On appeal from the Superior Court of New Jersey, Law Division, Essex County.
Approved for Publication November 28, 1995. As Corrected January 30, 1996.
Before Judges Long and Brochin
Defendant Liberty Mutual Insurance Company issued a multi-peril insurance policy which named defendant Howard Savings Bank as the mortgagee of the insured property. By the terms of the policy, its coverage commenced July 23, 1983 and expired July 23, 1986. The insurer claims to have canceled the policy on November 21, 1985 because its insured, the owner of the property, failed to pay a premium of $23,490.79. The building which was the subject of the multi-peril policy was destroyed by fire on February 27, 1987, well beyond the date on which the policy would have terminated according to its terms if it had not been canceled previously.
Howard Savings Bank, as the named mortgagee under the insurance policy, demanded indemnification from Liberty Mutual. Liberty Mutual declined payment on the ground that the policy was not in force on the date of the fire which destroyed the mortgaged property. Howard Savings Bank sued, claiming that the insurer remained liable despite the cancellation of the policy and the expiration of the policy term because the bank had not been given the notice of cancellation and nonrenewal which, the bank claimed, were required by statute, administrative regulations, the insurance policy itself and case law.
Liberty Mutual moved for summary judgment dismissing the complaint on the ground that even if Howard Savings Bank were assumed not to have been sent the November 1, 1985 notice of cancellation of the policy for nonpayment of premiums, the policy had expired by its terms on July 23, 1986, prior to the February 27, 1987 fire loss. In opposition, Howard Savings Bank *fn1 argued, as it does before this court, that the policy remained in effect on its scheduled termination date because the insurer failed to notify the bank of cancellation for nonpayment, and that the policy continued to be in force on the date of the fire loss because the insurer failed to notify the bank of its nonrenewal. Alternatively, Howard Savings Bank argued to the Law Division and to us that even if there was no legal obligation to notify the bank of nonrenewal, Liberty Mutual is liable to Howard Savings Bank because the bank would have obtained a renewal policy if it had been notified of the cancellation of the policy during its term.
Judge Donald S. Goldman, J.S.C., explained the rationale for his grant of summary judgment in a formal written opinion. He framed the question for decision to be, "whether a mortgagee is an 'insured' under N.J.A.C. 11:1-5.2(a)(3), the regulation which requires an insurer to give an 'insured' notice of its intent not to renew a policy." He pointed out that N.J.A.C. 11-1-5.2 was promulgated pursuant to N.J.S.A. 17:29C-1, which authorizes regulations requiring thirty days' written notice to be given: "(1) to the insured, of the cancellation of any such policy; (2) to any designated mortgagee not named therein as the insured of the cancellation of any interest in such policy; and, (3) to the insured, of intent not to renew any such policy." He also quoted N.J.A.C. 11:1-5.2, promulgated pursuant to that statute, which reads:
(a) All fire and casualty policies of insurance, except accident and health policies, shall provide for the issuing company to give:
1. Thirty days' written notice to the insured of the cancellation of any policy;
2. Thirty days' written notice of cancellation of any policy to any mortgagee mentioned in said policy; and
3. Thirty days' written notice to the insured of said company's intent not to renew any policy.
[N.J.A.C. 11:1-5.2 (Emphasis added.)]
Judge Goldman read the quoted provisions of N.J.S.A. 17:29C-1 and N.J.A.C. 11:1-5.2 to mean that Liberty Mutual was not subject to any statutory or regulatory requirement to provide notice of nonrenewal to Howard Savings Bank. In Citta v. Camden Fire Ins. Assoc., Inc., 152 N.J. Super. 76, 78, 377 A.2d 779 (App. Div. 1977), we held that in the absence of an explicit statutory, regulatory or contract provision requiring notice, "neither the insurer nor its agent has a legal duty to give notice of the expiration of a policy . . . ." On the basis of the Citta opinion, Judge Goldman ruled that Liberty Mutual was not obligated to notify Howard Savings of the nonrenewal of the policy. We agree with that ruling.
We add that the language of the subject policy demonstrates that its terms impose no contractual obligation on Liberty Mutual to notify Howard Savings of the nonrenewal of the policy at the end of its term. Mirroring the language of the statute and regulation which we have quoted, the policy's cancellation provision provides that "if the insured fails to discharge when due any of his obligations in connection with the payment of premiums or any installment of such premium . . . this policy may be cancelled . . . by mailing to the insured . . ., and ...