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Christian v. Ormsby

Decided: December 18, 1992.

JAMES AND LINDA CHRISTIAN, PLAINTIFFS,
v.
JAMES E. ORMSBY AND NEW JERSEY AUTOMOBILE FULL INSURANCE UNDERWRITING ASSOCIATION, DEFENDANTS



Schwartz, J.s.c.

Schwartz

[267 NJSuper Page 240] This case involves a determination of the validity of a notice of cancellation for non-payment of premiums of an automobile insurance policy issued by Liberty Mutual Insurance Company ("Liberty Mutual") as servicing carrier for the New Jersey Automobile

Full Insurance Underwriting Association ("JUA" or "defendant") to the plaintiffs James and Linda Christian. The insurer seeks further clarification of the methods by which proof of compliance with the requirements of N.J.S.A. 17:29C-10 for the mailing of a notice of cancellation may be satisfied. A second issue requiring resolution is whether an automobile insurer may, pursuant to N.J.S.A. 17:29C-8, issue to its insured, prior to the premium due date, a notice of cancellation effective the day following the premium due date. This latter issue appears to be one of first impression in New Jersey.

At the outset of the trial, a motion was granted to substitute the JUA for Liberty Mutual as the defendant to the fourth count of the complaint seeking declaratory judgment. That motion to amend was granted pursuant to R. 4:9-2. The answer of Liberty Mutual was also deemed amended to substitute the JUA for Liberty Mutual. On plaintiff's motion the sixth count of the complaint which charges defendant, John Randolph ("Randolph"), the broker through whom plaintiffs purchased the policy in issue, with negligence, was dismissed with prejudice.

This matter was tried to the court without a jury. Three witnesses testified at the trial. These witnesses included the plaintiff, Linda Christian ("Mrs. Christian"), Christopher Brewer ("Brewer"), the production supervisor for Liberty Mutual and the broker, Randolph. In reaching the findings of the fact set forth below, the court has had to evaluate the credibility of these witnesses.

During the period between May 1985 and February 1988 plaintiffs resided at 24 Valley Street, Newark, New Jersey. In early 1988 plaintiffs, who then owned a 1973 American Gremlin, secured an automobile insurance policy through Randolph from Liberty Mutual, acting as servicing carrier for the JUA. The policy insured the Gremlin for the period February 28, 1987, through February 28, 1988 (Exhibit P-2).

On October 7, 1987, Mrs. Christian signed a contract for the purchase of a 1987 Oldsmobile Ciera coupe. Upon execution of

the contract of purchase Mrs. Christian, at the recommendation of the car salesman, called Randolph's office to ask that the new car be added to her existing insurance policy. She spoke with "Phyliss," a clerical employee of Randolph, and later went to Randolph's office and picked up a temporary insurance identification card for the Oldsmobile (Exhibit P-5). The temporary I.D. card, which was issued in the name of James Christian ("Mr. Christian"), stated that the effective date of coverage for the Oldsmobile was October 7, 1987. On that date Randolph sent a request for policy change to Liberty Mutual seeking to add the 1987 Oldsmobile to plaintiffs' policy (Exhibit P-4). Pursuant to that request for policy change, Liberty Mutual issued a policy endorsement (Endorsement # 3), adding the 1987 Oldsmobile Ciera as the second automobile on the policy and listing United Jersey Bank as the loss payee (Exhibit P-6). The effective date of Endorsement # 3 was October 7, 1987.

When Mrs. Christian went to Randolph's office to obtain the temporary insurance I.D. card, she inquired about payment of the premium and was told by Randolph's secretary, Phyliss, not to worry about payment of the premium at that time. Phyliss informed Mrs. Christian that she would be receiving a premium notice from the company informing her as to the amount of the additional premium and the premium due date. During that conversation Phyliss did not inform Mrs. Christian as to the amount of the premium which would be due for the Oldsmobile or its due date.

Mr. Christian was involved in an automobile accident on November 13, 1987, while driving the 1987 Oldsmobile during the course of which he suffered bodily injuries. Mr. Christian has commenced this litigation against the other driver, James E. Ormsby, and has himself been named a defendant in a separate consolidated action commenced by Ebon Blackson ("Blackson"), a passenger in Mr. Christian's vehicle, in which Blackson seeks damages for bodily injuries sustained in the November 13, 1987, accident.

In their amended complaint plaintiffs seek an declaration that they are covered under the policy issued by Liberty Mutual on behalf of the JUA for personal injury protection ("PIP") benefits arising as a result of the injuries sustained by plaintiff James Christian in the November 13 accident, as well as for collision damages to the 1987 Oldsmobile.*fn1

The JUA in its answer denies any liability to plaintiff and asserts as its primary defense cancellation of the policy for non-payment of premium prior to the date of the November 13, 1987, accident.

Mrs. Christian testified that she never received a copy of the premium notice (Exhibit P-8) alleged to have been issued and mailed on or about October 21, 1987, and providing for a payment of $362 in premiums on November 10, 1987. Mrs. Christian also denied having received the cancellation notice dated October 22, 1987, effective November 11, 1987 (Exhibit P-9; Exhibit D-7), and alleged to have been mailed from the Boston, Massachusetts, post office on October 26, 1987 (Exhibit D-1). Mrs. Christian testified

that she received the premium notice (Exhibit P-8) from Randolph's secretary Phyliss the day she delivered the police accident report to her following the November 13 accident. The premium notice marked into evidence as Exhibit P-8 is addressed to John Randolph at his then address at 976 Eighteenth Avenue, Newark, New Jersey. There is no address for James Christian, whose name appears on that premium notice. Based upon Randolph's testimony the court finds that Exhibit P-8 is the producer's copy of the premium notice, rather than the policyholder's copy of that premium notice.

Another copy of the premium bill marked Exhibit D-5 was produced from the files of John Randolph. That premium notice bears the name and address of James Christian on the left side and Randolph's name and address on the right side. Mrs. Christian also denied having ever seen or received Exhibit D-5. Randolph testified that he also sent plaintiffs his own notice, (Exhibit D-6) dated November 5, 1987, notifying Mr. Christian that Randolph had just received a notice cancelling the policy for non-payment of premium effective November 10, 1987, and requesting that Mr. Christian send him a check "today." Mrs. Christian denied receiving the original of that notice as well.

Randolph's testimony with regard to these two premium notices was contradictory. He initially testified that Exhibit D-5 was the premium notice received in his office and that he had taken it out of his file to deliver to counsel for the JUA; that Exhibit P-8 was the original of the premium bill sent to James Christian and that he had not seen Exhibit P-8 prior to the trial. However, on cross-examination, he testified that he did not know how he obtained both copies of the premium notice and did not recall giving Exhibit P-8, which would be the producer's or broker's copy of the premium notice, to Mrs. Christian and did not know whether anyone in his office provided Mr. or Mrs. Christian with Exhibit P-8. However, Randolph testified that the premium notice is mailed in a window envelope with the address showing through the window; that he opens the mail delivered to his office; and

that he did not recall receiving the policyholder's copy of the premium notice in the same envelope as the producer's copy of that premium notice.

Two possible inferences can be drawn from the circumstances surrounding the presence of the policyholder's copy of the premium notice in Randolph's file. They are: (1) that Randolph's recollection was in incorrect and that in fact he received the policyholder's copy of the premium notice in the same envelope as the producer's copy of the premium notice or that it was otherwise mistakenly delivered to him with other mail he received from Liberty Mutual; or (2) that the policyholder's copy of the premium notice was delivered by Mrs. Christian to Randolph's office sometime after the accident in question, was left at his office and was placed loose into the file by Randolph's secretary. The court concludes that the latter inference is more probable than the former for the following reasons.

All of the documents removed from Randolph's file and marked into evidence in this matter contained double hole punches at the top or along the left-hand margin so that each document could be inserted into an "Acco" binder clip which held Randolph's file together. The single exception to that practice was Exhibit D-5 which contained no hole punches. Secondly, Exhibit D-5 contains the words "Old Stuff". These words were apparently written on Exhibit D-5 by Randolph or someone in his office. The words "Old Stuff" clearly infer that the policyholder's copy of the premium notice was received by Randolph some time after he received the producer's copy of that premium notice and since the premium notice was addressed to James Christian at his address in Newark, it is reasonable to infer that the policyholder's copy of that premium notice was delivered or mailed to Randolph by Mr. or Mrs. Christian some time after the November 13 accident. Accordingly, the court concludes that plaintiffs received the premium notice from Liberty Mutual in the ordinary course of the mails sometime after October 21, 1987, and substantially prior to November

10, 1987, and that the testimony of Mrs. Christian to the contrary must be rejected as not credible.

The credibility of Mrs. Christian's denials of her receipt of the Liberty Mutual cancellation notice and the notice from Randolph concerning cancellation of the policy must be evaluated both upon the basis of her demeanor on the witness stand and in light of the testimony provided by Brewer and Randolph. Their testimony is summarized below.

Brewer, as production supervisor for Liberty Mutual at present and in November 1987, has the duty to make sure that all billing and cancellation notices go out on timely basis. He testified that all cancellation notices were computer generated on the third shift in a department called "Computer Operations." Exhibit D-4 is an unused combination of the data mailers and the company's file copies of cancellation notices which was offered in evidence to illustrate the procedures followed by Liberty Mutual. This form contains a green top page which represents the Liberty Mutual file copy of the cancellation notice. Immediately underneath the top page is an envelope and the policyholder's copy of the cancellation notice is located inside the envelope or data mailer. The form is carbonized and an impact printer prints out the name and address of the policyholder, the name and address of the agent, the date of the notice, the policy number, the effective date of cancellation and the minimum amount of premium due. Because the forms are carbonized, one typing is made to the Liberty Mutual file copy and the information is transferred through the carbonized interior of the top of the envelope to the cancellation notice inside the envelope. The name and address of the policyholder is printed on the right-hand side of the envelope as well as on the right-hand side of the cancellation notice. On the left-hand side of the policyholder's copy of the cancellation there is printed the name and address of the broker or agent through whom the policy was purchased.

Pursuant to Liberty Mutual's procedures, a second copy of the cancellation notice is sent to the broker or agent. The broker's

copy of the cancellation notice is printed by the impact printer at the same time that the Liberty Mutual file copy of the broker's copy of the notice is printed and immediately following the printing of the policyholder's copy of cancellation notice. The broker's or agent's copy of the cancellation notice is also located inside a data mailer envelope addressed to the broker or agent. The only difference between the broker's copy and the policyholder's copy of the cancellation notice is that on the broker's copy, the broker's name and address appears on the right-hand side and the policyholder's name and address appears on the left-hand side of the cancellation notice. The cancellation notices are never removed from the mailing envelopes before the envelopes containing those notices are placed in the mail.

Liberty Mutual retains in continuous form all of the computer generated file copies of the cancellation notices mailed to policy holders and brokers in each state for each date of mailing. Exhibit D-3 contains all of the Liberty Mutual file copies of the cancellation notices dated October 22, 1987, and mailed to the State of New Jersey on October 26, 1987. Exhibit D-3 contains Liberty Mutual's file copies of 573 cancellation notices mailed on October 26, 1987, to the State of New Jersey. Included in this continuous form are copies of the cancellation notices mailed to James Christian and John Randolph with respect to policy number AB9-339-124908-007 5. The company's file copies of these cancellation notices indicate that plaintiffs' policy had been issued by Liberty Mutual on behalf of the JUA.

At the same time as the cancellation notices are computer generated and printed, a document identified by Brewer as a "hereby" is also computer generated. That document (Exhibit D-2) lists the names and addresses of all policyholders, brokers and agents and the policy numbers of all policies for which cancellation notices were computer generated that date. Exhibit D-2 contains a certification at the top which states "I hereby verify that the items received by me for mailing are the same items listed below". Underneath the certification is a form number CR108 and the title

"Certificate of Mailing." The "hereby" is not signed, but attached to the "hereby" is a certificate of mailing bearing the initials of the postal clerk who receives the envelopes containing the cancellation notices. Among the names listed in the "hereby" (Exhibit D-2) is the name and address of "James Christian, 24 Valley Street, Newark, New Jersey," immediately followed by that of "John C. Randolph, 976 Eighteenth Avenue, Newark, New Jersey".

Brewer testified that each of the envelopes containing a cancellation notice is placed through a bursting machine which bursts each of the data mailers apart for mailing purposes. Brewer assures that the names and addresses on the data mailers are the same as the names and addresses on the "hereby" by having two employees under his supervision match up the first and last names on the "hereby" with the names on the first and last data mailer.

Brewer testified that 573 cancellation notices were generated on October 22, 1987, by the computer department for mailing to the State of New Jersey. Once the mailing department received all of the cancellation notices, his department puts together the certification of mailing (Exhibit D-1) attached to the "hereby." The certificate of mailing form is obtained from the post office and is filled out both by an employee in the Liberty Mutual mailing department and a post office clerk. Liberty Mutual applies the correct postage to the mailings and lists the number of pieces going out on the certificate of mailing on the lower left-hand corner. The upper left-hand corner of the certificate of mailing contains the name and address of Liberty Mutual, the form number (CR108), the division, the date of issuance and the type of mailing, which in this case is a certificate of mailing. The notation "Division 4" at the top of Exhibit D-1 was identified by Brewer as the State of New Jersey.

The actual meter tapes which Liberty Mutual uses for metering the postage are affixed by Liberty Mutual to the certificate of mailing. The mailroom employees know the number of pieces which are being mailed from a count sheet which is generated with each list of names appearing on the "hereby" for New Jersey.

The fee for a mailing made pursuant to a certificate of mailing was forty-five cents in 1987.

Once the total number of pieces being mailed have been determined, the mail department brings the data mailers containing the cancellation notices to the post office for mailing and verification. In 1987 Liberty Mutual had to transport its bulk mail to the United States Post Office in Boston, Massachusetts, for verification because that was where Liberty Mutual's bulk mailing permit was located. Mailings were brought to Boston on a daily basis until the location of bulk mailing permit was changed from Boston to Portsmouth, New Hampshire.

Brewer testified that after the postal clerk verifies the information that Liberty Mutual has given the Post Office on the certificate of mailing, the postal clerk will initial the certificate, write down the number of pieces he has received and frank the certificate of mailing by placing a postal mark on top of the certificate of mailing which states the date and location of the post office where the mailing is received. Exhibit D-1 contains such a stamp marked "Boston, Massachusetts October 26, 1987 Back Bay Annex". A similar stamp appears on the top of the "hereby" (Exhibit D-2). The certificate of mailing and the "hereby" are then returned to Brewer's office for filing and safekeeping.

In his position as production supervisor Brewer certified at the trial that the file copy of the cancellation notice addressed to James Christian contained within Exhibit D-3 is a true copy of the notice mailed to James Christian on October 26, 1987. While the file copy of the cancellation notice contains at the top a certification that it is a duplicate copy of the original mailed to the policyholder, that certification is not signed or dated.

While Brewer was responsible for mailing the premium due notices, he testified that Liberty Mutual does not keep copies of those premium notices, and that Liberty Mutual did not have a copy of the premium notice mailed to plaintiff in October 1987. Brewer testified that it was Liberty Mutual's policy that cancellation

notices must be post marked within five days of the issue date of the cancellation notice, which in this case was October 27, 1987.

Randolph is a self-employed independent insurance broker who wrote various lines of personal insurance, including automobile insurance. Randolph had written auto insurance for plaintiffs on a 1973 American Gremlin (Exhibit P-2) and in October 1987 they requested him to insure the 1987 Oldsmobile Ciera. On October 7, 1987, he prepared a request for policy change to ...


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