Fuentes, Julio M., J.s.c.
This action was commenced by plaintiff, a New Jersey insurance carrier, for a declaratory judgment that it is not liable for a major fire loss sustained by the Bruckner Plaza Shopping Center located in New York on June 21, 1988. The building was owned by a real estate investment partnership. Although insurance coverage had been requested by one of the partners sometime in May of 1988, coverage was not bound until June 27, 1988, (after the fire) effective June 17 (prior to the fire). One, possibly two partners knew of the fire when it occurred but did not advise the partner applying for insurance. The primary issue is whether plaintiff's insurance binder was intended to cover defendants' loss which occurred prior to the date the policy was issued.
The plaintiff, Affiliated FM Insurance Company (Affiliated), filed this action against the property owners, the Bruckner Plaza Associates (Bruckner), and its parent company, the Kushner Companies, claiming that its policy was not intended to cover defendants' loss because it was a known loss which Bruckner failed to reveal. Bruckner agrees with Affiliated that it was aware of the
fire before coverage was bound. However, Generali Insurance Company of Trieste and Venice (Generali), which had an existing policy on the building on the date of the loss, has intervened and claims that Affiliated's retroactive policy was valid. According to the intervenor, in the event Affiliated's policy is deemed to cover Bruckner's loss, under New York law, it must provide approximately 95% of the total coverage. Generali would contribute the remaining 5%. On the other hand, if Affiliated's policy is voided, Generali pays the total loss. See New York Insurance Law, 3404; Continental Ins. Co. v. Commercial Union Ins. Co., 27 A.D. 2d 333, 278 N.Y.S. 2d 995, 998 (1967).
This case was tried without a jury. Virtually all the material facts have been stipulated. In 1987, Bruckner Plaza Associates purchased the Bruckner Plaza shopping center. Harry Skydell was the managing partner for Bruckner Plaza Associates. Skydell's company, Hudson Park Management, a real estate management firm, managed the property for the partnership. Hudson Park had previously obtained insurance for the Bruckner Plaza location from the intervenor, Generali, effective September 1987. In addition to being a partner in Bruckner Plaza Associates, Skydell was president and sole shareholder of Hudson Park Management. In the Spring of 1988, Bruckner applied through the Feldman Agency, a retail broker, for property insurance coverage on 29 other properties that it owned. Feldman, in turn, used another broker, Continental Coverage Corporation, a wholesale broker, to obtain the coverage from Affiliated. On May 20, 1988, Affiliated issued a property insurance policy effective May 9, 1988 covering these properties.
Soon after Affiliated's policy was issued, Richard Stadtmauer, a general partner in the Bruckner Plaza group, called Skydell and suggested transferring the Bruckner Plaza location and three other properties from Generali's policy to Affiliated's policy to save money. Skydell agreed and Stadtmauer told him that he would be in contact with his office for the needed information. Although Skydell had no personal involvement in obtaining insurance
for Bruckner Plaza from Affiliated, Stadtmauer spoke to Skydell or his staff and told them to contact Feldman so that Feldman could obtain the needed information to add the four locations to Affiliated's policy. As a result, Skydell's office sent Stadtmauer the existing insurance policies for the four locations.
On or about June 6, 1988, Bruckner's retail broker, the Feldman Agency, requested Continental to add the four properties to Affiliated's policy. Neither Bruckner nor its broker, Feldman, requested a specific coverage date except that coverage was to commence as soon as possible. On June 17, 1988, Continental faxed a letter to Affiliated requesting that the four properties be added, "[e]ffective inception if possible, otherwise as of today." Continental's request for coverage was acknowledge by Affiliated on Monday, June 20, 1988. By telefax dated June 22, 1988, Affiliated requested additional information on the properties for insurance purposes. This information was supplied two days later, and on June 27, 1988, Affiliated, unaware of the fire, issued a confirmation to Continental agreeing to bind coverage for the requested additional properties, retroactive to June 17, 1988.
It is stipulated by all parties that when Affiliated bound coverage on June 27, 1988, it intended to cover losses occurring to the Bruckner Plaza between June 17 and June 27, 1988 which were then unknown to its insured, Bruckner Plaza Associates. However, unbeknownst to Stadtmauer, the Bruckner partner in charge of obtaining the insurance, while the application for Affiliated's coverage was pending, a fire had caused substantial damage to the property. Although Harry Skydell knew of the fire the day it occurred, he did not immediately notify Stadtmauer. Skydell testified that he did not consider this event (the fire) so significant as to require immediate notice to the other partners. He testified that he managed many individual properties and he considered the fire a relatively minor occurrence. One other partner, Joseph Seiden, became aware of the fire about a day later, but there is no evidence that he notified any of the other partners.
On or about June 29, the Feldman Agency notified Stadtmauer that coverage on the four properties had been obtained. Stadtmauer was unaware that Feldman requested coverage to be effective as of the date Affiliated received the insurance application. Since Stadtmauer originally believed coverage was effective on the day he received notice from Feldman, he did not consider making a fire loss claim under Affiliated's policy. When he received the insurance endorsement in August, 1988, Stadtmauer learned that Affiliated's policy was retroactive to a date prior to the fire. Stadtmauer then asked Feldman to change the effective date to July 1, 1988, a date after the fire, because he believed that it would be "legally wrong and fraudulent" to obtain coverage without having informed Affiliated of the intervening loss. He did not inform Affiliated of the fire because he did not think Affiliated's policy provided coverage. Stadtmauer testified that he probably knew about the fire before Feldman told him in late June that insurance was bound and that he never intended retroactive coverage.
Stadtmauer's request for a change in effective date of the policy was received in September 1988, misplaced, and not issued until the following year. When the change was made, Affiliated refunded the premium to Bruckner for the period of June 17 to July 1, 1988. The effective date of coverage on the other three locations, June 17, 1988, remained unchanged. On December 18, 1989, Affiliated received formal notice of the Bruckner Plaza loss. The notice of claim was filed late since, according to Stadtmauer, the partnership never believed that coverage existed and because the existing insurer, Generali, brought up the question of Affiliated's potential liability in the course of a separate proceeding.
Since this action involves a loss by fire to property in the state of New York, the law of that state governs the parties' responsibilities. State Farm, etc., Ins. Co. v. Simmons' Estate, 84 N.J. 28, 417 A.2d 488 (1980); Bell v. Merchants & Businessmen's Mut. Ins. Co., 241 N.J. Super. 557, 575 A.2d 878 ...