On appeal from the Superior Court of New Jersey, Law Division, Essex County.
Gaulkin, Havey and Stern. The opinion of the court was delivered by Stern, J.A.D.
Plaintiff was injured during an abortion performed by Dr. E. Wyman Garrett on January 25, 1985, while defendant Princeton Insurance Company's (PIC) policy was in force. No claim was made until after the policy term ended and the policy was canceled for non-payment of premium. Plaintiff claims that, as a matter of law, the policy was an "occurrence" policy so that it covered the date of the operation. PIC contends that as the policy was a valid "claims made" policy there is no coverage. There is no contention that plaintiff cannot assert the coverage issue following default by the doctor.
The parties agree that if this were an "occurrence" policy, or must be treated as such, Dr. Garrett would be covered because the operation was performed during the period the policy was in force. On the other hand, if this is an enforceable "claims made" policy, there would be no coverage because the claim was not filed until after the termination. An "occurrence" policy covers all acts occurring within the policy period regardless of when the claim is filed, while a "claims made" policy provides coverage for negligent acts for which a claim is made and communicated to the carrier within the policy period regardless of when those acts occurred. Zuckerman v. National Union Fire Insurance Co., 100 N.J. 304, 310-11, 324, 495 A.2d 395 (1985). PIC's policy issued to Dr. Garrett provides that the act itself must also occur after the policy's effective date. However, under Sparks v. St. Paul Ins. Co., 100 N.J. 325, 495 A.2d 406 (1985), an enforceable "claims made" policy must provide retroactive coverage, or the insured must be provided with an opportunity to obtain same, so that his or her reasonable expectations are satisfied.
In prior litigation involving a different plaintiff but the same carrier and the same policy issued to Dr. Garrett, it was determined that there was coverage "[w]hether the policy is
construed as an 'occurrence' or 'claims made' policy."*fn1 We specifically noted that even though the act, involving a plaintiff who was injured during a similar operation, occurred during the policy period, the non-retroactivity provision was void or unenforceable because the court could not sustain a judgment "favorable to the drafter of the offensive document," quoting Sparks, supra, 100 N.J. at 341, n. 5, 495 A.2d 406. Further, we indicated that while Dr. Garrett was given the opportunity upon cancellation to purchase a "reporting endorsement," or "tail," so that his negligence during the policy period would still be subject to coverage for a claim made thereafter, his failure to do so did not render the limitation enforceable because similar conduct did not save the policy in Sparks. And significantly we stated there was no showing "that Garrett specifically understood or bargained for this type of coverage . . . ."
Plaintiff insists that our decision in the prior case precludes litigation by PIC of the factual issues surrounding the purchase of the policy to show that "the terms of this policy were specifically understood and bargained for by [the insured] and that, although a policy with adequate retroactive coverage was available to him . . . he specifically elected to purchase this policy with no retroactive coverage in the first year" and it was therefore enforceable as a "claims made" policy. Sparks, supra, 100 N.J. at 342, n. 6, 495 A.2d 406. Here, the trial Judge found that Dr. Garrett was told of the distinctions between an "occurrence" and "claims made" policy and opted, essentially for economic reasons, to obtain the "claims made" policy without a retroactive provision and, although given the opportunity, never bought a "tail" after it was terminated or canceled. The Judge thus found that the policy was enforceable and provided no coverage for the claim made.
We need not decide the procedural question or accept the invitation to expand the preclusive effect of collateral estoppel principles. We so conclude because our review of the record reflects no evidence that Dr. Garrett was specifically advised of his right to purchase a "claims made" policy with a retroactive provision and that he knowingly elected not to do so. In the absence of such proofs, Sparks mandates coverage.
In Zuckerman, the Supreme Court held that a "claims made" policy limiting coverage to claims filed during the policy period is enforceable so long as the policy provides substantially unrestricted retroactive coverage. 100 N.J. at 321, 495 A.2d 395. However, in Sparks, decided the same day, the Court concluded that a "claims made" policy which "provided no retroactive coverage whatsoever during its first year" was not enforceable, 100 N.J. at 328, 495 A.2d 406, because it failed to provide coverage consistent with an insured's objectively reasonable expectations, and was thus violative of the State's public policy. Id. at 329, 495 A.2d 406. The Court held
that where there has been no proof of factual circumstances that would render such limited retroactive coverage both reasonable and expected, a "claims made" policy that affords no retroactive coverage whatsoever during its initial year of insurance does not accord with the objectively ...