers)
The FAIR Plan has no agents. The use of the term "Agent" does not grant any contract relationship, either actual or implied, between the FAIR Plan and any individual or entity.
1. No agent or broker has or shall have any authority to bind the Plan in any way.
2. No agent or broker may issue a policy, binder, endorsement or cancellation notice, nor assign any loss, on behalf of the Plan. No agent or broker may sign any form as an authorized representative of the FAIR Plan.
3. When dealing with the FAIR Plan, any licensed property insurance agent or broker is acting as the designated representative of the applicant or insured, and not as an agent of the Plan.
Because of these terms of the Association's plan of operation, National knows, or ought to know, that it is not an agent for the Association. Unlike an insured, National cannot fairly claim the benefit of the statutory agency by estoppel embodied in N.J.S.A. 17:22-6.2a. That act, like the doctrine of apparent agency which it codifies, ...