On appeal from Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-0075-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 25, 2011 - Decided Before Judges Yannotti, Espinosa and Skillman.
Plaintiffs Dominic and Linda Nicolosi purchased a new home that was covered by a home buyer's warranty issued by a private plan approved pursuant to the New Home Warranty and Builders' Registration Act, N.J.S.A. 46:3B-7, rather than the home warranty program administered by the Department of Community Affairs (DCA). The question presented in this case is whether plaintiffs agreed, through an arbitration provision in their home buyer's warranty, that arbitration was the exclusive remedy available to them in their dispute with defendant National Home Insurance Company (NHIC), the insurer for the home warranty issued in the approved private plan. By leave granted, NHIC appeals from the denial of its motion to compel arbitration. For the reasons that follow, we reverse.
The New Home Warranty and Builders' Registration Act (the Act), N.J.S.A. 46:3B-1 to -20, established "a program requiring that newly constructed homes conform with certain construction and quality standards and provides buyers of new homes with insurance-backed warranty protection in the event such standards are not met." N.J.S.A. 46:3B-7.1. To implement this program, the Act prohibits any builder from engaging in the business of constructing new homes unless registered with DCA. As a condition of registration, the builder is required to participate in the home warranty program established by N.J.S.A. 46:3B-7, or "an approved alternate new home warranty security program" (private plan). N.J.S.A. 46:3B-5.
The home warranty program established by N.J.S.A. 46:3B-7 is maintained by the State Treasurer and administered by the Commissioner of DCA pursuant to rules and regulations adopted by the Commissioner. N.J.S.A. 46:3B-3. The Act also provides for an election of remedies for those homeowners whose warranty is administered through the State program. N.J.S.A. 46:3B-9 provides in pertinent part:
Nothing contained herein shall affect other rights and remedies available to the owner. The owner shall have the opportunity to pursue any remedy legally available to the owner. However, initiation of procedures to enforce a remedy shall constitute an election which shall bar the owner from all other remedies.
The Act prescribes a different role for the Commissioner regarding private plans. The Commissioner is authorized and directed to review such private plans and "[i]f the [C]commissioner finds that a new home warranty security program provides coverage and financial security at least equivalent to the new home warranty security fund, he shall approve the program." N.J.S.A. 46:3B-8. The private plan is neither maintained by the State Treasurer nor administered by the Commissioner of DCA but must satisfy the requirements for private plans adopted by the Commissioner, which are set forth in N.J.A.C. 5:25-4.2. Significantly, a private plan is not required to provide an election of remedies provision like that contained in N.J.S.A. 46:3B-9, and, in fact, is explicitly permitted to limit the available remedy to arbitration. N.J.A.C. 5:25-4.2(e) sets forth the private plan's obligation as follows:
A private plan shall provide a complaint, claims and payment procedure which:
1. Provides for an attempt at informal settlement of any claim arising out of the warranty between the builder and the owner and requires that any owner desiring to make a claim provide written notice of the complaint to the builder.
2. Provides for conciliation and/or arbitration of any warranty claim dispute by an independent third party selected and appointed in a manner approved by the Department and disclosed to the owner on or before the warranty date.
3. Provides the owner with an opportunity to accept or reject a conciliation decision in satisfaction of the claim and notice of the opportunity to appeal that decision to a court of competent jurisdiction. [Emphasis added.]
The private plan is further required to provide a full description of the complaint/claims process, a copy of the dispute settlement procedures and "a full description of the manner in which dispute settlement will be conducted under the plan." N.J.A.C. 5:25-4.3(b)(1),(2),(7) and (8)(i). The Commissioner retains authority to revoke or suspend approval for such a program under specific circumstances, including that the plan "[d]eviated in a significant way from the complaint and claims process upon which the approval was based." N.J.A.C. 5:25-4.4(a)(7).
The new home warranty at issue here was not issued through the home warranty program established by N.J.S.A. 46:3B-7, but rather, through a private plan approved pursuant to N.J.S.A. 46:3B-8. At the time they purchased their new home, plaintiffs executed a "Certificate of Participation in New Home Warranty Plan of Home Buyers Warranty." The certificate identifies the warranty guarantor as "National Home Insurance Company (A Risk Retention Group)" located in Colorado, and states that the warranty is offered by Home Buyers Warranty as administrator for NHIC. In executing the certificate of participation, plaintiffs acknowledged receipt of the following warranty documents: Home Buyers Warranty ...