December 4, 2009
MARGUERITE SCOTT, BY HER SUBROGEE, STATE FARM FIRE & CASUALTY COMPANY; AND MARIA AND PABLITO DAVIDAS; FRANK AND ORIA VIRUET; EDWARD S. WILLIAMS; AND ROSEMARIE JOHN AND PAUL M. NJERU, BY THEIR SUBROGEE, HIGH POINT SAFETY & INSURANCE COMPANY, PLAINTIFFS,
JOVIL CONSTRUCTION, INC.; JUAN VILARINHO, D/B/A/ JOVIL CONSTRUCTION, INC. AND/OR JOVIL PLUMBING; GUERREIRO CONSTRUCTION; AND JERSEY CITY EPISCOPAL COMMUNITY DEVELOPMENT CORP., DEFENDANTS, AND JOVIL, INC., DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT,
MERCHANTS INSURANCE GROUP, THIRD-PARTY DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Hudson County, L-5559-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted November 17, 2008
Before Judges R. B. Coleman and Sabatino.
In this dispute over insurance coverage, defendant/third-party plaintiff-appellant Jovil Inc., also identified as Jovil Construction, Inc. (Jovil), appeals from an August 6, 2007 order of the Law Division granting summary judgment in favor of third-party defendant-respondent Merchants Insurance Company (Merchants). That order determined that Merchants owes no duty to defend or indemnify Jovil with regard to certain consolidated actions arising out of an August 3, 2005 fire. We reverse.
As required by Rule 4:46-2(c), we view the facts in the light most favorable to Jovil. Such facts may be summarized as follows. On August 3, 2005, there was a fire at a construction site in Jersey City where Jovil had been acting as a plumbing subcontractor. Jovil was sued for fire damage by the owners of the affected properties in consolidated actions in the Law Division, in Hudson County, and in connection with the claims of the owners, a judgment or judgments of over $768,000 were entered against Jovil. In those consolidated actions, Jovil filed a third-party complaint against Merchants, seeking a defense and insurance coverage. Upon notice of motion dated June 28, 2007, Merchants moved for summary judgment, which was granted by order dated August 6, 2007, for reasons stated on the record that same date.
In short, the motion judge ruled as a matter of law that Jovil's policy had been effectively cancelled for non-payment before the fire took place. More specifically, the motion judge concluded that "[e]ven though Merchants failed to provide adequate notice under its policy,*fn1 Jovil subsequently entered into a verbal agreement with Merchants Insurance on June 24, 2005,... [and] therefore waived its right to argue that Merchants Insurance failed to provide the required notice of cancellation pursuant its insurance policy."
In its statement of material facts, Merchants acknowledges that it provided insurance coverage to Jovil during the period May 22, 2003 to May 26, 2004*fn2 and that it offered to renew and did renew an insurance policy to Jovil for the period May 22, 2005 to May 22, 2006. If kept in force, that policy would have covered losses due to a fire such as the occurrence of August 3, 2005. The critical issue on appeal is whether there are any genuine issues of material fact in dispute with respect to Merchants' cancellation of Jovil's policy before the fire occurred.
The renewal certificate for the coverage period from May 22, 2005 to May 22, 2006 stated as follows: "In consideration of the payment of the premium shown on the declarations page, the numbered policy is renewed for the policy term shown, subject to all the terms and conditions of the policy including forms and endorsements unless otherwise specified." As mandated by New Jersey law, Merchants' insurance policy contained the following clause regarding cancellation for non-payment:
7. Cancellation of Policies in Effect for 60 days or More.
a. If this policy has been in effect for 60 days or more, or is a renewal of a policy we issued, we may cancel this policy only for one or more of the following reasons:
(1) Nonpayment of premium;
b. If we cancel this policy based on Paragraphs 7.a. (1)..., we will mail or deliver a written notice, to the first Named Insured and any person entitled to notice under this policy, at least 10 days before the effective date of cancellation.....
c. In the notice of cancellation which is sent to the first Named Insured, we will state the reason for cancellation. For cancellation due to the nonpayment of premium, the notice will state the effect of nonpayment by the due date. Cancellation for nonpayment of premium will not be effective if payment of the amount due is made before the effective dates set forth in the notice.
d. Notice will be sent to the last mailing address known to us, by:
(1) Certified mail; or
(2) First class mail, if we have obtained from the post office a date stamped proof of mailing showing the names and addresses.
The renewal certificate required that Jovil pay the full annual premium by May 22, 2005, the date of inception for the renewed policy. Jovil did not make such payment by the specified date. Consequently on June 13, 2005, Merchants alleges it sent Jovil a notice of cancellation for nonpayment of the $4,866 annual premium due, indicating the cancellation would be effective as of June 28, 2005 at 12:01 a.m.
Miguel Vilarinho, a son of the principal of Jovil, was handling the insurance issue in May 2005. He testified that he did not receive any notice of cancellation of the business insurance from either Jovil's broker, Colonial Insurance Management, Inc. (Colonial), or Merchants in May or June. Jovil continues to allege in this appeal that it did not receive the June 13, 2005 notice of cancellation. Merchants points out, however, that it also sent a copy of the notice to Colonial, and no one denies that Colonial received its copy of the notice. In addition, Merchants relies upon a Commercial Certificate Mailing List for Insured Cancellation Notice, initialed by the Postmaster and dated June 13, 2005, which listed 26 Sanford Avenue, Belleville, New Jersey, as one of the addresses to which a cancellation notice was sent.*fn3
As noted, Colonial received the copy of the cancellation notice sent to it; and Colonial's records indicate it informed Jovil on Friday, June 24, 2005, that Merchants had issued a notice of cancellation for nonpayment of premium, effective June 28, 2005. Regarding her communication with Jovil, on Friday, June 24, Deanne Waltz, of Colonial, wrote that Merchants had agreed to "amend the payment plan from annual pay to a quarterly pay plan," on the condition that Jovil send the first payment and a letter indicating no losses "no later than Monday, June 27, 2005." Waltz' memorandum regarding that agreement included her observation that Jovil needed to send the payment overnight for it to be received on time.
Jovil did not send either the payment or the signed statement of no loss to Merchants by Monday, June 28, 2005. Subsequently, in another memorandum dated July 5, 2005, addressed to Joao Vilarinho of Jovil, Waltz recorded that she advised Jovil that (a) Merchants had not received the premium payment as of that date, and (b) "the general liability policy remain[ed] cancelled as of May 22, 2005." The memorandum further stated that "[t]he only way to reinstate the policy" at that time was for Jovil to provide Colonial with information regarding Jovil's check, including the check number, date of mailing, check amount and the address to which the check was mailed. It is not clear whether Colonial's memorandum was actually sent to Jovil, and it is noted that, although the addressee is Joao Vilarinho, the body of the memorandum appears to address Miguel.
Jovil mailed a check for the amount of the quarterly premium, dated July 11, 2005, to Merchants. On that same date, Jovil faxed a signed statement of no loss to Colonial. On July 15, 2005, however, Merchants returned Jovil's check with a form letter indicating that Merchants had received Jovil's payment but could not process it because a policy number was not indicated with the payment. The form letter further stated that "the due date and cancellation date... remain[ed] the same as indicated on [the] billing statement or cancellation notice."
On July 19, 2005, Colonial wrote to Jovil and reiterated that Merchants had cancelled Jovil's general liability policy as of May 22, 2005, due to lack of payment and that Jovil had no general liability coverage at that time. Colonial advised that if Jovil wished to re-write the coverage, Jovil should contact Colonial, and if Jovil had mailed a check prior to that date, Colonial could "try to have the policy reinstated."
On August 2, 2005, Jovil re-sent to Merchants, via FedEx Express Priority Overnight, the check with the policy number added to the check. In that mailing, Jovil included the original envelope from the first mailing of the check. As evidenced by FedEx tracking records, at 9:26 a.m., on August 3, 2005, Merchants received Jovil's payment and original envelope. Ironically, on that same date, a fire occurred, which occasioned the losses that became the subject of the underlying lawsuits.
Initially, we note that the Commissioner of Banking and Insurance has statutory authority to promulgate rules and regulations regarding insurance non-renewal or cancellation notices. N.J.S.A. 17:29C-1; Barbara Corp. v. Bob Manelly Ins. Agency, 197 N.J. Super. 339, 342 (App. Div. 1984). Pursuant to such authority, the Commissioner adopted, among other provisions, N.J.A.C. 11:1-5.2, which provides that all fire and casualty policies of insurance, except accident and health policies, shall provide for the issuing company to give thirty days written notice to the insured of the cancellation of any policy, and provides further that provisions for less than thirty days notice are null and void except for, among other things, cancellation for nonpayment of premium. In a consistent manner, N.J.A.C. 11:1-20.1, which applies to "all commercial insurance policies which are in force, issued or renewed on or after November 7, 1986, by companies licensed to do business in this state," provides, with certain exceptions that are not relevant to the present case, that:
A policy shall not be cancelled for nonpayment of premium unless the insurer, at least 10 days prior to the effective cancellation date, has mailed or delivered to the insured notice as required in this subchapter of the amount of premium due and the due date. The notice shall clearly state the effect of nonpayment by the due date. [N.J.A.C. 11:1-20.2(e).]
In addition, a notice of cancellation or non-renewal is not valid unless it is sent:
1. By certified mail; or
2. By first class mail, if at the time of mailing the insurer has obtained from the Post Office Department a date stamped proof of mailing showing the name and address of the insured, and the insurer has retained a duplicate copy of the mailed notice. [N.J.A.C. 11:1-20.2(i).]
In this case, Merchants acknowledges that its notice was sent by first class mail and the exhibits offered in support of its motion for summary judgment include a certificate of mailing. That certificate reflects the address of Jovil - 26 Sanford Avenue, Belleville - but Jovil's name does not appear on the certificate. Thus, the notice does not comport fully with the requirements of N.J.A.C. 11:1-20.2(i).
We have said, albeit in the context of automobile insurance coverage, that in order to be effective, notices of non-renewal and notices of cancellation must be sent in strict compliance with applicable statutory and regulatory provisions. See, e.g., Lopez v. N.J. Auto. Full Ins. Underwriting Ass'n, 239 N.J. Super. 13, 20 (App. Div.), certif. denied, 122 N.J. 131 (1990). See also Bright v. T & W Suffolk, Inc., 268 N.J. Super. 220, 225 (App. Div. 1993) (observing that "continuation of coverage is favored in our law" and "[t]hus, we insist that insurance companies strictly comply with all statutory requirements."). "Where a notice of cancellation does not comport with the appropriate timing and mailing requirements, it is deemed ineffective." Munoz v. N.J. Auto Full Ins. Underwriting Ass'n, 145 N.J. 377, 391 (1996). "[C]compliance is a sine qua non of an effective cancellation." Celino v. General Accident Ins. and/or Camden Fire Ins. Co., 211 N.J. Super. 538, 541 (App. Div. 1986).
We have also recognized, however, that "[a]n insured need not actually receive a cancellation notice in order for it to be effective, provided that the statutory proof of mailing has been satisfied." Hodges v. Pa. Nat. Ins. Co. on Behalf of NJAFIUA, 260 N.J. Super. 217, 222-23 (App. Div. 1992) (citing Weathers v. Hartford Ins. Group, 77 N.J. 228, 233-34 (1978)). The determinative factor is the mailing of the notice, not its receipt. Needham v. N.J. Ins. Underwriting Ass'n, 230 N.J. Super. 358, 369 (App. Div. 1989). Significantly, however, "the insured's,... non-receipt 'is admissible for the purpose of refuting the hypothesis of mailing.'" Valley Nat'l Bancorporation v. Am. Motorists Ins., 316 N.J. Super. 152, 158 (App. Div. 1998) (quoting Weathers, supra, 77 N.J. at 235). In Valley Nat'l, the panel also observed that "Weathers also instructed that the insurer does not establish effective proof of mailing by presenting a certificate of mailing and then representing its standard company policy for preparing and sending notice. More is required." Ibid. (citation omitted).
The facts of Weathers are quite analogous to the facts of this case. In Weathers, the plaintiff failed to pay her final premium installment in a timely manner which prompted the insurer to issue a notice of cancellation. Weathers, supra, 77 N.J. at 230. The plaintiff denied receiving the notice, and on the day after the effective date of cancellation contained in the notice the insurer insisted it sent, plaintiff paid the outstanding premium to the broker who immediately issued his check for the premium installment and forwarded it to the insurer. Id. at 230-31. The next day, plaintiff was involved in an accident. Id. at 231. The insurer refused to accept the premium because it was dated subsequent to the cancellation date, and it declined coverage. Ibid.
At trial, Weathers testified regarding her non-receipt of the notice of cancellation, and the trial judge credited her testimony, finding that the purported cancellation was ineffective. Id. at 232. On appeal, however, we held that the insurer's certificate of mailing for cancellation and its testimony regarding its cancellation procedures were sufficient to satisfy the statutory requirement that the notice had been mailed, and hence, plaintiff's claim of non-receipt was legally irrelevant to the validity of the cancellation. Ibid.
The Supreme Court reversed our ruling, emphasizing that "[i]t is the function of the fact-finder to determine whether such mailing had occurred." Weathers, supra, 77 N.J. at 234. The Court explained:
Although the inference of non-mailing provided by evidence of non-receipt might in most cases be outweighed by the inferences of mailing which may be drawn from a certificate of mailing whose reliability has been established, we discern no cogent reason for depriving the trier of fact of such evidence by holding it inadmissible even for that limited purpose. While, as we have held above, defendant's proofs as to mailing are admissible, they are not conclusive of that issue and do not preclude the existence of a genuine issue of material fact in the face of a claim of non-receipt so as to entitle the insurer to judgment as a matter of law. [Id. at 235.]
Similarly, in this case, Jovil's denial of receipt, though countered by proofs of mailing presented by Merchants, presented a disputed issue of fact that was not so insubstantial that it could be disregarded. Certainly, affording Jovil the favorable inferences required on a motion for summary judgment, the issue of fact should not have been resolved against Jovil as a matter of law.
While the power to cancel an insurance policy is based on contractual agreement, Kubeck v. Concord Ins. Co., 103 N.J. Super. 525, 533-34 (Ch. Div. 1968), aff'd, 107 N.J. Super. 510 (App. Div. 1969), notices of cancellation must be sent in compliance with statutory requirements. Hodges, supra, 260 N.J. Super. at 222-23. In addition, Merchants has correctly observed that courts have not required such compliance where the insured admits receipt of the cancellation notice. Pawlick v. N.J. Auto. Full Ins. Underwriting Ass'n, 284 N.J. Super. 629, 634 (App. Div. 1995). However, in this instance, Jovil does not admit receiving the cancellation notice, and on a motion for summary judgment, the court must view the evidence in the light most favorable to Jovil. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
Notably, the insurer has the burden of proving "'constructive notice by adequately establishing that the notice of cancellation was mailed.'" Needham, supra, 230 N.J. Super. at 370 (quoting Weathers, supra, 77 N.J. at 236). However, proof of mailing "is not conclusive on the issue of mailing." Id. at 369. To establish conclusively the fact of mailing, "'testimony from one who actually mails the notices or letters is necessary.'" Id. at 371 (quoting Cwiklinski v. Burton, 217 N.J. Super. 506, 511 (App. Div. 1987)).
In Needham, the insurer offered proof that it mailed the notice of cancellation to plaintiff, including "a certificate of mailing of the notice of cancellation, a certified office copy of the notice of cancellation and testimony on standard office procedure with respect to the preparation and mailing of notices of cancellation." Id. at 371. However, because the insurer "did not present testimony from the mail clerk who actually mailed the notice of cancellation[,]" the court held that the insured's testimony that it did not receive the notice created a factual issue, properly submitted to the jury. Ibid.
Consistently, the United States District Court for the District of New Jersey has concluded that
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....
[Unger v. Afco Credit Corp., 239 F. Supp. 2d 447, 452-53 (D.N.J. 2002) (citing Kende Leasing Corp. v. A.I. Credit Corp., 217 N.J. Super. 101, 106 (App. Div. 1987)); Needham, supra, 230 N.J. Super. at 371).]
Curiously, both Jovil and Merchants assert a waiver by the other. Jovil asserts that "by changing the payment terms from annual to quarterly and by extending the deadline for payment of the quarterly premium," Merchants waived cancellation of the policy. For its part, Merchants argues, and the judge found, that Jovil waived its right to the notice of cancellation pursuant to its insurance policy because it entered into a verbal agreement to pay the quarterly premium which was conditioned on payment by Monday, June 27.
"Waiver" is the voluntary or intentional relinquishment of a known right. Knorr v. Smeal, 178 N.J. 169, 177 (2003); City of E. Orange v. Bd. of Water Comm'rs, 41 N.J. 6 (1963); Charles Bloom & Co. v. Echo Jewelers, 279 N.J. Super. 372, 384 (App. Div. 1995). It is an election by a "party to dispense with something of value, or to forego some advantage, which that party might have demanded and insisted on." Clarke v. Clarke ex rel. Costine, 359 N.J. Super. 562, 571 (App. Div. 2003) (quoting W. Jersey Title & Guaranty Co. v. Industrial Trust Co., 27 N.J. 144, 152 (1958)); Country Chevrolet, Inc. v. N. Brunswick Twp. Planning Bd., 190 N.J. Super. 376, 380 (App. Div. 1983); State v. Arundell, 278 N.J. Super. 202, 208 (Law Div. 1994).
Although Merchants agreed to accept a quarterly premium instead of the requested annual premium, it did not extend the deadline for receipt of payment beyond its original cancellation date. Rather, by oral agreement with Jovil's broker, Merchants agreed to amend the payment plan from an annual to a quarterly payment, on the condition that Jovil send the first such payment and a letter indicating no losses no later than Monday, June 27, 2005. Jovil's reliance on cases relating to fraud and material breach of contract is irrelevant to this case. The reduction of the amount needed to continue coverage and to avoid cancellation was not a false representation upon which Jovil relied to its detriment. It is the effectiveness of the notice of cancellation and the timing of the remittance that are in dispute.
The trial court concluded that Jovil "waived its right to argue that [Merchants] failed to provide the required notice of cancellation pursuant to its insurance policy[,]" when it "entered into a verbal agreement with [Merchants] on June 24, 2005 which was later memorialized in writing[.]" Notably, "[a]n effective waiver requires a party to have full knowledge of his legal rights and intent to surrender those rights." Knorr, supra, 178 N.J. at 177. There is no evidence that any representative of Merchants spoke with Jovil directly regarding the cancellation or an agreement to modify its terms. If the original cancellation was not in compliance with the regulation and statute, the cancellation would have been deemed ineffective. Munoz, supra, 145 N.J. at 391. The agreement to modify was between Colonial and Merchants, however, even assuming that Colonial was acting with the full knowledge and authority of Jovil, there is nevertheless a factual issue relating to the disparity of the bargaining positions of the respective parties and relating to Jovil's knowledge of what it was waiving by "agreeing" to make the required submissions via overnight mail.
Jovil argues Merchants was required to give new notice of the cancellation reflecting the terms of any agreement modifying the terms of cancellation. N.J.A.C. 11:1-20.2 is specific as to what constitutes adequate notice. Merchants' oral agreement with the Jovil's broker on June 24, 2005 requiring payment by June 27, 2005 would not constitute adequate notice under the Code because (1) it is not a writing delivered or mailed in accordance with the Code; and (2) it was not issued at least ten days prior to the policy expiration date. In addition, it is not in accordance with Merchants' own policy that notice be given "to the first Named Insured."
As stated above, when "an insurer fails to send a notice of non-renewal" as statutorily required, the insured is "entitled to continue the expiring policy at the same terms and premium until such time as the insurer shall send appropriate notice of termination or renewal[.]" N.J.A.C. 11:1-20.2(j). Whether Merchants sent Jovil proper notice of cancellation or non-renewal raises a genuine issue of material fact.
Reversed and remanded for further proceedings.