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RAPP v. AWANY

May 22, 2002

KIMBERLY A. RAPP, EXECUTRIX OF THE ESTATE OF EDWIN R. RAPP. JR, KIMBERLY A. RAPP, ADMINISTRATRIX OF THE ESTATE OF BRADFORD RAPP, KIMBERLY A. RAPP, MOTHER AND NATURAL GUARDIAN OF GRACE RAPP, A MINOR, AND KIMBERLY A. RAPP, INDIVIDUALLY, PLAINTIFFS,
V.
ABDUL M. AWANY, J.C., PROFESSIONAL AGENCY, INC., NATIONAL CONTINENTAL INSURANCE CO., PROGRESSIVE INSURANCE GROUP, DEFENDANTS.



The opinion of the court was delivered by: Hochberg, District Judge.

  OPINION

This case involves a horribly tragic accident and a tragic set of insurance regulations. Before the Court are Defendants' motions for summary judgment. Oral argument was held on April 16, 2002.

I. BACKGROUND

This case arises from an August 21, 1998 automobile accident that occurred on Interstate Highway 78 in Pennsylvania. A motor vehicle operated by Edwin R. Rapp, Jr. and a truck, owned by non-party G.S. Freight Lines, Inc. ("G.S. Freight") and operated by its President, Gurdev Singh ("Singh") were involved in the accident. Two of the four occupants of the vehicle — Edwin Rapp and his child, Bradford — were killed in the horrendous accident. Plaintiff, executrix of the estate of her husband, Edward Rapp, and mother of their deceased child, Bradford, brought a personal injury and wrongful death action in the United States District Court for the Eastern District of Pennsylvania. Plaintiff received a judgment in the amount of $27,741,000 entered against Singh and G.S. Freight on May 9, 2001. G.S. Freight's insurance carrier tendered the policy limit of $35,000.

Plaintiff commenced the present action against J.C. Professional Agency, Inc. (collectively "Awany") for broker/agency negligence and against National Continental Insurance Co. and Progressive Insurance Group (collectively "National") for failure to provide greater insurance coverage.

The Insurance Policy

At the time of the accident, G.S. Freight was insured by National pursuant to policy number 7953240 with combined single limits for liability of $35,000. The policy had effective dates of March 3, 1998 through March 3, 1999 and was originally issued as a "bobtail policy," which is used for vehicles that are not attached to trailers and are unable to haul anything.

When questioned at the time he was completing the application on March 2, 1998, Singh informed Awany that his company did not have a Department of Transportation (DOT) number and did not require ICC or other federal filings. Singh notified Awany that G.S. Freight derived sixty percent of its revenues transporting boxes within New Jersey and thirty or forty percent of its revenues transporting boxes between New Jersey and New York, specifically John F. Kennedy Airport. Awany recorded this information in Section 7 of the CAIP application. The accident vehicle, a 1994 GMC truck, was added to the policy a few weeks later, by endorsement effective March 20, 1998. A truck can be added to a "bobtail policy" once such a policy has already been issued.

Information was discovered during the Pennsylvania action that G.S. Freight did obtain a DOT number on April 1, 1998, shortly after both the application for the insurance and the addition of the accident vehicle had become effective. Defendants did not receive this information until after commencement of the Pennsylvania action regarding the accident. In addition, Plaintiff produced evidence in the present action that G.S. Freight had submitted a record to the New Jersey Division of Motor Vehicles (DMV) noting that G.S. Freight regularly engages in interstate commerce; this record was not provided to Defendants at the time the application was completed.

The information provided by Singh to the insurance broker on March 2, 1998 is now known to have been false. Unbeknownst to Awany and National, Singh had earlier filed a document with the DMV showing that G.S. Freight derived revenue for other interstate commerce aside from travel to Kennedy Airport. If either Awany or National knew that Singh transported boxes outside New Jersey other than to Kennedy Airport, then Singh would have been required to purchase insurance limits of at least $750,000, the amount required for truckers in interstate commerce.

The insurance application based on the false information given by Singh was signed by Singh and Awany. Singh also signed a coverage selection form, stating the following:

I have read the buyer's guide outlining the coverage options available to me. My choices are shown above. I agree that each of these choices will apply for all vehicles insured by my policy and to each subsequent renewal, continuance or replacement or amendment until the insurance company or my designated producer of record receives my request that a change be made.

Awany testified at his deposition that he also made the New Jersey Auto Insurance Buyer's Guide available to Singh by placing it before Singh on the table, but that Singh may not have looked at it or taken it from the table. In addition to signing the coverage selection form, Singh also signed an addendum to the application, which informed the insured about potential liability in connection with giving false or misleading information in the insurance application.

On March 12, 1998, G.S. Freight's CAIP application was assigned to National for processing. On March 14, 1998, National was notified by a Policy Change Request form, that a 1994 GMC truck (the accident vehicle) was to be added to the policy. Singh, on behalf of the insured, signed the Policy Change Request form, again attesting to the truth of the false information he had given in the form. National approved G.S. ...


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