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Ward v. Merrimack Mutual Fire Insurance Company

July 07, 2000


Before Judges Havey, Keefe and Collester.

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


Argued May 22, 2000

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

This is an insurance coverage dispute concerning a first-party claim arising out of the destruction of plaintiff's structure by fire. Defendant Merrimack Mutual Fire Insurance Company (Merrimack) denied coverage, claiming that its authorized agent who issued a binder covering the structure had no actual or apparent authority to issue it. A jury ultimately determined that Merrimack was obligated to issue the policy and that it had breached that obligation.

Under its policy, Merrimack is obligated to pay the actual cash value of the insured's loss "until actual repair or replacement is completed." The trial court held that plaintiff is entitled only to the actual cash value of the loss, rather than the cost of replacement, because he did not repair or replace the structure before the County of Monmouth condemned the property fifteen months after the fire loss. We reverse and remand for a trial on the issue of damages. There are genuine issues of material facts concerning plaintiff's claim that Merrimack's wrongful breach of the insurance contract rendered impossible his ability to satisfy the condition precedent that he replace the structure before Merrimack is obligated to pay the cost of replacement.

On November 23, 1994, plaintiff, on behalf of himself and several business partners, purchased a three-story wood-frame building on Ocean Avenue in Long Branch. Thereafter, pursuant to a partnership agreement with his associates, plaintiff arranged for Robert Sickler to serve as "representative and agent in all dealing[s]" with respect to the property. Sickler applied for a fire insurance policy through defendant Barrett Insurance Agency, Inc., Merrimack's authorized agent. On April 21, 1995, George Barrett, on behalf of the Agency, issued a fire insurance binder covering the building through Merrimack, and Sickler paid Barrett $830, representing the full amount of the annual premium. The binder limited coverage to $329,000.

According to plaintiff, he and his associates expended approximately $150,000 in renovating the building. On May 2, 1995, the building was destroyed by fire. As of this time, no policy had been issued by Merrimack. Nevertheless, Barrett gave notice of the fire loss and pendency of plaintiff's claim for coverage to Merrimack. By letter dated May 10, 1995, Merrimack notified Barrett that it was "unable to accept [plaintiff's] application and [is] accepting no responsibility for any losses that have occurred here." The Merrimack representative explained:

This application requests that we accept coverage in an amount that exceeds our maximum for dwellings built in 1925. We have knowledge that the property is located approximately 300 feet from the ocean and, as you know, we are unable to accept coverage on property within 1,000 feet of the ocean. Although the application indicates that the property is occupied by one family, we believe that this may not be the case.

Both parties agree that had an insurance policy been issued by Merrimack it would have provided that:

When the cost to repair or replace the damage is more than $1000 or more than 5% of the amount of insurance in this policy on the building, whichever is less, we will pay no more than the actual cash value of the damage until actual repair or replacement is completed.

You may disregard the replacement cost loss settlement provisions and make claim under this policy for loss or damage to buildings on an actual cash value basis and then make claim within 180 days after loss for any additional liability on a replacement cost basis.

On June 6, 1995, plaintiff obtained an estimate to replace the structure which totaled $638,546.51. On July 30, 1996, Merrimack, despite denying coverage, invoked a provision under the exemplar policy calling for the appointment of appraisers to fix the actual cash value of plaintiff's loss. On September 20, 1996, over fifteen months after the fire, Monmouth County condemned plaintiff's property.

Plaintiff thereupon filed the present action against Merrimack, Barrett Insurance Agency, and George Barrett, seeking a declaration that Merrimack had insured the property through the Barrett Insurance Agency and that Merrimack breached the contract of insurance. *fn1 In an amended complaint, plaintiff asserted that Merrimack violated the Consumer Fraud Act, N.J.S.A. 56:8-1 to -97. Because the parties' appraisers could not agree on a figure as to actual cash value, an umpire was appointed by the trial court in accordance with the policy terms. ...

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