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Robert and Antonia Flaherty v. Dalton Insurance Agency


May 5, 2011


On appeal from Superior Court of New Jersey, Law Division, Camden County, Docket No. L-13-06.

Per curiam.


Argued November 10, 2010

Before Judges Fuentes, Gilroy and Ashrafi.

Plaintiffs Robert and Antonia Flaherty appeal from an order granting summary judgment to defendant Dalton Insurance Agency, LLC (Dalton) on their claim of negligent procurement of insurance for Robert Flaherty's employer. We affirm.

Viewed most favorably to plaintiffs, see R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995), the evidence presented in Dalton's summary judgment motion revealed the following facts. Flaherty was employed as an investigator with the law firm of Tomar, Simonoff, Adourian, O'Brien, Kaplan, Jacoby & Graziano. The Tomar firm provided a vehicle to Flaherty for his business and personal use. In February 2000, Flaherty was injured in a motor vehicle accident while driving the firm's vehicle for personal reasons.

Because he claimed the extent of his injuries exceeded the $300,000 liability coverage of the other driver's insurance policy, Flaherty filed a claim for underinsured motorist coverage with Harleysville Insurance Company, the carrier that had issued a business motor vehicle policy to the Tomar firm. The Harleysville policy had been procured for the Tomar firm by defendant Dalton in 1999, and it had a $1,000,000 coverage limit for underinsured motorist claims.

However, the policy also contained a step-down provision that reduced the limits of underinsured motorist coverage to any lower limit fixed in a personal automobile policy that covered a claimant other than one who was a "named insured" of the Harleysville policy. The only named insured in the policy was the Tomar firm. Flaherty was also covered by a personal automobile policy issued by Eagle Insurance Company to his wife. That policy had coverage limits of $50,000 per person and $100,000 per accident for underinsured motorist claims.

Harleysville denied Flaherty's claim based on the step-down provision of its policy, asserting that the lower policy limits of the Eagle Insurance policy were applicable and that the other driver had insurance coverage exceeding those limits. Flaherty eventually settled his lawsuit against the other driver for $285,000.

In December 2005, plaintiffs brought the current cause of action against Harleysville and Dalton for coverage under the Tomar firm's business policy. The claim against Harleysville was that the step-down provision of the policy was not enforceable. The claim against Dalton was that it had negligently procured a policy with the step-down provision rather than a policy that provided $1,000,000 of underinsured motorist coverage for any employee driving a vehicle owned by the Tomar firm.

Dalton filed a third-party complaint against J.S. Braddock Agency as the insurance agent that had originally procured a policy from Harleysville for the policy period preceding Flaherty's accident.

In 2009, Harleysville successfully appealed before us the trial court's denial of its motion for summary judgment. In an unpublished opinion, we stated that the step-down provision of the policy had been determined to be enforceable by the Supreme Court in Pinto v. N.J. Mfrs. Ins. Co., 183 N.J. 405 (2005). We further held that legislation enacted after Pinto to prohibit such step-down provisions, N.J.S.A. 17:28-1.1f, was to be applied prospectively only, as we had previously held in Olkusz v. Brown, 401 N.J. Super. 496, 499 (App. Div. 2008). Flaherty v. Harleysville Ins. Co., A-3796-07 (App. Div. June 11, 2009). As a result of our decision, Harleysville was dismissed from the case.

Dalton then moved for summary judgment alleging that, before Pinto, it did not owe a duty to advise a business insured such as the Tomar firm regarding how it might avoid a step-down clause of a policy. The trial court agreed and granted summary judgment dismissing plaintiffs' complaint by order dated January 22, 2010. Plaintiffs moved for reconsideration, arguing that Pinto was not the relevant case but that Dalton's duty should be determined in accordance with the subsequent holding of the Supreme Court in Pizzullo v. N.J. Mfrs. Ins. Co., 196 N.J. 251 (2008). The trial court denied the motion for reconsideration by order dated March 5, 2010. Plaintiffs filed a notice of appeal from the two orders.*fn1

In Pinto, supra, 183 N.J. at 417, the Supreme Court stated:

An employer can cover employees as "named insureds" provided appropriate language is added stating such an intention. Finally, to avoid having an employer misapprehend whether there is a need to include specific language incorporating employees as "named insureds" on business automobile policies, we impose on insurers, their agents, and brokers, a duty to inform employers about the necessity for such language so that employers may make informed decisions about whether their employees will have the status of "named insureds" under the employers' business automobile insurance policies.

Before the trial court, Dalton argued that the duty imposed in the quoted language was intended to apply prospectively and did not affect its procurement of insurance for the Tomar firm in 1999, six years before Pinto was decided. Plaintiffs argued that the quoted language was dictum and did not alter Dalton's pre-existing fiduciary duty to obtain $1,000,000 of underinsured motorist coverage for all employees driving firm cars. We agree with the trial court's conclusion that the duty imposed upon an insurance agent such as Dalton by the quoted language from Pinto was intended to apply prospectively.

In their appellate brief, plaintiffs have focused their argument more narrowly on Dalton's duty to provide a policy as requested by its insured, the Tomar firm.*fn2 Plaintiffs contend that their allegation of negligence is not limited to Dalton's failure to advise the Tomar firm to list Flaherty and other employees as "named insureds" on the business policy. They argue instead that Dalton's negligence was in failing to procure the specific coverage requested by the Tomar firm, namely, a policy that would provide $1,000,000 underinsured motorist coverage for all employees driving the firm's vehicles without regard to whether they were named insureds or not. Plaintiffs contend such policies without step-down clauses were readily available in 1999 but Dalton failed to procure one or to inform the Tomar firm of their availability.

In Pizzullo, supra, 196 N.J. at 263-68, the Supreme Court addressed the scope and applicability of a statutory immunity provision, N.J.S.A. 17:28-1.9a, enacted for the purpose of protecting insurance companies, agents, and brokers from liability for failing to advise an insured to obtain better coverage than the insured selected. In that case, the insured had specifically requested a separate new automobile policy for his wife that would have equal coverages as his existing policy. Id. at 256. The carrier's representative had mistakenly told the insured that a joint policy for both husband and wife would provide the same coverages, but the underinsured motorist coverage of a joint policy would limit the recovery of each to one-half the maximum amount if both were severely injured in a single accident. Id. at 258.

The Court held the statutory immunity applied to circumstances where the insured had been provided accurate information about coverage choices and had elected a lower level of coverage than available. Id. at 268. It did not apply to the "truly unique" factual circumstances before the Court in Pizzullo, where the insured had specifically requested a particular level of coverage and had been misinformed about the coverage the carrier's policy would provide. Id. at 256-58.

The summary judgment record in this case does not support plaintiffs' assertion that their claim against Dalton is controlled by Pizzullo. Citing deposition testimony and a certification of Ronald Graziano, the managing partner of the Tomar firm, plaintiffs argue that Dalton was asked to procure underinsured motorist coverage of $1,000,000 for all employees of the firm operating a vehicle owned by the firm. Graziano stated he did not request that the policy be obtained from Harleysville and would not have accepted the Harleysville policy had he realized that it contained the step-down provision.

There is no evidence, however, of a specific conversation of Graziano or any other representative of the Tomar firm with Dalton regarding coverage of $1,000,000 for every driver. Rather, there was a general request regarding the policy limit on underinsured coverage. More important, there was no evidence of an "inaccurate answer" to a specific coverage request, id. at 258, or an "affirmative misrepresentation to plaintiff," id. at 260, that every employee driving a Tomar vehicle would have $1,000,000 of underinsured motorist coverage through the Harleysville policy.

The testimony and certification of Graziano differ from the unique factual circumstances of Pizzullo because Dalton did not affirmatively misrepresent the nature and limits of the Harleysville policy it obtained. In fact, the Harleysville policy contained a limit of $1,000,000 for underinsured motorist coverage. The negligence of Dalton that the evidence might establish, if viewed most favorably to plaintiffs, is Dalton's failure to advise the Tomar firm that a step-down clause in the policy would affect the coverage level for drivers unless they were named insureds in the policy. Dalton failed to advise the Tomar firm that it might choose to list all drivers of its vehicles as named insureds in the Harleysville policy. That is precisely the advice that the Supreme Court discussed in Pinto, but imposed only as a prospective duty. Advising the firm to select another carrier that used different policy language amounts to essentially the same advice in the circumstances of this case.

In the absence of evidence of affirmative misrepresentation by Dalton, plaintiffs have alleged breach of a duty that did not exist until the Supreme Court imposed it in 2005.


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