December 14, 2007
CHRISTA NOLAN RUCCI, ASSIGNEE OF GREG AND LOIS LAWRENCE T/A PARKWAY TILE, ASSIGNORS AND THIRD-PARTY BENEFICIARY OF THE INSURANCE CONTRACT BETWEEN PLAINTIFFS GREG AND LOIS LAWRENCE AND DEFENDANT, R. BRUCE HILL AGENCY, LTD., AND GREG AND LOIS LAWRENCE T/A PARKWAY TILE, PLAINTIFFS-APPELLANTS,
R. BRUCE HILL AGENCY, LTD., DEFENDANT/THIRD-PARTY PLAINTIFF-RESPONDENT,
MYSTIC INSURANCE AGENCY, THIRD-PARTY DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, L-502-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 26, 2007
Before Judges Lintner and Sabatino.
Following a determination by a Law Division judge that an issue of fact existed concerning whether defendant, R. Bruce Hill Agency, Ltd., fulfilled its duty as insurance broker by sending two letters to inform its insureds, Greg and Lois Lawrence, t/a Parkway Tile (Parkway), of the availability of non-owned automobile coverage, plaintiff, Christa Nolan Rucci, entered a stipulation that the letters were sent and a consent judgment dismissing her complaint. Plaintiff then filed her notice of appeal, contending that the judge erred in preventing her expert from testifying concerning an insurance broker's duty and thus usurped her ability to present testimony of the applicable standard of care, which is "beyond the ken of the average juror." We reject plaintiff's contention and affirm the judge's determination and the resulting judgment dismissing plaintiff's complaint.
On September 25, 1998, plaintiff was seriously injured in an automobile accident when her vehicle was struck by a vehicle owned and operated by Felix Mendez. At the time of the accident, Mendez was employed by Parkway. Rucci filed a personal injury suit against Mendez and Parkway. The case was tried and a jury returned a verdict in favor of Rucci, finding Mendez and Parkway seventy-five percent negligent.*fn1 Following a subsequent bench trial, Rucci's injuries were valued at $900,000. Judgment was thereafter entered for $675,000 plus $167,614.05 interest on July 16, 2002. On August 29, 2002, the Lawrences executed an assignment allowing plaintiff to pursue any direct cause of action Parkway had against its insurance broker.
On February 17, 2004, plaintiff filed her complaint, asserting that defendant was negligent for not providing adequate liability coverage that would cover Parkway employees for use of their personal automobiles while on company business. On April 15, 2004, pursuant to N.J.S.A. 2A:53A-27, Timothy Tighe, an insurance agent and broker, submitted an affidavit of merit, asserting that defendant "failed to follow the normal and customary procedures in failing to advise their clients of the uninsured vicarious liability exposure of non-owned automobiles.
. . . [I]t is my opinion that the professional services rendered by [defendant] as insurance broker fell outside of the acceptable professional standard requirement of an insurance broker in failing to advise and offer or provide coverage for non-owned automobiles."
The following facts were revealed in discovery. Greg and Lois Lawrence were the sole proprietors of Parkway. At the time of the accident, the vehicles owned by the Lawrences, although used in their business, were insured by a personal lines policy obtained through the Mystic Insurance Agency, which did have coverage for commercial uses.*fn2 Thus, the Lawrences' personal automobile policy did not provide non-owned automobile coverage for Parkway's vicarious liability arising from the operation by an employee of the employee's vehicle.
Parkway was covered by workers' compensation insurance and a commercial liability (CGL) policy initially acquired through defendant's predecessor, Mirth Insurance Associates, in Tuckerton. Defendant acquired Mirth sometime in the 1990s. When Parkway's CGL policy came up for renewal in 1995, Bruce Hill spoke with Lois on the telephone in an attempt to acquire the Lawrences' automobile coverage. He did not know what auto coverage they had, nor whether it provided non-owned coverage. Hill sought to review the automobile policy, however, Lois declined his invitation to meet with him, explaining that they had two DWIs and were not good automobile risks and would keep their automobile insurance with Mystic. According to Hill, he explained to Lois the need for non-owned automobile coverage. Lois, however, testified at her deposition that she did not remember having a discussion with Hill about auto coverage, although she conceded that her automobile record was not favorable. She claimed that she did not have a conversation with Hill about non-owned coverage.
On February 1, 1996, defendant's employee, Judy Todd, wrote Parkway the following letter addressed to the attention of Greg Lawrence:
Attached please find your renewal for your General Liability policy which is written through Assurance Company of America. There has been a slight increase in premium, which is due to a general increase in rates.
Last year Mr. Hill spoke with Lois regarding your business auto. He was advised, the driver records were not favorable. However, he requested copies of the policy, so he could review same and quote. He also expressed the importance of being sure whether or not you have hired car and non owned coverage. This coverage can be added to our policy for [an] additional premium.
If you have any questions please do not hesitate to contact this office.
Lois Lawrence denied receiving Todd's letter, although she admitted that it was addressed correctly.
On July 10, 1998, Raquel Scibetta, an account manager for defendant, wrote Greg and Lois the following letter:
I have reviewed your file and wish to call to your attention, that our office carries your General Liability and Workers Compensation insurance. There are various things you can do to improve your insurance coverage. Higher liability coverage is available through an Umbrella policy. However, I [cannot] quote a premium since we do not have your auto insurance. We do not know what vehicles you own, nor do we know your auto limits.
It might be to your advantage to allow our office to review this policy as we might be able to reduce the premium. We also recommend hired car and non owned coverage if you do not carry this on your current policy.
Our office also writes Homeowner insurance and or tenant insurance, as well as personal auto, recreation vehicle and other coverages.
If you have any questions please feel free to contact me.
On January 20, 1996, relying on Rider v. Lynch, 42 N.J. 465 (1964), and Aden v. Fortsh, 169 N.J. 64 (2001), Tighe issued a report, asserting that defendant failed in its professional duty of care by (1) "not following up with a phone call nor a letter to assert his concern for the importance of non-owned auto coverage;" (2) "fail[ing] to continue to make Parkway . . . aware of the gap in coverage" when certificates of insurance were issued; (3) failing in the two letters to adequately explain non-owned automobile coverage, by providing a stronger recommendation, and advising of the low premium cost; (4) not unilaterally issuing an endorsement for non-owned auto coverage because its cost would have been between $100 and $200.
At oral argument, the motion judge rejected plaintiff's assertion that, similar to medical malpractice cases, it is the expert that defines the duty. The judge also rejected defendant's argument that a broker's duty to its insured is satisfied once the broker obtains the policy sought by the insured. Instead, applying the scope of a broker's obligation as set forth in Rider, the judge found that it was the court's obligation to define the duty, and stated:
I define in the context of a case like this a duty defined that I have just used in the language from Rider as including not only the responsibility of providing accurately and completely the kind of coverage that an insured seeks, but also the rendering of appropriate advice and appropriate suggestions to an insured with respect to subject matters having to do with the nature and extent of the coverage requested.
Denying defendant's summary judgment motion, the judge found that there was a question of fact as to whether the letters were sent and a telephone call made as alleged by defendant. The judge determined that the placing of the telephone call alone would not satisfy a broker's duty. However, he rationalized, in the factual context of this case, that if a jury determined that the letters were sent, it would fulfill the duty imposed under Rider. Accordingly, he concluded that the sole issue for the jury to decide was whether the letters of February 1, 1996, and July 10, 1998, were sent. Plaintiff entered into the stipulation that defendant had sent both letters. The consent judgment was then entered, based upon the judge's ruling, dismissing her complaint with prejudice, thus perfecting this appeal.
On appeal, plaintiff reprises her contention that the expert in all professional malpractice cases sets the standard of care, her expert's report was sufficient to establish that defendant breached its duty as an insurance broker and the judge's ruling improperly precluded the expert from testifying respecting his opinion.
Generally, the determination of whether a party has a duty of care and the scope of such a duty are questions of law that must be decided by the court. Clohesy v. Food Circus Supermarkets, Inc., 149 N.J. 496, 502 (1997). The key to the legal determination that a duty exists is based upon the foreseeability of the risk, the seriousness of the risk, and the "practicality of preventing it." J.S. v. R.T.H., 155 N.J. 330, 339 (1998). When a plaintiff seeks to impose a duty on a defendant to control the acts of a third party, the plaintiff "may be required to prove that defendant was in a position to 'know or have reason to know, from past experience, that there [was] a likelihood of conduct on the part of [a] third person' that was 'likely to endanger the safety' of another." Id. at 338 (quoting Clohesy, supra, 149 N.J. at 507). Even if the risk is foreseeable, a legal duty does not necessarily arise. Ivins v. Town Tavern, 335 N.J. Super. 188, 195 (App. Div. 2000); see also Lombardo v. Hoag, 269 N.J. Super. 36, 52-53 (App. Div. 1993), certif. denied, 135 N.J. 469 (1994); McIntosh v. Milano, 168 N.J. Super. 466, 483 (Law Div. 1979).
Determining the existence of a duty of care "'involves identifying, weighing, and balancing several factors[, including] the relationship of the parties, the nature of the . . . risk, the opportunity and ability to exercise care, and the public interest in the proposed solution.'" Alloway v. Bradlees, Inc., 157 N.J. 221, 230 (1999) (quoting Hopkins v. Fox & Lazo Realtors, 132 N.J. 426, 439 (1993)). "The analysis is both very fact-specific and principled; it must lead to solutions that properly and fairly resolve the specific case and generate intelligible and sensible rules to govern future conduct." Hopkins, supra, 132 N.J. at 439. These factors are considered under the totality of the circumstances. Clohesy, supra, 149 N.J. at 508. Reasonableness, public policy, fairness, and common sense also must be taken into account when imposing new legal duties. Williamson v. Waldman, 150 N.J. 232, 245-46 (1997).
In medical malpractice cases, a medical practitioner's standards of care and deviations therefrom ordinarily must be established by expert testimony, as average jurors lack the "'requisite special knowledge, technical training and background'" to make those determinations without an expert's assistance. Kelly v. Berlin, 300 N.J. Super. 256, 265 (App. Div. 1997) (quoting Rosenberg v. Cahill, 99 N.J. 318, 325 (1985)); see also Estate of Chin v. St. Barnabas Med. Ctr., 160 N.J. 454, 469-70 (1999). However, unlike medical malpractice cases, our courts have defined the duty of care required of insurance brokers and agents. Insurance brokers, like agents, "are obliged to inform insureds of available coverage." Weinisch v. Sawyer, 123 N.J. 333, 340 (1991) (citing Sobotor v. Prudential Prop. & Cas. Ins. Co., 200 N.J. Super. 333, 337-41 (App. Div. 1984)); Rider, supra, 42 N.J. at 476, (1964); Walker v. Atl. Chrysler Plymouth, Inc., 216 N.J. Super. 255, 259-60 (App. Div. 1987). "The fiduciary relationship gives rise to a duty owed by the broker to the client 'to exercise good faith and reasonable skill in advising insureds.'" Aden, supra, 169 N.J. at 79 (quoting Weinisch, supra, 123 N.J. at 340).
Indeed, in rendering his report, plaintiff's expert expressly recognized that the standard of care owed by a broker was "outlined" in Rider and "reinforced" in Aden. The motion judge correctly rejected plaintiff's contention that, as in medical malpractice cases, the expert sets the standard.
Rider involved an eighteen-year-old with a limited ability to read English who told her broker that she needed auto insurance for a car owned by her fiancé who gave her permission to use the car while he was out of state. Rider, supra, 42 N.J. at 470-71. The broker issued a non-owner's insurance policy, however, did not explain that the policy only covered automobiles not regularly used by the insured or any relative. Id. at 473-74. The coverage the woman wanted was thus useless because she and her family planned to use the car on a regular basis, a fact the broker knew or should have known. Id. at 474. Neither the woman nor her stepfather read the policy. Id. at 482. The stepfather was involved in an accident and brought suit on behalf of the woman against the insurer and the broker, after the insurer denied coverage.
Rejecting the insurer's claim that the woman's failure to read the policy could be considered as contributory negligence, the Court pointed out, based upon the agency relationship, that both the woman and her stepfather "were entitled to rely upon and believe that the broker had fulfilled his undertaking to provide the coverage impliedly agreed upon, and that the policy sent to them represented accomplishment of that undertaking." Id. at 468.
In Aden, the insureds asserted that, after purchasing a $48,000 condominium, they advised their insurance broker of the price of the condominium and that they had contents valued at $16,000. Aden, supra, 169 N.J. at 70. The broker claimed that the insured sought a policy with minimum coverage. The policy issued provided coverage in the amount of $1000 in the event of damage to the dwelling. Id. at 71. A fire occurred, causing $20,000 in damage. Id. at 72. In its opinion, the majority reaffirmed the ruling in Rider, applying the same rationale to eliminate comparative negligence as a defense based upon the failure of an insured to read the policy, noting that "[a]n insured who hires and pays a professional broker does so to reduce, if not eliminate, the risk that an inadequate policy will be procured." Id. at 86. The Court, however, held that its elimination of comparative negligence as a defense did not prevent a defense that the failure of an insured to read the policy severs the causal connection between the broker's neglect and the harm sustained by the insured. Id. at 82.
In his affidavit of merit, plaintiff's expert set forth the factual circumstances related by plaintiff:
After obtaining the initial insurance policy, over the ensuing 18 years the Lawrences were never contacted by Mr. Hill or his employees about their business or any changes that may have occurred in the business, nor did they ever complete a renewal application or update any information as a result of being contacted by anyone at the R. Bruce Hill Agency. The Lawrences never had any discussion or recommendation from any agents or individuals at the R. Bruce Hill Agency wherein it was recommended that they obtain "other car" coverage to eliminate the risk of liability damages caused by their employees when they used their personal cars in the scope of employment by the Lawrences t/a Parkway Tile.
The affidavit of merit filed by plaintiff's expert correctly stated the applicable standard when he offered the opinion that, according to the factual circumstances presented by plaintiff, the broker was negligent for "failing to advise and offer or provide coverage for non-owned automobiles." Once plaintiff conceded that the letters advising the Lawrences of the need for hired-car or non-owned coverage on their CGL policy were sent, the question of fact initially raised by plaintiff, that the broker did not provide good faith and reasonable skill in advising its insured of the needed coverage, disappeared. Unlike the facts in Rider, defendant, who did not obtain the Lawrences' automobile policy nor was permitted, despite requests, to review it, expressly alerted its insured to the potential deficiency in its policy and the need for the added coverage. Accordingly, under these particular factual circumstances, the judge properly determined that the undisputed sending of the letters satisfied defendant's fiduciary duty as an insurance broker to exercise good faith and reasonable skill in advising insureds concerning the needed coverage.