December 22, 2008
ALEXANDER P. POROWSKI, PLAINTIFF-RESPONDENT,
JOHN P. REHM AND ROSE T. REHM, HIS WIFE, OLD RED HOUSE CONSTRUCTION, LLC, SCHEMATA ARCHITECTURAL GROUP, P.C., THE NIA GROUP, LLC, DEFENDANTS, AND HARTFORD CASUALTY INSURANCE COMPANY, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, L-5850-03.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 12, 2008
Before Judges Winkelstein, Gilroy and Chambers.
Defendants John and Rose Rehm own a single-family home in Budd Lake. They hired defendant Old Red House Construction as a general contractor to perform renovations to their home. Plaintiff Alexander Porowski was an independent carpenter, engaged by Old Red House, to do wood framing for the renovations. Defendant Hartford Casualty Insurance Company was the general commercial liability carrier for Old Red House. Plaintiff, who was seriously injured while performing work at the Rehms' home, brought claims against Old Red House, the Rehms and Hartford. During the litigation, the plaintiff dismissed his claims against the Rehms and Old Red House defaulted.
After the trial court twice denied Hartford's motion for summary judgment, the parties entered into a consent order in which judgment was entered against Hartford and Old Red House for $850,000. The order reserved to Hartford the right to appeal from the trial court's denial of its summary judgment motions. On appeal, Hartford claims, as it did in the Law Division, that: (1) plaintiff lacked standing to assert a direct cause of action against Hartford; (2) plaintiff had no right to coverage through Old Red House because Hartford properly cancelled Old Red House's policy for nonpayment of its premium, and gave proper notice to Old Red House of the cancellation; and (3) plaintiff is not a third party beneficiary of the certificate of insurance that Hartford issued to the homeowners. We agree with defendant's arguments and consequently conclude that summary judgment was warranted, dismissing plaintiff's claim against Hartford.
Before construction began, upon the Rehms' request, Old Red House provided the Rehms with a certificate of liability insurance. Hartford issued the certificate, dated November 26, 2002, naming Old Red House as the insured, and designating Jack Rehm as the "Certificate Holder." The certificate states that Old Red House was insured under a commercial general liability policy with an aggregate limit of two million dollars, with a maximum of one million dollars for each occurrence, effective from October 20, 2002 to October 20, 2003.
At the top of the first page of the certificate is a disclaimer, in all capital letters, that reads:
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
The certificate also contains the following cancellation provision:
SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING INSURER WILL ENDEAVOR TO MAIL 10 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED [HEREIN], BUT FAILURE TO DO SO SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON THE INSURER, ITS AGENTS OR REPRESENTATIVES.
A disclaimer on the reverse side of the certificate states: "The Certificate of Insurance on the reverse side of this form does not constitute a contract between the issuing insurer(s) and authorized representative or producer, and the certificate holder, nor does it affirmatively or negatively amend, extend or alter the coverage afforded by the policies issued thereon." The insurance policy referenced by the certificate only identifies Old Red House as an insured. No "additional insureds" are identified on the policy.
On March 14, 2003, Hartford cancelled the policy due to Old Red House's failure to pay premiums, and notified Old Red House accordingly. Neither Hartford nor Old Red House notified the Rehms that the insurance policy had been cancelled. Old Red House continued renovations to the Rehms' home, and plaintiff was injured on April 23, 2003, more than a month after the policy was cancelled.
On April 28, 2003, Old Red House sought a reinstatement of its policy; Michael Racanella, the principal of Old Red House, certified to Hartford that he was unaware of "any claims or any occurrences which may give rise to claims under the policy," from March 14, 2003 (the date of cancellation) to April 28, 2003 (the date of reinstatement). That statement was false because Racanella was present when plaintiff was injured. Based on Racanella's certification, Hartford initially reinstated the policy with "no lapse in coverage," but on October 20, 2003, Hartford notified Old Red House that Racanella's certification constituted a material misrepresentation because it did not advise Hartford of the April 23, 2003 incident involving plaintiff. As such, Hartford informed Old Red House that no coverage would be available "to Old Red House and/or Michael Racanella for any and all claims arising out of the April 23, 2003, incident involving [plaintiff]."
For purposes of its summary judgment motions, Hartford conceded that no notice of cancellation of Old Red House's insurance coverage had been given to the Rehms. Nevertheless, it argued that summary judgment was warranted as a matter of law because the certificate of insurance imposed no legal duty on Hartford to notify the Rehms, or to provide coverage to plaintiff in light of Old Red House's failure to pay its premium. The trial court twice denied Hartford's motions.
In addressing Hartford's arguments, we apply the same standards on summary judgment as does a trial court. If there exists no genuine issue of material fact, the moving party is entitled to summary judgment as a matter of law. R. 4:46-2; Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). When the evidence is so one-sided that one party must prevail as a matter of law, the court should not hesitate to grant summary judgment. Ibid. Nevertheless, in reviewing a trial court's decision on a question of law, our review is de novo. Manalapan Realty v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995).
Here, we conclude that the trial court erred in denying Hartford's summary judgment motions as a matter of law. Plaintiff lacks standing to bring a direct cause of action against Hartford; and Hartford had no contractual duty under the certificate of insurance to notify plaintiff or the homeowners of the cancellation of the policy. Simply put, Hartford had no duty to provide insurance coverage to plaintiff.
"[I]t is well recognized that an injured person possesses no direct cause of action against the insurer of the tortfeasor prior to recovery of judgment against the latter." President v. Jenkins, 357 N.J. Super. 288, 312 (App. Div. 2003), rev'd in part on other grounds, 180 N.J. 550 (2004); see also Cruz-Mendez v. ISU/Ins. Servs., 156 N.J. 556, 566-67 (1999) ("Generally, plaintiffs in tort actions may not directly sue insurers.").
In President, the plaintiff filed a medical malpractice claim against several defendants, including her physician, the hospital in which he had admitting privileges, and the physician's insurance company. Id. at 295-96. The hospital's by-laws required all admitting physicians to maintain professional liability insurance; accordingly, the physician provided the hospital with a certificate indicating he had coverage. Id. at 296-97. The insurer later cancelled the physician's policy for failure to pay premiums. Id. at 296. The physician did not notify the hospital of the cancellation. Id. at 297.
We affirmed the trial court's dismissal of the plaintiff's claim against the insurer for failure to state a claim, recognizing that the plaintiff could not directly sue an insurer in a tort action. Id. at 312-13. We further held that the insurer, absent a statutory, regulatory or contract provision to the contrary, had no legal duty to notify the hospital that it had cancelled the physician's insurance policy. Ibid.; see also Howard Savings Bank v. Liberty Mutual Ins. Co., 285 N.J. Super. 491, 495 (App. Div. 1995) (insurer not obligated to provide notice of cancellation or non-renewal of policy to mortgagee of insured property, absent explicit statutory, regulatory, or contract provision to the contrary). Here, for substantially the same reasons as expressed in President and Howard, Hartford did not have a legal duty to notify plaintiff of the cancellation of its insurance policy, and plaintiff lacks standing to bring a direct cause of action against Hartford.
Next, we address plaintiff's equitable estoppel claim. He does not dispute that Hartford rightfully cancelled Old Red House's coverage for failure to pay premiums, nor does he dispute Hartford's rescission of coverage after Old Red House misrepresented its knowledge of circumstances that could give rise to a claim. Rather, plaintiff contends that Hartford is equitably estopped from denying coverage because Hartford failed to send notice of the cancellation to Jack Rehm, causing Rehm to continue to allow construction at his home under the false impression that Old Red House was properly insured. Had Rehm known the policy was cancelled, plaintiff argues, Rehm would have stopped the work and the accident would have been prevented.
To establish a claim of equitable estoppel, the party claiming the benefit of the estoppel must show that the alleged conduct was done, or representation was made, intentionally or under such circumstances that it was both natural and probable that it would induce action; and, the party seeking estoppel must rely on the conduct, and change his or her position to his or her detriment. Knorr v. Smeal, 178 N.J. 169, 178 (2003); Miller v. Miller, 97 N.J. 154, 163 (1984).
Plaintiff cannot establish that he relied on Hartford's issuance or cancellation of the policy, or that he changed his position to his detriment based on his reliance. If any party could have been in a position to rely on Hartford's conduct, it would have been the Rehms, the homeowners. Based on the disclaimers in the certificate, however, even the Rehms had no reasonable basis to rely on Hartford's issuance or cancellation of the certificate. The disclaimer language in the certificate of insurance was clear - the certificate was issued as a matter of information only, and conferred no rights upon the certificate holder. It did not amend, extend, or alter the coverage afforded by the insurance policy.
Given this language, even if plaintiff could place himself in the shoes of the homeowner for establishing an equitable estoppel claim, the homeowner could not have justifiably relied on the certificate of insurance. It did not create a duty on Hartford to notify the homeowner of cancellation of the policy. Courts in other jurisdictions have come to a similar conclusion when reading certificates of insurance containing substantially the same language as did the Hartford certificate. See Bradley Real Estate Trust v. Plummer & Rowe Ins. Agency, Inc., 609 A.2d 1233, 1235 (N.H. 1992); West Am. Ins. Co. v. Meridian Mutual Ins. Co., 583 N.W.2d 548, 551 (Mi. Ct. App. 1998) (insurer is not equitably estopped from denying coverage because certificate, issued as evidence of insurance only, imposed no duty on insurer to notify certificate holder about subsequent changes in coverage).
Nonetheless, plaintiff argues in the alternative that Hartford owed a duty to "endeavor" to mail notice of cancellation to Rehm, and its failure to do so estops Hartford from denying coverage. Plaintiff's argument fails. Although the certificate states that Hartford will "endeavor to mail 10 days written notice to the certificate holder," it also states that the "failure to do so shall impose no obligation or liability of any kind on the insurer." Faced with a similar disclaimer in Bradley, supra, 609 A.2d at 1234-35, the New Hampshire Supreme Court held that such language does not create a duty to notify a third-party certificate holder of cancellation of the policy, even where those third parties, like the Rehms, specifically required a certificate of insurance be issued to them.
Finally, contrary to plaintiff's contention, he is not a third party beneficiary of the certificate issued to Rehm. Plaintiff relies on Carter Lincoln-Mercury, Inc., Leasing Div. v. Emar Group., Inc., 135 N.J. 182 (1994); Werrmann v. Aratusa, LTD, 266 N.J. Super. 471 (App. Div. 1993); and Eschle v. Eastern Freight Ways, Inc., 128 N.J. Super. 299 (Law Div. 1974), for the proposition that plaintiff is a third party beneficiary of Hartford's purported duty to notify Rehm of cancellation of the policy; and as such, he is entitled to coverage for Hartford's failure to provide such notice.
Those cases are inapplicable. Each involves broker liability to third parties arising from the breach of a contractual duty to the insured to procure or maintain insurance coverage. Carter, supra, 135 N.J. at 204 (broker's duty to loss-payee is derived from broker's duty to insured to perform an investigation through reasonable inquiry of the general financial soundness of the carrier with which the broker proposes to place insurance); Werrmann, supra, 266 N.J. Super. at 475 (where broker failed to properly renew insurer's policy, "it is patently unfair to forfeit the injured party's unquestioned interest in the insured's liability policy . . . and his or her right to be made whole simply because of the fortuitous circumstance of the broker's negligence which results in the lapsing of the liability policy"); Eschle, supra, 128 N.J. Super. at 304 ("the potential lack of recompense to a potential injured party is a natural and foreseeable result of an agent's or broker's actions if he negligently fails to obtain proper coverage in accordance with his instructions").
What is more, plaintiff does not claim that he is a third party beneficiary of the insurance policy between Hartford and Old Red House; rather, he claims that he is a third party beneficiary of the certificate of insurance issued to Rehm. In other words, plaintiff's third party beneficiary claim is grounded in a claimed duty created by the certificate between the insurer and the certificate holder. And as we have indicated, no such duty exists.
In sum, Old Red House was not entitled to coverage under its insurance policy with Hartford as a result of its failure to pay its premium. The homeowners never had coverage under the policy, not being listed as additional insureds; and, furthermore, plaintiff's claim against them has been dismissed. Significantly, no evidence suggests that plaintiff ever relied on Hartford's issuance of the certificate of insurance to the Rehms. Plaintiff's position is just too attenuated to support an equitable estoppel claim, and his third party beneficiary theory fails in the absence of a contractual obligation between Hartford and the Rehms.
Reversed. We remand to the trial court to vacate the final judgment as it applies to Hartford.
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