The opinion of the court was delivered by: Hochberg, District Judge.
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.
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
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.
G.S. Freight applied for commercial automobile insurance for a 1986
Benz Tractor ("MB Tractor") by submission of an application
dated March 2, 1998 through its insurance broker, Defendant Awany.
Singh, on behalf of G.S. Freight, chose $35,000 in liability coverage
limits. The decision to take just $35,000 in coverage came after Awany
offered higher coverage, coming down a step at a time until Singh chose
the minimum coverage. Although Awany preferred to sell a policy with
greater coverage, New Jersey insurance regulation set the minimum
coverage at $35,000 for motor vehicles. N.J.S.A. 39:6B1. Awany completed
the automobile insurance application for the New Jersey Commercial
Automobile Insurance Plan (CAIP), for a policy limit of $35,000 as
requested by Singh. The CAIP is a plan that requires national carriers to
share in the risk of insuring certain insureds; it is an involuntary
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.
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. ...