On appeal from the Superior Court, Law Division, Monmouth County.
Havey, Stern and Brochin. The opinion of the court was delivered by Havey, J.A.D. Stern, J.A.D. (concurring).
On December 31, 1987, plaintiff Cheryl Werrmann sustained personal injuries while a patron of the Aratusa Supper Club, a boat-restaurant moored in Secaucus. Plaintiff attempted to sit on a bar stool which slid out from under her. She instituted suit against defendant Aratusa, Ltd. (Aratusa) seeking to recover damages for her personal injuries.*fn1 Aratusa, in turn, filed a third-party complaint against R. Bruce Hill Agency (Hill), Aratusa's insurance broker, claiming that Hill negligently failed to renew a general liability policy covering Aratusa's premises. Aratusa's policy had lapsed approximately two months before plaintiff's accident. Plaintiff thereupon amended her complaint naming Hill a direct defendant, claiming she was a third-party beneficiary of Hill's agreement with Aratusa to procure insurance. She also advanced a negligence theory, asserting Hill owed her a duty, and breached that duty by not maintaining liability coverage on Aratusa's behalf.
Aratusa's claim against Hill was dismissed for Aratusa's failure to answer interrogatories. Hill then moved to dismiss plaintiff's claim on the ground that plaintiff failed to state a claim upon which relief could be granted. The trial court granted the motion, concluding that Hill owed no duty to plaintiff, and that she was not an intended third-party beneficiary of the contract between Aratusa and Hill. Thereafter, Aratusa defaulted on plaintiff's claim against it. At a proof hearing plaintiff was awarded $85,000 in damages against Aratusa. We are advised that the award is uncollectible because Aratusa is judgment proof. Plaintiff now appeals the order dismissing her complaint against Hill. We reverse.
To recover under a negligence theory, the defendant must owe a duty to the plaintiff. Strachan v. John F. Kennedy Mem. Hosp., 109 N.J. 523, 529, 538 A.2d 346 (1988). It is of course settled that an insurance broker owes a duty to his principal to exercise diligence in obtaining coverage in the area his principal seeks to be protected. Rider v. Lynch, 42 N.J. 465, 476, 201 A.2d 561 (1964). The question here is whether that duty is also owed to a member of the general public who is injured as a result of the negligence of the principal.
Reasonable foreseeability of harm is essential to the creation of a duty. Hill v. Yaskin, 75 N.J. 139, 143-44, 380 A.2d 1107 (1977). The inquiry is whether it is foreseeable to a reasonable person that his conduct will create an enhanced risk to those coming within the range of such a hazard. Ibid. See also Johnson v. Usdin Louis Co., 248 N.J. Super. 525, 529, 591 A.2d 959 (App.Div.) (discussing the elements of a legal duty), certif. denied, 126 N.J. 386, 599 A.2d 163 (1991). However, duty is not established solely by recourse to "foreseeability." Goldberg v. Housing Auth. of Newark, 38 N.J. 578, 583, 186 A.2d 291 (1962). "The question of whether a duty exists is a matter of law . . . and is largely a question of fairness or policy." Wang v. Allstate Ins. Co., 125 N.J. 2, 15, 592 A.2d 527 (1991); accord Hopkins v. Fox & Lazo Realtors, 132 N.J. 426, 439, 625 A.2d 1110, 1116 (1993); Strachan, 109 N.J. at 529, 538 A.2d 346. The question "involves a weighing of the relationship of the parties, the nature of the risk, . . . the public interest in the proposed solution," Kelly v. Gwinnell, 96 N.J. 538, 544, 476 A.2d 1219 (1984), and any other surrounding circumstances. Johnson, 248 N.J. Super. at 529, 591 A.2d 959.
The only New Jersey reported case on point is Eschle v. Eastern Freight Ways, Inc., 128 N.J. Super. 299, 319 A.2d 786 (Law Div.1974). There, a passenger injured in a motor vehicle accident sued the driver's insurance agent because the driver's liability policy had lapsed. The Law Division found that the passenger, as a member of the general public, had both a third-party
beneficiary-breach of contract and negligence claim against the agent. Id. at 305-06, 319 A.2d 786. The court based its holding in part on the public policy underlying mandatory automobile liability insurance: "to see that drivers are insured" and to create a fund from which the public may expect a source of payment beyond the means of the tortfeasors. Id. at 302, 319 A.2d 786. In finding the agent owed a duty to the general public, the court stated that "the potential lack of recompense to a potential injured party is a natural and foreseeable result of an agent's or broker's actions if he negligently fails to obtain proper coverage in accordance with his instructions." Id. at 304, 319 A.2d 786 (emphasis added). It added:
This case does little more than synthesize two established rules in New Jersey law. First, that an insurance agent is liable to the potential insured for the failure to obtain such coverage, and second, that an injured party acquires an interest in an insurance policy which may be available to cover the accident. If the agent stands in the shoes of the company which would have issued the policy (had he not been negligent or breached his contract), there is no reason to deny the direct action against him, combining these two lines of cases. To hold to the contrary would be to insulate the agent from the consequences of his acts, and leave the public without adequate protection.
We find Eschle 's reasoning compelling and persuasive. It is true that the court bottomed its analysis in part on the agent's failure to procure mandatory automobile insurance. Nonetheless, the essence of its holding is that it is reasonably foreseeable, from the viewpoint of an insurance agent or broker, that an innocent party who is injured by the tortious conduct of the insured may be left without a means of redress if the insured's liability policy is allowed to lapse. That reasonable foreseeability exists whether the insurance is mandatory or optional. In our view, it is patently unfair to forfeit the injured party's unquestioned interest in the insured's liability policy, see In re Gardinier, 40 N.J. 261, 265, 191 ...