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Progressive Casualty Insurance Co. v. Hanna

November 06, 1998

PROGRESSIVE CASUALTY INSURANCE COMPANY, PLAINTIFF-RESPONDENT,
v.
THAER K. HANNA AND OR THAER SALIBA, DEFENDANT-APPELLANT, AND ROBERT MIKOLSKI AND PATRICIA MIKOLSKI, DEFENDANTS.



Before Judges Pressler, Brochin, and Kleiner.

The opinion of the court was delivered by: The opinion of the court was delivered by Kleiner, J.A.D.

[9]    Argued September 15, 1998

On appeal from the Superior Court of New Jersey, Law Division, Somerset County.

Defendant Thaer K. Hanna and/or Thaer Saliba ("Hanna") appeals from the grant of summary judgment to plaintiff, Progressive Casualty Insurance Company ("Progressive") in its declaratory judgment action which sought to void ab initio a commercial comprehensive liability insurance policy, wherein Hanna was the named insured. *fn1

The underlying facts raise an issue of first impression. May an insurer void ab initio an insurance policy for which the applicant provides full and true answers yet omits facts about which no inquiry is made when the omitted facts are material to the insurer's determination whether to accept the insurance risk? Stated alternatively, does New Jersey recognize the concept of "concealment" which has been defined as "the designed and intentional withholding of any fact material to the risk which the insured in honesty and good faith ought to communicate to the insurer"? 7 Am. Jur. 2d § 65; 43 Am. Jur. 2d § 1003. Although the motion Judge did not specifically discuss the concept of "concealment," he implicitly implied it when he granted summary judgment to plaintiff. We disagree and reverse. We conclude that an insurer may not rescind ab initio a policy of comprehensive liability insurance on the basis of an applicant's failure to disclose a material fact, when the insurer fails to ask the insurance applicant questions designed to elicit a material fact.

I.

Hanna resided with his family in Uniondale, Long Island, as a teenager. When he turned sixteen, Hanna, desirous of entering New York bars, purchased from a private citizen a bogus New York driver's license bearing his photograph and the name "Thaer Saliba," *fn2 and designating his age as twenty-one. The license was not issued by the New York Division of Motor Vehicles.

Hanna stated in his pre-trial discovery deposition that in 1980 or 1981, after moving to New Jersey, he applied for a New Jersey driver's license, using the bogus New York driver's license to establish his entitlement. *fn3 A New Jersey driver's license was issued to Hanna under the name "Thaer Saliba." The Division of Motor Vehicles suspended that license in 1982 or 1983 because of his numerous driving infractions and his subsequent failure to pay motor vehicle fines and motor vehicle surcharges. The "Saliba" license was reinstated, but in 1984, it was suspended again. *fn4 Hanna testified that between 1984 and 1992 he operated a motor vehicle without a driver's license. *fn5

On an undetermined date in 1992, Hanna, using his real name, applied for and was issued a New Jersey driver's license bearing number H0447 73572 08632 and the name "Thaer Hanna." *fn6

II.

On October 24, 1994, Hanna completed an application for comprehensive liability insurance at the offices of Hanna's insurance broker, the AAAA Insurance Agency. The broker submitted Hanna's application to the New Jersey Commercial Automobile Insurance Plan ("CAIP"), a program which provides coverage for owners of commercial vehicles unable to procure insurance through the voluntary market. CAIP operates pursuant to N.J.A.C. 17:29D-1 and N.J.A.C. 11:3-1.1 et seq.

Section 3 of the rules promulgated by CAIP provides in pertinent part:

"No applicant shall be qualified if the principal operator of the automobile to be insured does not hold a valid driver's ...


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