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
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.
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.
The insurance application based on the false information given by Singh
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. Freight's
insurance application on April 10, 1998, and issued an automobile
insurance policy with liability limits of $35,000.
National sent the insured an inquiry about the garaging and use of the
GMC truck on April 21, 1998. After receiving no response from the
insured, National sent a second request on August 21, 1998. National
canceled the policy effective October 17, 1998 for failure of the insured
to provide the underwriting information requested by the company. Based
upon the CAIP rules in New Jersey, National was required to issue the
policy at the limits sought by Singh, absent the knowledge that Singh lied
on his insurance application.
Plaintiff's Cause of Action Against Awany and National
Plaintiff brings this action against Awany for broker/agency
negligence. Plaintiff claims that Awany should have advised Singh that he
was required to purchase greater insurance coverage. Plaintiff also
asserts a claim against National for damages in excess of the policy
limit, alleging that National negligently failed to issue a liability
insurance policy of at least $750,000 in coverage as required by federal
law. Thus, Plaintiff seeks $715,000, the difference between the $35,000
paid on the policy and $750,000, which she contends was the proper amount
of insurance coverage that should have been obtained by Singh and G.S.
Freight from Awany and National.
Defendants' Motions for Summary Judgment
Defendants claim that the negligence actions against them should be
dismissed for one of the three following reasons: (1) Plaintiff has no
standing; (2) N.J.S.A. 17:28-1.9 bars Plaintiff's claim; and/or (3) there
was no duty owed to Plaintiff pursuant to New Jersey law because
Defendants complied with the requirements under the CAIP. Plaintiff Rapp
opposes the motion for summary judgment on the grounds that there are
genuine issues of material fact in support of her claims against
II. STANDARD OF REVIEW
Pursuant to Rule 56(c), a motion for summary judgment will be granted
pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law. See Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986). In other words, "[s]ummary judgment may be
granted only if there exists no genuine issue of material fact that would
permit a reasonable jury to find for the nonmoving party." Miller v.
Indiana Hosp., 843 F.2d 139, 143 (3d Cir. 1988). All facts and inferences
must be construed in the light most favorable to the nonmoving party.
Peters v. Delaware River Port Auth., 16 F.3d 1346, 1349 (3d Cir. 1994).
The party seeking summary judgment always bears the initial burden of
production. Celotex Corp., 477 U.S. at 323. This requires the moving party
to establish either that there is no genuine issue of material fact and
that the moving party must prevail as a matter of law, or to demonstrate
that the nonmoving party has not shown the requisite facts relating to an
essential element of an issue on which it bears the burden. See Id. at
322-23. Once the party seeking summary judgment has carried this initial
burden, the burden shifts to the nonmoving party. To avoid summary
judgment, the nonmoving party must demonstrate facts supporting each
element for which it bears the burden, and it must establish the
existence of "genuine issue[s] of material fact" justifying trial.
Miller, 843 F.2d at 143; see also Celotex Corp., 477 U.S. at 324.
It is clear that if a moving party satisfies its initial burden of
establishing a prima facie case for summary judgment, the opposing party
"must do more than simply show that there is some metaphysical doubt as
to material facts." Matsushita, 475 U.S. at 586. Instead, "[w]here the
record taken as a whole could not lead a rational trier of fact to find
for the nonmoving party, there is no "genuine issue for trial." Id. at
587 (quoting First National Bank of Arizona v. Cities Serv. Co.,
391 U.S. 253, 289 (1968)).
Plaintiff has standing to assert claims against Defendants. Numerous
cases have recognized that an injured third party who has received a
judgment against the insured has standing to pursue the insurer under the
rights of the insured. See, e.g., In re Gardinier, 40 N.J. 261, 265
(1963); Dransfield v. Citizens Casualty Co., 5 N.J. 190, 194 (1950);
Casey v. Selected Risks Ins. Co., 176 N.J. Super. 22, 28 (App. Div.
1980); Hanover Ins. Co. v. McKenney, 245 N.J. Super. 282, 287 (Law Div.
1990). In accordance with this well recognized right, Plaintiff, as a
judgment creditor of Singh and G.S. Freight, clearly has standing to sue
Defendants in the present case.
Despite the long line of cases that recognize the right of an injured
third party to sue the insurer, Defendants argue that Plaintiff does not
have standing because the insured has not assigned its right to sue to
Plaintiff. Assignment, however, is not necessary because third-party
standing against brokers and agents is based solely on the derivative
rights of an injured party who has received a judgment against the
insured and does not require an assignment of the insured's rights to
sue. See, e.g., Dransfield, 5 N.J. 190. Thus, Plaintiff, an injured third
party with a judgment against GS Freight, has standing
to assert a claim
against Defendants for their alleged negligent failure to provide GS
Freight with the minimum policy limits required by federal law.
B. Statutory Immunity Based on N.J.S.A. 17:28-1.9
Defendants argue that they are immunized by N.J.S.A. 17:28-1.9,
which provides that:
Notwithstanding any other provision of law to the
contrary, no person, including, but not limited to, an
insurer, an insurance producer, a servicing carrier or
noninsurer servicing carrier acting in that capacity
pursuant to P.L. 1983 . . . shall be liable in an
action for damages on account of the election of a
given level of motor vehicle insurance coverage by a
named insured as long as those limits provide at least
the minimum coverage required by law. . . . Nothing in
this section shall be deemed to grant immunity to any
person causing damage as the result of his willful,
wanton or grossly negligent act of commission or
b. The coverage selection form required pursuant to
section 17 of P.L. 1983, c. 362 (C.39:6A-23) shall
contain an acknowledgment by the named insured that
the limits available to him for uninsured motorist
coverage and underinsured motorist coverage have been
explained to him and a statement that no person,
including, but not limited to, an insurer [and] an
insurance producer . . . shall be liable in an action
for damages on account of the election of a given
level of motor vehicle insurance coverage by a named
insured as long as those limits provide at least the
minimum coverage required by law or on account of a
named insured not electing to purchase underinsured
motorist coverage, collision coverage or comprehensive
coverage, except for that person causing damage as the
result of his willful, wanton or grossly negligent act
of commission or omission.
Defendants argue that the statute immunizes them because Singh acquired
the minimum insurance required by law (based on the facts known to the
broker and carrier) and there is no genuine issue of fact tending to show
that either Defendant caused Plaintiff's damages by willful, wanton or
grossly negligent acts.
Plaintiff argues that the statutory immunity is inapplicable because
(1) Awany failed to provide Singh with a Buyer's Guide, as required by
N.J.S.A. 39:6A-23; and (2) statutory immunity only applies where at least
the minimum insurance coverage required by law was provided and it is now
known that G.S. Freight did not have the minimum insurance required by
1. The Buyer's Guide
At oral argument Plaintiff's counsel stated that Awany's testimony at
his deposition "makes clear that a copy of the buyer's guide was not
provided [to Singh]." However, the following is the testimony:
Q. Did you provide a copy of [the
Buyer's Guide] to Mr. Singh?
A. [Mr. Awany] It was there for him to read but I
don't think he read it.
Q. Did you offer it to him, though?
Plaintiff's counsel told the court that "Mr. Awany's testimony is the
only evidence in this case [regarding the Buyer's Guide]," and Awany
testified that he did provide Singh the Buyer's Guide. The statutes do
not require that an insurance broker force an insured to read the Buyer's
Guide. Rather, N.J.S.A. 39:6A-23, the requirements of which are
preconditions to qualifying for immunity under N.J.S.A. 17:28-1.9, states
that "the application for the policy [be] accompanied by a written notice
identifying and containing a buyer's