September 28, 2010
USMAN A. RASHABOV, PLAINTIFF-APPELLANT, AND STELLA RASHABOV, PLAINTIFF,
STEVEN A. ALFUSO, DCFS TRUST, VANESSA H. DELIA, COLLEEN A. TROY, KATHLEEN A. TROY, DEFENDANTS.
STELLA N. AYVAZOVA, GULCHEKHRA M. RASHABOVA AND KAMOL A. RASHABOV, PLAINTIFFS,
VANESSA H. DELIA, STEPHAN ALFUSO, KATHLEEN A. TROY, COLLEEN A. TROY, USMAN RASHABOV, DEFENDANTS, AND SELECTIVE INSURANCE COMPANY, DEFENDANT-RESPONDENT.
KATHLEEN TROY, PLAINTIFF,
VANESSA H. DELIA, STEPHEN ALFUSO, DCFS TRUST, DEFENDANTS.
On appeal from the Superior Court of New Jersey, Law Division, Passaic County, Docket Nos. L-2910-07, L-852-07 and L-1142-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 15, 2010
Before Judges Fuentes, Gilroy and Ashrafi.
Plaintiff Usman Rashabov appeals from an order for summary judgment dated September 30, 2008, dismissing his claims for coverage by defendant Selective Insurance Company (Selective) for injuries he suffered in a motor vehicle accident. He also appeals from an order of March 20, 2009, denying in part his motion for reconsideration. The issue is whether Selective is required to provide personal injury protection (PIP) benefits to plaintiff despite inaccurate information contained on his application to Selective for automobile insurance regarding the number of residents in his household. We affirm the grant of summary judgment to Selective.
In reviewing a grant of summary judgment, we apply the same standard under Rule 4:46-2(c) that governs the trial court. See Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007). We must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). On this appeal, we review the facts most favorably to plaintiff based on the summary judgment record, which consists of the deposition testimony of plaintiff and his wife, affidavits by representatives of Selective, and relevant documents, most significantly, the insurance application.
In April 2005, plaintiff, who is of Turkish descent, immigrated to the United States from Russia as a refugee. He did not speak English. He came with his wife, his parents, and two brothers. The family moved into a residence on Knickerbocker Avenue in Paterson. By the fall of 2005, plaintiff had obtained employment and a driver's license.
In November 2005, plaintiff purchased a used minivan from an auto dealership in Paterson. An employee of the dealership, known to plaintiff only as Slovik, spoke Russian and assisted plaintiff with the necessary documents for the purchase. Because the dealership would not release the car to him until he obtained an automobile insurance policy, Slovik helped plaintiff purchase the policy from Selective.
Slovik completed the insurance application in plaintiff's presence. According to plaintiff, Slovik "briefly" translated "the gist of it." Plaintiff assumed that Slovik translated "whatever he considered important." Slovik asked plaintiff some questions as he filled out the form, but plaintiff could not recall the questions other than where he lived and the zip code for that address. Plaintiff signed the application after it was completed and translated as described.
The insurance application contained a section entitled "RESIDENT AND DRIVER INFORMATION," which instructed the applicant to "list all residents and dependents (licensed or not) and regular operators." Plaintiff's application listed only himself in that section. At the time, however, November 2005, and at all other relevant times, plaintiff resided in the same single-family home with his wife, father, mother, and two brothers, all of whom were adults. Plaintiff could not remember whether Slovik asked him about other residents of his household.
Above plaintiff's signature on the application was an "APPLICANT'S STATEMENT":
I have read the above application and any attachments. I declare that the information provided in them is true, complete, and correct to the best of my knowledge and belief. This information is being offered to the company as an inducement to issue the policy for which I am applying.
Selective issued an automobile insurance policy to plaintiff, effective November 28, 2005, which included coverage for PIP benefits, as required by N.J.S.A. 39:6A-4.
At the time of the application, plaintiff was the only member of his household who held a driver's license. Plaintiff's wife had been issued a learner's permit on November 21, 2005, a few days before the application for insurance. She later obtained her driver's license in June 2006. Additionally, plaintiff's two brothers obtained driver's licenses a few months after the purchase of the vehicle. Selective was not notified of these developments in plaintiff's household.
On August 6, 2006, plaintiff was driving the minivan on the Garden State Parkway when an accident occurred with two other vehicles. Plaintiff was injured, as were his wife, mother, and brother, who were passengers in the minivan. Plaintiff received treatment of injuries to his knee and back billed at more than $48,000. Plaintiff's wife and other family members also incurred similar medical expenses for their injuries. The bills were submitted to Selective for payment under the PIP coverage of the policy. Selective did not pay the medical bills.
Subsequently, plaintiff and his injured family members filed complaints in the Law Division against Selective seeking coverage.*fn1 Selective conducted an investigation of the plaintiff's application and, by letter dated November 26, 2007, formally rescinded the insurance policy effective the date of its issuance, November 28, 2005. The rescission letter alleged that plaintiff had "willfully made false statements as to material matters in the documents submitted in support of [the] application for insurance." It described the allegedly false statements as follows:
The application and follow up questionnaire reflect that you, Usman A. Rashabov, were the only household resident at [your prior and] current residence. . . . Our investigation has revealed that your wife, Stella, reside [sic] at the policy address.
Please be advised you failed to identify and list Stella as a licensed member of your household.
Selective declined to pay PIP benefits on behalf of plaintiff and his wife.*fn2
On September 30, 2009, the trial court granted Selective's motion for summary judgment dismissing the claims for PIP coverage. Plaintiff and his wife filed motions for reconsideration.
By order dated March 20, 2009, the court modified its September 30 order as to plaintiff's wife only, holding that she was entitled to PIP benefits as an innocent third party because her marriage to plaintiff was not recognized in Russia, and hence, was also not recognized in New Jersey.*fn3 The trial court denied plaintiff's motion for reconsideration as to him. This appeal followed. Selective has not cross-appealed from the ruling requiring that it pay PIP benefits on behalf of plaintiff's wife.
On appeal, plaintiff argues that, to rescind the insurance policy, the carrier must prove that his misrepresentation was intentional, and here, disputed issues of fact exist as to his intent and his knowledge of the questions and answers on the application form. He contends that he did not understand the questions and did not intentionally provide false answers. Additionally, plaintiff argues that defendant failed to establish a material misrepresentation. He asserts that he had married his wife in a religious ceremony that he alleges was not recognized in Russia, and therefore, he did not misrepresent his marital relationship. He also contends that none of his family members had a driver's license in November 2005.
New Jersey courts recognize that insurance policies are "contracts of the utmost good faith." Progressive Cas. Ins. Co. v. Hanna, 316 N.J. Super. 63, 69 (App. Div. 1998). Not only must insurance carriers deal fairly with the insured but the insured must also deal fairly with the insurance carrier. In this regard, the New Jersey Supreme Court has repeatedly upheld the duty of insurance applicants not to misrepresent or conceal material information. See, e.g., Mass. Mut. Life Ins. Co. v. Manzo, 122 N.J. 104 (1991); Longobardi v. Chubb Ins. Co., 121 N.J. 530 (1990).
For an insurance carrier to rescind a contract of insurance, the insured's misrepresentation must be knowing and material. Longobardi, supra, 121 N.J. at 540. The carrier need not prove, however, that the insured harbored an intent to defraud the carrier. Ibid.
The Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to -30, makes it unlawful for an applicant to: make any written or oral statement, intended to be presented to any insurance company or producer for the purpose of obtaining:
(b) an insurance policy, knowing that the statement contains any false or misleading information concerning any fact or thing material to an insurance application or contract. [N.J.S.A. 17:33A:4a(4).]
See also N.J.S.A. 17B:24-1.1d and -3d (With respect to life insurance, health insurance, or annuities, insurance carrier is not liable if it relied on false statements in application, but a false statement does not bar benefits unless it "materially affected either the acceptance of the risk or the hazard assumed by the insurer.")
The focus of these statutes is on the effect that a knowing misrepresentation has on the decision of the carrier to issue a policy of insurance and the rates charged, not on the intent of the insured. See Manzo, supra, 122 N.J. at 113-14. When an applicant has knowingly made a material misrepresentation in connection with obtaining an insurance policy, New Jersey courts recognize the right of the carrier to rescind the policy. LaCroix, supra, 194 N.J. at 527.
Disputing that he knew information in the application was inaccurate, plaintiff argues that because he lacked experience with obtaining insurance and did not speak English, he should not be held responsible for the false statement in the application that he was the only resident of his household. He claims that he did not understand the question, and that he does not remember it being translated for him by Slovik. We reject plaintiff's argument.
We have noted that the insured is "chargeable with knowledge of the terms and contents of the policy, and of the application which became a part of it." Allstate Ins. Co. v. Meloni, 98 N.J. Super. 154, 160 (App. Div. 1967) (internal citation omitted). Our courts have long recognized the presumption that, absent fraud, misconduct, or overreaching, a party to a written contract "read, understood, and assented to its terms." Fortunel v. Martin, 114 N.J. Eq. 235, 241 (E. & A. 1933) (citing Fivey v. Pennsylvania R.R. Co., 67 N.J.L. 627, 632 (E. & A. 1902)). The Supreme Court has consistently confirmed this principle of contract law. See, e.g., Rudbart v. N. Jersey Dist. Water Supply Com'n, 127 N.J. 344, 353, cert. denied sub nom. First Fidelity Bank v. Rudbart, 506 U.S. 871, 113 S.Ct. 203, 121 L.Ed. 2d 145 (1992); Henningsen v. Bloomfield Motors Inc., 32 N.J. 358, 386 (1960).
The inability of plaintiff to speak English does not absolve him of his obligations under a contract. Even where a contracting party cannot read, there is a presumption against the signer of a contract unless the other party engaged in fraud or misconduct in procuring the contract. See Paruch v. Rasiewicz, 124 N.J.L. 356, 359-60 (Sup. Ct. 1940) (parol evidence inadmissible to prove claim that plaintiff was illiterate and did not understand partnership agreement). A party to a contract must take the opportunity to understand its terms before signing it. See ibid.
Here, plaintiff could not read the application that he signed, but he had the opportunity to understand the questions through an interpreter he selected. He claims that Slovik did not translate all the questions, but it was plaintiff's obligation to assure himself that he understood what he was signing. Plaintiff cannot now claim ignorance of the questions on the application when Selective did nothing to prevent him from understanding them.
The law presumes that plaintiff understood what he was signing, an application falsely representing that he was the only resident of his household. There is no disputed issue of fact that plaintiff knew his wife, mother, father, and two brothers were residing with him at the time he signed the application.
Although innocent mistakes may refute the presumption of knowing misrepresentation, plaintiff bears the burden of overcoming that presumption. He cannot meet that burden on this summary judgment record. Plaintiff can only say that Slovik translated the important parts of the application for him, and he does not remember what specific questions Slovik asked him as he was completing the form.
Viewing the application form in conjunction with plaintiff's deposition testimony, there is no doubt that Slovik went far beyond asking plaintiff for his address and zip code. The application form also contains other specific information, such as the address for plaintiff's place of employment and information about his intentions with respect to use and storage of the vehicle. The application contains specific yes or no answers to a list of questions about the circumstances of plaintiff's use of the car, other insurance in the household, and the status of other household members. "Yes" is checked in answer to a question about the vehicle being parked in the street. These parts of the application contain information that Slovik could not have answered without plaintiff's participation. Having obtained answers to such specific questions, no reasonable inference can be drawn from the evidence that Slovik failed to inquire about residents of plaintiff's household in responding to a specific question on the application form requesting that information.
Even if the relevant inquiry were what questions Slovik actually translated, plaintiff could not say affirmatively in his deposition that Slovik failed to ask him a question about other residents of his household. In the deposition, plaintiff was asked: "Do you remember whether he asked you who was living in your household?" Plaintiff answered: "No, I don't remember." Consequently, he cannot refute the presumption that he is responsible for the false representation that no other persons resided with him.
In Merchants Indem. Corp. v. Eggleston, 68 N.J. Super. 235, 251 (App. Div. 1961), aff'd, 37 N.J. 114 (1962), we distinguished between an insurance applicant's concealment of a matter specifically asked and one that was not. We noted that "if the concealment relates to a matter specifically inquired of, the state of mind of the insured may be immaterial; in such an instance, the concealment by the insured would in effect constitute a misrepresentation." Ibid. On the other hand, if the applicant concealed a fact not inquired about in the application, then the insurance carrier would need to demonstrate purposeful fraud to justify voiding the policy. Ibid.
In this case, the misrepresentation was on a matter specifically asked. The application unambiguously required the applicant to "list all residents and dependents (licensed or not) and regular operators." Selective was not required to prove that plaintiff intended to misrepresent that information or to commit a fraud.
Plaintiff argues alternatively that the false information was not a material misrepresentation because none of the other members of his family were licensed drivers at the time of the application and he was not legally married to his wife at that time. He argues that Selective did not establish for purposes of summary judgment that the information about other residents of his household would have affected its decision to issue the policy or the rates charged.
A misrepresentation or concealment in an insurance application is material if "a reasonable insurer would have considered the misrepresented fact relevant to its concerns and important in determining its course of action." Bastien, supra, 175 N.J. at 148 (citing Longobardi, supra, 121 N.J. at 542). A misrepresentation is material if it "naturally and reasonably influences the judgment of the under-writer in making the contract at all, or in estimating the degree or character of the risk, or in fixing the rate of premiums." Manzo, supra, 122 N.J. at 115. To justify rescission, the carrier must show that it relied upon the misrepresentation and that such reliance was reasonable. Meloni, supra, 98 N.J. Super. at 160.
In support of its motion for summary judgment, Selective submitted the signed affidavit of Carol Ann Cruts, employed as a lead underwriter for Selective. She stated:
The information concerning drivers and residents in the household in the application for insurance is essential information which affects the assessment of risk and premium charged and such essential information is relevant to Selective and its underwriting concerns and course of action. Simply put, this is vital information needed to make underwriting decisions for prospective insureds.
Plaintiff has no evidence to refute this contention. He claims that more specific information about the rates that would apply is necessary to determine whether the misrepresentation is material. In LaCroix, supra, 194 N.J. at 523-24, however, the Court described two main coverage classes of potential PIP beneficiaries under an auto policy, resident members of the household and other third parties who might be injured in connection with use of the vehicle. What happened in this case illustrates the importance of the carrier having accurate information about household residents. Although plaintiff declared only himself as a resident, three other members of his family besides plaintiff were injured while riding in the insured vehicle. The unrefuted statement of Selective's representative that the information was essential to its underwriting decision was sufficient without specific rating quotations to establish its materiality.
Finally, the legality of plaintiff's marriage in Russia is irrelevant to the issues on this appeal. Whether or not plaintiff's marriage would be recognized in New Jersey, his wife and other family members were residents of his household that he failed to list in response to a specific question asking for that information. For the same reason, the licensure status of the family members at the time of the application does not alter the essential misrepresentation, that plaintiff lived alone.