United States District Court, District of New Jersey, D
September 30, 2002
GLENDA UNGER, PLAINTIFF,
AFCO CREDIT CORP., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Mary L. Cooper, United States District Judge
This is an action, inter alia, to recover damages for breach of an
insurance policy. The insurer, the defendant Scottsdale
("Scottsdale"), moves for summary judgment dismissing the complaint and
all cross claims insofar as asserted against it. For the following
reasons, the motion is denied.
BACKGROUND: THE PARTIES; THE PREMIUM FINANCE AGREEMENT;
INTENT TO CANCEL AND CANCELLATION; and, MOTION PRACTICE
I. The Parties
The plaintiff, Glenda Unger ("Unger"), is a resident of New Jersey and
allegedly held an insurable interest in a commercial building in
Lakewood, New Jersey ("the Lakewood property"). (Am. Compl. at 2; Unger
Cert. dated 1-28-02 ("1-28-02 Cert.") at 1-2.) Since 1986, she had an
office near the Lakewood property to oversee her real estate holdings,
run a taxicab company, sell cars, and receive mail. (Cert. in Supp. of
Pl.'s Resp. filed 2-8-02 ("Pl.'s 2-8-02 Cert."), Ex. A, Tr. of Unger's
8-2-01 Dep. ("Unger Dep.") at 11, 14, 20-24.) Scottsdale, an Arizonan
insurer, issued policy number CPS0322732 ("the policy") to Unger in July
1999 covering, inter alia, fire damage to the Lakewood property from July
23, 1999, through July 23, 2000. (Scottsdale's Br. in Supp. of Mot. for
Summ. J. ("Scottsdale Br."), Ex. C.) In a July 22, 1999, premium finance
agreement ("the agreement"), Unger contracted with the defendant Afco
Credit Corp. ("Afco"), a Pennsylvanian premium finance company, to
finance her one-time premium payment to Scottsdale and agreed to repay
Afco on a monthly basis. (Id., Ex. B.) The defendant USI Midlantic, Inc.
("USI") was Unger's insurance agent as she procured coverage and premium
financing. (Am. Compl. at 5-6.)See footnote 1*fn1
II. The Premium Finance Agreement
The agreement included: (1) a limited-power-of-attorney provision
appointing Afco as Unger's attorney-in-fact with authority to direct
Scottsdale to cancel the policy — upon giving any required
statutory notice — if she missed a payment, and permitting Afco to
execute and deliver on her behalf all forms, instruments, and notices
concerning the policy in furtherance of the agreement; and (2) a
provision that New Jersey law governed. (Scottsdale Br., Ex B. at ¶¶
2, 14, 23.) Thus, the manner in which Afco could direct Scottsdale to
cancel the policy was to be in accordance with the New Jersey Insurance
Premium Finance Company Act ("the Act"). See N.J.S.A. §§ 17:16D-1,
Afco was required under the Act to give Unger at least ten days written
notice by mail of its intent to direct Scottsdale to cancel the policy if
she missed a payment, unless she cured her default; Afco was also
required to "send" a copy of the notice of intent to cancel to USI.
N.J.S.A. § 17:16D-13(b). Afco could then request cancellation of the
policy in Unger's name after the ten-day period expired by mailing to
Scottsdale a notice of cancellation; the policy would then be cancelled
as if the notice had been submitted by Unger herself. N.J.S.A. §
17:16D-13(c). Afco was also required to mail a notice of cancellation to
Unger's last known address and to USI. Id.
III. Intent to Cancel and Cancellation
Afco allegedly mailed Unger a notice of intent to cancel the policy
from its Kansas office on September 1, 1999, but — according to the
eventual deposition testimony of
Martin Quish ("Quish"), an Afco employee
working in its New York office since 1998 — it failed to keep a
copy. (Pl.'s 2-8-02 Cert., Ex. C, Tr. of Quish's 8-28-01 Dep. ("Quish
Dep.") at 5, 13.) Afco generated a print-out in Kansas dated September
1, 1999, entitled, "List of `Notice of Intent to Cancel'" ("the
print-out"), listing several insureds, agents, and account numbers; Unger
and a USI employee were included. (Scottsdale Br., Ex. G.) The print-out
included no addresses and contained at the bottom the following: "I
certify that notices of intent to cancel . . . containing information
shown above were placed in envelopes with the postage fully prepaid,
sealed and deposited in the mail addressed to the insured and insurance
agent at the proper addresses on the date shown above." (Id.) That
statement was signed and dated by Ann James, an Afco employee in Kansas.
(Id.; Quish Dep. at 11, 78.)
It was James's job — according to Quish — to review the
notices, put them in envelopes, and bring them to the mail room. (Id. at
13, 81-84.) The mail-room employees, however, neither signed affidavits
attesting that these notices were mailed, nor did they obtain proof of
receipt from the post office. (Id. at 24-25, 84-85.) Quish also testified
that he knew neither who ran the mail room nor who was in charge of
affixing postage to the mail in Kansas. (Id. at 94-95.)
Unger testified at her eventual deposition that neither she nor her
family-member employees received the notice of intent. (Unger Dep. at
36-38, 58.) Her sister, a former employee, agreed with this testimony at
her deposition and testified that she had always referred any notices of
intent to cancel policies to Unger. (Pl.'s 2-8-02 Cert., Ex. D, Tr. of
Ellen Goldberg's 8-28-01 Dep. ("Goldberg Dep.") at 31-33.)
Afco allegedly mailed notices of cancellation of the policy to Unger
and Scottsdale from Kansas on October 8, 1999; the cancellation was to be
effective six days later. (Scottsdale's Br., Ex. J., Notice of
Cancellation; Quish Dep. at 62-63, 78-79.) Afco apparently kept a copy of
the notice of cancellation allegedly mailed to Unger. (Id.) But Afco
failed to keep a copy of the original notice of cancellation allegedly
mailed to Scottsdale. (Id. at 66). Also, according to Scottsdale itself,
Scottsdale "did not receive a copy of the Notice of Cancellation mailed
on October 8, 1999, until April 3, 2000, when it was faxed to
Scottsdale's broker." (Pl.'s 2-8-02 Cert., Ex. F, Scottsdale's Resp. to
Pl.'s Req. to Admit dated 10-29-01 ("Scottsdale's Resp. to Req. to
Admit").) As to a list showing Unger's notice of cancellation, Quish
testified as follows:
COUNSEL: [W]hen a notice of cancellation goes out, is
a form generated like the notice of intent?
QUISH: We have a listing. There is a listing, a notice of
cancellation listing for that day.
COUNSEL: . . . I want to know if there's such a
document for the notice of cancellation that allegedly
went to Ms. Unger.
QUISH: Yes, there is.
COUNSEL: That is something that you can produce? . . .
QUISH: If we still have it, yes, it is.
COUNSEL: If you still have it, where could it be if
you don't still have it?
QUISH: We have retention dates. It might be destroyed
by now. I don't know — for that exact form that
you're speaking about, I don't know what the actual
retention date is. . . .
COUNSEL: That is Ann James's job also at this time period?
QUISH: No, it is not.
COUNSEL: It's someone else's job?
QUISH: Yes, it is.
COUNSEL: And who's job is that?
QUISH: I do not know.
Id. at 86-87. Apparently, Afco also had no "certification" that the
notice of cancellation was mailed to Unger.
Unger testified in her deposition that neither she nor her
family-member employees received a notice of cancellation from Afco.
(Unger Dep. at 44-46, 58.) Her sister testified to this as well.
(Goldberg Dep. at 32-33).
The Lakewood property was damaged by fire on July 12, 2000. (Am.
Compl. at 2; Scottsdale Br. at 5.) Scottsdale denied coverage in
September 2000, asserting that the policy had been "cancelled by [Afco]
effective 10-14-99 for non-payment of premium." (Pl.'s 2-8-02 Cert., Ex.
M, letter dated 9-5-00.) Unger commenced this action in December 2000.
IV. Motion Practice
This Court granted Afco's earlier motion to dismiss the complaint
insofar as asserted against it (see Fed.R.Civ.P. 12(b)(6)) by order dated
December 21, 2001 ("12-21-01 Order"). Without considering whether Afco
provided proper notices of intent to cancel or of cancellation, the Court
held that Unger had no legally cognizable cause of action against Afco,
even though Afco was charged with complying with the Act's notice
requirements. (Id. at 10.) The Court found that under New Jersey law the
Act's purpose is promoted "by treating [Afco's] failure . . . to follow
[the Act] as vitiating any purported cancellation of the insurance
policy, thereby allowing [Unger] to pursue a cause of action against
[Scottsdale]." (Id. at 18.) In addition, the Court held that under New
Jersey law "an insured is best protected from an unannounced cancellation
by permitting the insured to sue the insurer under the insurance policy
rather than by recognizing the cancellation but permitting a claim
against a premium finance company," and that Scottsdale had the burden of
showing Afco's compliance. (Id. at 22-25.) The Court also found that New
Jersey public policy dictated that premium finance companies be protected
from liability that might otherwise cause them to cease financing
premiums for those who could not otherwise afford to buy insurance. (Id.)
Scottsdale now moves for summary judgment dismissing the complaint and
all cross claims insofar as asserted against it, arguing that the policy
was properly cancelled. Alternatively, it argues that Unger did not have
an insurable interest in the Lakewood property and, thus, is not entitled
DISCUSSION: SUMMARY JUDGMENT STANDARD; AFCO'S ALLEGED
CANCELLATION; and, UNGER'S INSURABLE INTEREST
I. Summary Judgment Standard
A court may grant a motion for summary judgment if the 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. Fed.R.Civ.P. 56(c). The summary judgment movant bears
the initial burden of showing that there is no genuine issue of material
fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the movant
has met that initial burden, the non-movant must present evidence
establishing that a genuine issue of material fact exists, making it
necessary to resolve the difference at trial.
Id. at 324; Jersey Cent.
Power & Light Co. v. Lacey Twp., 772 F.2d 1103, 1109 (3d Cir. 1985).
The non-movant, rather then rely on mere allegations, must present actual
evidence that raises a genuine issue of material fact. Anderson v.
Liberty Lobby, 477 U.S. 242, 249 (1986).
The Court must view the evidence in the light most favorable to the
non-movant when deciding a summary judgment motion. Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The judge's
role at the summary judgment stage is not to weigh the evidence, but to
determine whether there is a genuine issue for trial. Anderson, 477 U.S.
at 249. "By its very terms, this standard provides that the mere
existence of some alleged factual dispute between the parties will not
defeat an otherwise properly supported motion for summary judgment; the
requirement is that there be no genuine issue of material fact." Id. at
247-48 (emphasis in original). A fact is material only if it might affect
the outcome of the action under governing law. Id. at 248; Boyd v. Ford
Motor Co., 948 F.2d 283, 285 (6th Cir. 1991). "[T]here is no issue for
trial unless there is sufficient evidence favoring the nonmoving party
for a jury to return a verdict for that party. If the evidence is merely
colorable, or is not significantly probative, summary judgment may be
granted." Anderson, 477 U.S. at 249-50 (citations omitted).
II. Afco's Alleged Cancellation
Afco was required, inter alia, to mail notice to Unger of its intent to
direct Scottsdale to cancel the policy and then mail notices of
cancellation to Scottsdale and Unger. N.J.S.A. § 17:16D-13; Wright
v. Rumble, 194 N.J. Super. 337, 476 A.2d 1250 (App.Div. 1984). Section
17:16D-13 "require[s] exact and careful compliance and [is] to be
strictly enforced. This is no more than a matter of attention to the
public policy of New Jersey and a matter of general public importance."
Brown v. Shaw, 174 N.J. Super. 32, 40, 415 A.2d 360, 364 (App.Div.
1980). Scottsdale, as the insurer and summary judgment movant, bears the
initial burden of showing that there is no genuine issue of material fact
as to whether Afco complied with the statutory notice requirements. See
Ryan v. Henderson, 220 N.J. Super. 589, 533 A.2d 70 (Super.Ct. Monmouth
Cty. 1986); see generally Celotex, 477 U.S. at 323. It has failed to do
The parties cite, and the Court's research reveals, no regulations
regarding records a premium finance company must maintain under N.J.S.A.
§ 17:16D-13. However, this Court concludes that the New Jersey courts
would likely deny an insurer's summary judgment motion unless it was
supported by (1) either testimony or affidavits from the employees or
agents of the premium finance company with actual knowledge of the
content, addressees, and mailing of the notices of intent to cancel and
of cancellation, and (2) certified office copies from the premium finance
company of those notices. See Kende Leasing Corp. v. A.I. Credit Corp.,
217 N.J. Super. 101, 106, 524 A.2d 1306, 1308-09 (App.Div. 1987); see
also Needham v. N.J. Ins. Underwriting Ass'n, 230 N.J. Super. 358, 371,
553 A.2d 821, 828 (App.Div. 1989) (involving insurer's direct
relationship with insured).See footnote 2*fn2 This Court also concludes
that the New Jersey courts
would likely accept a business record
custodian's testimony as to the accuracy of any affidavits only if the
proper employees or agents of the premium finance company executed them at
the time of the actual preparation, addressing, and mailing of the
notices. See Celino v. Gen. Accident Ins., 211 N.J. Super. 538, 543,
512 A.2d 496, 499 (App.Div. 1986).
These requirements are neither unusual nor unreasonable. In Scottsdale
Insurance Co. v. Grim, 44 Pa. D. & C. 4th 338 (Ct. Com. Pl. Monroe
Cty. 1999), the insurer sought a judgment declaring that it need not
defend and indemnify the insured because the policy had been cancelled at
a premium finance company's direction. The Grim court denied the relief,
as the insurer failed to show that the finance company complied with the
Pennsylvania Insurance Premium Finance Company Act; its notice
requirements are similar to those in N.J.S.A. § 17:16D-13. See 40
P.S. § 3310. The court found that a finance company employee's
unnotarized, general written statements that the notices were brought to
a presort service were insufficient to demonstrate that they were
actually mailed by the post office. Grim, 44 Pa. D. & C. 4th at
The New York intermediate appellate courts addressing compliance with
similar notice requirements under the New York Insurance Premium Finance
Agencies Act are also in accord with New Jersey. See N.Y. Banking Law
§ 576; L.Z.R. Raphaely Galleries v. Lumbermens Mut. Cas. Co.,
191 A.D.2d 680, 681-82, 595 N.Y.S.2d 802, 804 (2d Dep't 1993) (finding
insurer failed to show agency complied with notice requirement; submitted
no affidavit of agency employee at mailing location attesting first-hand
to methods used to ensure proper mailing); Lumbermens Mut. Cas. Co. v.
Comparato, 151 A.D.2d 265, 267-68, 542 N.Y.S.2d 179, 181-82 (1st Dep't
1989) (finding agency's cancellation list included no addresses and,
thus, no showing that addresses on envelopes were checked; no testimony
or affidavit from agency employee who allegedly mailed notices); Friedman
v. Allcity Ins. Co., 118 A.D.2d 517, 518-19, 500 N.Y.S.2d 124, 125 (1st
Dep't 1986) (finding affidavit of agency's employee, who had no personal
knowledge and stated computer-generated log showed notices were sent,
Scottsdale has failed to submit testimony or an affidavit from an Afco
employee with actual knowledge of the mailing of Unger's notice of intent
to cancel and of the notices of cancellation for Unger and Scottsdale.
See Kende, 217 N.J. Super. at 106, 524 A.2d at 1308-09; Needham, 230
N.J. Super. at 371, 553 A.2d at 828. It submitted a print-out of the
allegedly mailed notices of intent to cancel, listing no addresses and
containing a "certification" of an Afco employee in Kansas that the
notices listed thereon — one of which was for Unger — were
properly mailed. (Scottsdale Br., Ex. G.) But a different employee in the
mail room actually deposited them in the mail. (Quish Dep. at 24-25,
84-85.) Scottsdale submitted neither testimony nor an affidavit from this
mail-room employee. In fact, Afco's witness — Quish — knew
neither who ran the Kansas mail room nor who was in charge of affixing
postage. (Id. at 94-95.) Furthermore, Quish could only testify that it was
James's job to review notices of intent, put them in envelopes, and bring
them to the mail room, not that she actually did so here. (Id. at 13,
81-84.) Quish did not know who was responsible for the production and
mailing of the notices of cancellation, and he testified that the list
detailing the mailing of Unger's notice of cancellation may have been
destroyed. (Id. at 85-87.)
Scottsdale has also failed to submit copies, whether certified or in
any other form, of the notice of intent Afco allegedly mailed to Unger in
September 1999 and the notice of cancellation allegedly sent to it in
October 1999 (see Kende, 217 N.J. Super. at 106, 524 A.2d at 1308-09;
Needham, 230 N.J. Super. at 371, 553 A.2d at 828) because Afco failed to
maintain them. (Quish Dep. at 5, 13, 66.) Thus, because of the
deficiencies in Scottsdale's submissions, the branch of its motion which
is for summary judgment dismissing the complaint and all cross claims
insofar as asserted against it on the ground that the policy was properly
cancelled is denied.
The parties have not cited a New Jersey Supreme Court case on
compliance with N.J.S.A. § 17:16D-13. The intermediate New Jersey
appellate-court decisions cited herein are not necessarily binding. Gares
v. Willingboro Twp., 90 F.3d 720, 725 (3d Cir. 1996). But such decisions
are "not to be disregarded by a federal court unless it is convinced by
other persuasive data that the highest court of the state would decide
otherwise." West v. Am. Telephone & Tel. Co., 311 U.S. 223, 237
(1940); see Boyanowski v. Capital Area Intermediate Unit, 215 F.3d 396,
406 (3d Cir.), cert. denied, 531 U.S. 1011 (2000). The Court has found no
persuasive data that the New Jersey Supreme Court would decide this branch
of Scottsdale's motion differently.
The Court need not address Unger's arguments in opposition to the
motion as to her non-receipt of the notices. See Needham, 230 N.J.
Super. at 371-72, 553 A.2d at 829; see also Auger v. Gionti Agency,
218 N.J. Super. 360, 364, 527 A.2d 928, 930 (App.Div. 1987) (noting
insured admitted receiving notice); see generally Celotex, 477 U.S. at
323. As Scottsdale has not met its initial burden, the Court need not
determine, for instance, whether Unger's testimony was merely
self-serving. Credibility determinations, and the weighing of her
testimony against Scottsdale's evidence, must be performed by a trier of
III. Unger's Insurable Interest
Unger claimed to own the Lakewood property in her pleadings and
testimony. (Am. Compl. at 1; Unger Dep. at 15, 26.) But in support of its
motion, Scottsdale submitted deeds showing that the property was
transferred from Standard Roofings, Inc. ("Standard") to 100 Ocean Avenue
LLC ("Avenue LLC") in September 1999, and then to Red Oak LLC ("Red Oak")
in June 2000. (Scottsdale Br., Exs. M & N.) In addition, USI has
submitted Unger's 1999 and 2000 tax returns, which do not list the
property as part of her holdings. (USI's R. 56.1 Stmt., Exs. G & H.)
Thus, Scottsdale has met its initial burden in support of its argument
that Unger had no insurable interest in the Lakewood property when the
policy was issued in July 1999 and the fire occurred in July 2000. See
Celotex, 477 U.S. at 323.
Unger has submitted in opposition a July 1999 agreement with Standard,
wherein she is listed as the Lakewood property's buyer. (1-28-02 Cert.,
Ex. 1 ("the 7-19-99 agreement").) In the 7-19-99 agreement, she agreed to
pay Standard $25,000, was given access to and use of the property, was
required to buy insurance and maintain the property, and was required to
pay off certain liens. (Id.) The 7-19-99 agreement anticipates a sale to
Unger, and states, "Until such time as [Unger] makes payment to
[Standard] in the amount of $25,000, [Unger] will pay [Standard] $500 per
month to occupy the premises." (Id.)
Unger also submitted agreements with Avenue LLC, dated September 27,
1999, and Red Oak, dated June 5, 2000, wherein she agreed to lease and
maintain the Lakewood property, and to buy fire insurance. (1-28-02
Cert., Exs. 3 & 4.) The agreements also gave her an option to buy the
property. (Id.) She has also submitted two leases dated December 15,
1999, wherein she subleased space on the property to others. (Pl.'s
2-8-02 Cert., Ex. O.) The evidence submitted by Unger of her alleged
payments, obligations to buy insurance and maintain the property, options
to buy, and subleases establish that a genuine issue of material fact
exists on her insurable interest in the Lakewood property.
Unger "retains an insurable interest as long as [she] has a reasonable
expectation of deriving pecuniary benefit from the preservation of the
property or would suffer a direct pecuniary loss from its destruction."
Miller v. N.J. Ins. Underwriting Ass'n, 82 N.J. 594, 600, 414 A.2d 1322,
1325 (1980). Thus:
The test of insurable interest in property is whether
the insured has such a right, title or interest
therein, or relation thereto, that [she] will be
benefitted by its preservation and continued existence
or suffer a direct pecuniary loss from its destruction
or injury by the peril insured against.
Lancellotti v. Md. Cas. Co., 260 N.J. Super 579, 584, 617 A.2d 296, 298
(App.Div. 1992) (emphasis in original) (citation omitted). Viewing the
evidence in the light most favorable to Unger, see Matsushita, 475 U.S.
at 587, there exists a genuine issue of material fact on her insurable
interest in the Lakewood property. Celotex, 477 U.S. at 324. See also
Special Jet Servs. v. Fed. Ins. Co., 643 F.2d 977, 982 (3d Cir. 1981)
(finding lessee had insurable interest in airplane, as exposed to risk of
suit for injuries or damages caused by airplane). The branch of
Scottsdale's motion which is for summary judgment dismissing the
complaint and all cross claims insofar as asserted against it on the
ground that Unger held no insurable interest in the Lakewood property is
denied. See footnote 3*fn3
An appropriate order accompanies this memorandum opinion.
For the reasons stated in the accompanying memorandum opinion,
IT IS on this day of September, 2002, ORDERED that the motion (no.
34-1 on the docket) by the defendant Scottsdale Insurance Company
for summary judgment dismissing the complaint and all cross claims
insofar as asserted against it be and hereby is DENIED.