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TWBC v. Underwriters at Lloyd's London

July 13, 1999

TWBC III, INC., A NEW JERSEY CORPORATION, AND 1331 OCEAN AVENUE SEA BRIGHT ASSOCIATES, A PARTNERSHIP, PLAINTIFFS-APPELLANTS,
v.
THOSE CERTAIN UNDERWRITERS AT LLOYD'S LONDON SUBSCRIBING TO POLICY NO. 894 305481 92, H. JAMES GRIFFITH, PRINCETON RISK MANAGERS, INC., DEFENDANTS-RESPONDENTS. AND R.A.M. INSURANCE AGENCY, INC., AND RONALD MANZO, DEFENDANTS.



Judges Havey, P.g. Levy and Lesemann.

The opinion of the court was delivered by: Lesemann, J.s.c. (temporarily assigned).

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

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

Plaintiffs, owners and operators of a nightclub and beach club which operate, respectively, in two buildings in Sea Bright, appeal from a summary judgment which dismissed their complaint seeking recovery under an insurance policy for wind damage suffered by the nightclub. The two issues presented by the complaint are, first, which of the two buildings was covered by the policy; and second, whether defendant Princeton Risk Managers, Inc. (Princeton), who had obtained the policy, complied with its statutory notice obligation when it provided notice of the policy to the broker who had represented plaintiffs in ordering the insurance. The Law Division concluded that the policy insured against damage to the beach club, and not to the nightclub, and that Princeton had complied with its notice obligation. It therefore dismissed the complaint. We affirm.

The two businesses involved, the beach club and the nightclub, are owned by plaintiff T.W.B.C. III, Inc. (TWBC). The land and the buildings themselves are owned by plaintiff 1331 Ocean Avenue Sea Bright Associates (Ocean Avenue). In early 1991, plaintiffs retained Gilmartin & Kierstead, insurance brokers, to obtain insurance on their property. Because the property was located on the shore, placement of the insurance involved some complications and was relatively expensive. To obtain the coverage, Robert Kierstead, one of the principals of Gilmartin & Kierstead, contacted Princeton and submitted to it an application for surplus lines insurance. The nature of surplus lines insurance is to provide coverage for such difficult to insure risks which may be uninsurable through more routine channels.

Princeton is in the business of placing surplus lines insurance and is licensed to do so. When it received plaintiffs' application from Kierstead, it forwarded the application to an insurance broker in London, Thomas A. Miller & Sons (Miller), who then placed the insurance with a Lloyd's of London syndicate. On May 9, 1991, it advised Princeton that the insurance had been placed. Princeton, in turn, so advised Kierstead and also advised Kierstead of the premium amount. Kierstead accepted the proposal on behalf of TWBC and asked Princeton to bind the coverage with Lloyd's, which Princeton did, "subject [to a] satisfactory inspection report."

That inspection report revealed there were actually two distinct buildings on the property, something which Princeton says it had not theretofore known. Upon receipt of that information, Princeton contacted Kierstead and asked which building or buildings were to be covered by the policy. In response, Kierstead FAXed its answer to Princeton:

"I spoke to the owner of T.W.B.C. . . . today regarding your questions on value of buildings. He stated that the entire value should be on the main building and not on the nightclub. Any questions, please give me a call."

Princeton then forwarded a copy of that FAX to Miller, with the following note:

"Please see attached memo from agent advising main building only insured. Night club building not to be included."

Miller acknowledged the message and told Princeton that it had also "been noted by underwriters."

When the first Lloyd's policy (which covered a one-year period) was later renewed for an additional year, the renewal application also indicated that the policy covered the beach club and not the nightclub. It described the insured premises as "beach club seasonal operation, May to September." Consistent with that designation, when a claim for property damage (unrelated to the claim in the present suit) arose in 1992, it was rejected by Lloyds' adjuster because it involved an electric service line which

"provides electrical service to the neighboring night club building, which is not covered under this policy."

In December 1992 and March 1993, the nightclub building suffered substantial storm damage, and TWBC submitted a claim for that damage under its Lloyd's policy. Lloyd's rejected the claim on the grounds that its policy covered the beach ...


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