November 21, 2007
DEBORAH BILOTTI, PLAINTIFF-APPELLANT,
USAA CASUALTY INSURANCE GROUP, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-5416-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 11, 2007
Before Judges Axelrad, Sapp-Peterson and Messano.
Plaintiff Deborah Billotti appeals from the motion judge's order of January 11, 2007, that dismissed her complaint against defendant USAA Casualty Insurance Company. In that complaint, plaintiff alleged that defendant had issued an automobile insurance policy to her husband Joseph that was in effect on August 10, 2003, the day she was involved in a motor vehicle accident.*fn1 She was significantly injured in the accident and the tortfeasor's insurer, Allstate, ultimately tendered the limit of its policy, $100,000. Plaintiff sought to compel arbitration under the underinsured motorist coverage (UIM) provided by defendant's policy. She also sought reformation of the insurance contract increasing the UIM policy limits from $15,000 per accident and $30,000 per claim, as set forth on the policy's declaration page, to a single limit of $300,000 per claim. She contended that because defendant could not produce a coverage selection form (CSF) executed by Joseph at the time of the policy's issuance, the UIM coverage limit should be the same as the policy's limit for bodily injury claims.
After defendant filed its answer to the complaint and after discovery, both parties moved for summary judgment. When both motions were denied, plaintiff and defendant moved for reconsideration.*fn2 Judge Jamie S. Perri once again denied both requests. She found that defendant was not entitled to immunity under N.J.S.A. 17:28-1.9a because it could not produce a signed CSF. Although defendant had produced a number of renewal forms sent to Joseph that clearly indicated the UIM policy limit was $15,000/$30,000, the judge believed summary judgment was inappropriate, noting that although "it [was] undisputed that USAA issued an initial policy with UIM limits of $15,000/$30,000 and that there was never [any] requested  change in the limits . . . issues of fact existed regarding [Joseph's] reasonable expectations of the coverage . . . under the policy and the reasonable[ness] of his subsequent actions upon receipt of the policy and the renewal offers." To resolve these issues of fact, the judge ordered a plenary hearing.
During the hearing held on November 27, 2006, defendant introduced numerous policy documents into evidence and several of its employees testified via videoconference from its Texas office. Plaintiff and Joseph also testified. After considering the evidence and the arguments of counsel, Judge Perri issued a comprehensive written decision dated January 8, 2007.
We first summarize the judge's factual findings. Plaintiff first became aware of the policy's UIM limits when she and Joseph "'met with an attorney a few months after the accident.'" She claimed Joseph was quite upset because "'when he first bought the policy, he said he wanted the maximum amount of coverage in case we got sued or if we were hit by a person with no insurance.'"
Joseph first purchased a policy through defendant in 1992 and plaintiff was added as an insured when they married in 2002. While he had no specific recollection of the event, Joseph testified in his deposition that he told defendant's agent that he wanted a "'good policy'" with coverage limits of $300,000 "'so [he would be] covered.'" However, Judge Perri noted that Joseph's recollection was "remarkably more detailed" at the plenary hearing. He now claimed that he had specifically told defendant's representative that "he wanted '$300/$500 so that I would be covered . . . in case . . . I was sued or in case I was hurt by an uninsured drunk driver.'" Judge Perri found this testimony "strains belief," but nevertheless found plaintiff "is bound by [Joseph's] specific request to USAA to provide him with $300,000 in uninsured motorist coverage."
Joseph could not recall receiving the original policy materials, though he did remember receiving packages of information from defendant from time to time thereafter. His review of this information was limited to making sure the proper vehicles were covered; additionally, Joseph knew how to contact defendant and did so to make changes to the policy such as adding plaintiff as an insured and adding and dropping vehicles.
Defendant could not produce any of the original policy documents and only produced policy information from 1997 forward. Nevertheless, Judge Perri concluded that the original policy contained $15,000/$30,000 UIM limits because Joseph acknowledged never making any change to the coverage limits after he first purchased the policy in 1992.
Two of defendant's employees testified as to its usual business practices regarding data entry and records retention. Judge Perri found that based upon that testimony, "USAA complied with its usual business practices and in fact provided [Joseph] with a Buyer's Guide and [CSF] at the time it issued the original policy in 1992." She also found that given Joseph's "admitted practice of failing to review documents received from USAA in detail . . ., and his practice of failing to return signed [CSF] forms . . . with each renewal, the reasonable inference to be drawn is that [Joseph] would not have reviewed the Buyer's Guide when it was received."
Judge Perri then considered the legal arguments raised by plaintiff. Citing our decision in Martinez v. John Hancock Mut. Life Ins. Co., 145 N.J. Super. 301 (App. Div. 1976), certif. denied, 74 N.J. 253 (1977), the judge held that Joseph was "under a duty to examine his insurance policies" and that he was "required to notify the company of [any] inconsistency" between its terms and those he desired. She further concluded that the "average reader" would have noticed from a simple review of the declarations page that the UIM policy limits were not $300,000 as Joseph said he requested. She concluded that the continued failure by Joseph over the ensuing years of the policy's existence to review defendant's correspondences, coupled with the lack of any "fraud or unconscionable conduct, precludes the plaintiff from seeking the equitable relief of reformation . . . ."
The judge also denied plaintiff's claim that defendant should be equitably estopped from denying coverage at the $300,000 limit. Once again citing Martinez, the judge reasoned that plaintiff had failed to demonstrate that defendant had misrepresented "the fact or extent of coverage," and also failed to demonstrate Joseph's reasonable and detrimental reliance upon any misrepresentation. Judge Perri entered an order dismissing plaintiff's complaint with prejudice and this appeal ensued.
Plaintiff contends that because defendant could not produce the declarations page and a CSF executed by Joseph at the time of the policy's inception, which are statutory and regulatory requirements for the policy to be effective, reformation of the insurance contract was appropriate. She further argues that based upon Joseph's request at the time he purchased the policy, the UIM coverage limit in the reformed agreement should be $300,000. Alternatively, she argues that defendant should be equitably estopped from denying coverage at this increased policy limit.
We have considered these arguments in light of the motion record and applicable legal standards. We affirm substantially for the reasons set forth by Judge Perri in her written opinion. We add the following comments.
Our standard of review of challenges to the factual findings of a judge sitting without a jury is quite limited. Trial court findings will typically remain undisturbed unless "they are so wholly unsupportable as to result in a denial of justice," and are upheld wherever they are "supported by adequate, substantial and credible evidence." Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 483-84 (1974). We give deference to the judge's ability to assess the credibility of the witnesses, id. at 483-84, and will not "engage in an independent assessment of the evidence as if [we] were the court of first instance." State v. Locurto, 157 N.J. 463, 471 (1999). In this case, we are satisfied that Judge Perri's factual findings were indeed amply supported by the evidence adduced.
We accept plaintiff's assertions that defendant failed to produce the original application and executed CSF and that various statutes and regulations require the forms be executed before coverage is effective. But, plaintiff's complaint never alleged that the policy issued was not in effect. Rather, she claimed that an effective policy was issued but that it did not comport with the coverage limits Joseph had requested. She argues that because defendant could not produce the original policy documents, it was somehow unfair to require that she prove that Joseph indeed requested the higher coverage limits.
This argument, however, confuses the distinction between denying defendant the statutory immunity provided by N.J.S.A. 17:28-1.9a, and relieving plaintiff of the burden that she must bear - to prove the necessary elements of the case that entitle her to relief.*fn3 Judge Perri correctly concluded that defendant was not entitled to summary judgment because it could not demonstrate compliance with the statute. See Avery v. Wysocki, 302 N.J. Super. 186, 191 (App. Div. 1997)(noting that the insurer's statutory immunity from suit "does not apply to coverage selections made without benefit of the coverage selection form and the insured's execution thereof").
Plaintiff contends the natural consequence of defendant's inability to prove statutory compliance should be reformation of the insurance contract. In this regard, she relies extensively upon Carmody v. Dority, 290 N.J. Super. 441, 450 (Law Div. 1995), in which the Law Division held that reformation of the insurance contract was appropriate when the insurer could not demonstrate compliance with N.J.S.A. 17:28-1.9b.
However, we note that decision is not binding upon us, and more importantly, its general holding seems to be inconsistent with our subsequent decision in Avery. There, we noted that although the failure to demonstrate compliance with the statute would deny the insurer immunity, "[g]eneral principles of negligence, duty, and proximate cause would . . . apply to plaintiff's reformation action." Avery, supra, 302 N.J. Super. at 192. We reversed the prior grant of partial summary judgment and remanded the matter to the trial court to resolve disputed issues of fact. Id. at 192.
The Legislature has chosen to confer immunity upon an insurer if it can demonstrate statutory compliance. It did not, however, choose to relieve plaintiff of her burden of proof.
Judge Perri, therefore, appropriately considered whether plaintiff had demonstrated the necessary elements that would support her claim for reformation of the insurance contract.
We note that reformation is an equitable remedy that should only be granted where the moving party is able to show through clear and convincing proof that "there is mutual mistake or [ ] a mistake on the part of one party is accompanied by fraud or other unconscionable conduct of the other party." Heake v. Atlantic Cas. Ins. Co., 15 N.J. 475, 481 (1954); see also Martinez, supra, 145 N.J. Super. at 312(noting that the remedies of reformation and equitable estoppel cannot be granted without the requisite elements being proven). Reformation will not be granted on the grounds of mistake resulting from "the complaining party's own negligence." Millhurst Milling & Drying Co. v. Automobile Ins. Co., 31 N.J. Super. 424, 434 (App. Div. 1954). This is particularly applicable when the negligence is related to "the duty imposed upon an insured to examine his policy upon receipt, and if its terms are found to deviate from the original contract agreed upon, to notify the insurer immediately and refuse to accept the policy." Id. at 435.
We have recognized that the declaration page, which is the one page of the policy specific to the insured and not merely boilerplate, is a basis for defining the insured's expectation of coverage. Lehrhoff v. Aetna Cas. and Sur. Co., 271 N.J. Super. 340, 346-48 (App. Div. 1994). The declaration page is critical in evaluating reformation requests because it is tied to the insured's affirmative duty to read the insurance policy as issued and notify the company of any inconsistencies uncovered in the examination. Martinez, supra, 145 N.J. Super. at 310. The conduct expected from an insured is that of "a conscientious policyholder, [who] upon receiving the policy [examines] the declaration page to assure himself that the coverages and their amounts . . . accord with his understandings of what he is purchasing." Lehrhoff, supra, 271 N.J. Super. at 346-47.
Judge Perri took note of the simple and understandable terms contained in the policy's annual declaration page and emphasized that Joseph had failed over the years to ever raise an issue regarding the alleged discrepancy between the UIM policy limits he claimed to have requested and those he actually received. The judge also noted that plaintiff had failed "to prove that any actions on the part of USAA r[ose] to the level of fraud or unconscionable conduct." Plaintiff concedes that point. Therefore, based upon all of these circumstances, we agree that plaintiff failed to prove her entitlement to reformation of the insurance contract.
Lastly, plaintiff submits that defendant should be equitably estopped from denying coverage because of its failure to produce a signed CSF. This claim must also fail. Equitable estoppel may apply in those cases where "an insurer or its agent misrepresents, even though innocently, the coverage of an insurance contract . . . and the insured reasonably relies thereupon to his ultimate detriment . . . ." Harr v. Allstate Ins. Co., 54 N.J. 287, 306 (1969). Neither of those two elements existed in this case.