On appeal from the Superior Court of New Jersey, Law Division, Hudson County, L-3605-03.
The opinion of the court was delivered by: Coburn, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Coburn, Collester and S.L. Reisner.
American Millennium Insurance Company issued a workers' compensation insurance policy in New Jersey to Mainor Berganza. As required by statute, the policy provided that American Millennium was "directly and primarily liable" to Berganza's employees. After one of Berganza's employees, Jose Arias, was injured on the job, American Millennium sued Berganza and Arias for rescission of the policy, alleging fraud by Berganza. When the accident occurred, Berganza was a subcontractor in New Jersey for Stegers Brothers Drywall Company, Inc., which had a workers' compensation policy issued by Hartford Underwriters Insurance Company. Hartford and Stegers intervened in the action, opposing American Millennium's request. They took that course because of potential liability under N.J.S.A. 34:15-79, which requires coverage by a general contractor's insurer when a subcontractor has no coverage. After a bench trial, judgment was entered permitting rescission as to Berganza for fraudulent statements he made in the application process, but denying rescission as to Arias. The judgment also made Hartford responsible for half of any compensation that might be awarded to Arias and gave both insurance companies the right to seek reimbursement from Berganza. American Millennium appeals, and Hartford and Stegers cross-appeal, each side contending that the other should be liable for the entire compensation award. Berganza, who will ultimately be responsible under the judgment for any compensation paid to Arias in the workers' compensation proceedings, has not appealed. We affirm the denial of American Millennium's request for rescission as to Arias and reverse the judgment making Hartford responsible to Arias.
In early January 2003, Mainor Berganza, a drywall subcontractor for Stegers, employed Jose Arias to work for him on Stegers' project in New Jersey. On Saturday, January 18, Berganza went to City Line Insurance, Inc., which was a producer of business for Morston General Agency of New Jersey, Inc., a wholesale broker that placed workers' compensation policies with American Millennium. Berganza, with the help of City Line's employee, Donald E. Dutton, filled out an application and questionnaire for an American Millennium workers' compensation policy. The application requested an effective date for the policy of January 19. City Line immediately faxed "a policy certificate" to Stegers and faxed the application and questionnaire to Morston, which, in turn, faxed them to American Millennium on Monday, January 20.
On January 21, Arias fell off a ladder while performing work at Stegers' worksite and broke his leg. The judge found that Berganza reported the accident to City Line on January 24. Without objection, a fax dated February 28, 2003, from Dutton at City Line to American Millennium was introduced into evidence. The fax stated, among other things, that when Berganza reported the accident, City Line gave him the telephone number of Risk Management Planning Group, which was the third party administrator for American Millennium. Berganza called Risk Management and was told that he "needed a policy number to report the claim." Then a City Line employee called Morstan twice, each time leaving a message requesting the policy number, and a couple of days later Dutton called Morston, apparently with the same message.
On January 29 or 30, American Millennium issued the insurance policy to Berganza with an effective date of January 19. The policy included the following language:
These statements apply where they are required by law.
1. As between an injured worker and us, we have notice of the injury when you have notice.
2. Your default or the bankruptcy or insolvency of you or your estate will not relieve us of our duties under this ...