June 24, 2011
MICHAEL KIRK, PLAINTIFF-APPELLANT,
ALLSTATE INSURANCE COMPANY AND RICHARD L. DAWKINS, DEFENDANTS-RESPONDENTS, AND MICHAEL C. PAXTON, ESQ. AND R.C. SHEA & ASSOCIATES, P.C., DEFENDANTS
On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-8304-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 17, 2010 -- Decided Before Judges Fisher and Simonelli.
Plaintiff Michael Kirk became disabled as the result of an automobile accident. His wife, Donna Kirk (Mrs. Kirk), had an automobile insurance policy with defendant Allstate Insurance Co. (Allstate). The policy included bodily injury liability and uninsured/underinsured (UM/UIM) coverage of $100,000/$300,000, property damage liability coverage of $100,000, basic personal injury protection (PIP), including a medical expense benefit of $250,000, and added PIP coverage, including PIP Option 8, which provided income continuation benefits of $700 per week with a maximum of $72,800 for each person (i.e., a two-year maximum).*fn1
Plaintiff alleged that Allstate's agent, defendant Richard Dawkins, negligently failed to assess his insurance needs and advise him of the availability of PIP Option 16, which provides income continuation benefits for as long as the disability continues. In this matter, plaintiff sought to reform the automobile policy to include PIP Option 16.
The Kirks also had a personal umbrella protection (PUP) policy with Allstate, which provided excess liability coverage of up to $5 million. Plaintiff alleged that Dawkins negligently failed to advise him that the policy did not include excess UM/UIM coverage. He sought to reform the PUP policy to include that coverage.
Following a four-day bench trial, the trial judge issued a written opinion and entered judgment in defendants' favor. We affirm.
Mrs. Kirk had an Allstate automobile insurance policy prior to marrying plaintiff.*fn2 Plaintiff became an insured family member under her policy after their marriage in 1977. At that time, Mrs. Kirk's policy included a $700 weekly income continuation benefit for up to one year, which was the maximum coverage automobile insurance companies could offer at the time.
After 1978, Dawkins became the Kirk's Allstate insurance agent. There is no evidence that Dawkins had any training or experience with and gave any information or advice about policies offered by other insurers. Ostensibly, he only knew about and could only sell Allstate policies.
In 1983 or 1984, Mrs. Kirk met with Dawkins to discuss purchasing additional insurance coverage. She subsequently purchased a $1 million PUP policy, which was the maximum excess liability coverage Allstate offered at that time. The policy is a relatively simple one that only provides excess liability coverage. Dawkins testified the policy did not provide excess UM/UIM coverage, and he would have reviewed the policy with Mrs. Kirk at the time of the sale, but would not have gone through the wording of the policy itself. Plaintiff believed the policy included excess liability coverage for the family's automobiles, including excess UM/UIM coverage. However, his belief was based on what Mrs. Kirk had told him; nothing Dawkins said caused him to reach that conclusion.
According to plaintiff's expert, beginning in 1984, New Jersey law required automobile insurance carriers to send their policyholders a Buyer's Guide and coverage selection form. Insurers could not issue a new or renewal policy unless the policy holder filled out and returned the coverage selection form with the coverage options he or she selected. The Buyer's Guide explained, and the coverage selection form listed, all available coverage options, including options for income continuation benefits.
Allstate would renew its automobile policies every six months. Forty days prior to renewal, Allstate would send its policyholder a renewal package containing a Buyer's Guide, a coverage selection form, policy information, and a declaration page that listed the policyholder's current coverage choices. Although plaintiff claimed he never saw the Buyer's Guide, his insurance expert assumed that Allstate sent it and the coverage selection form to its policyholders every six months, as the law required. More importantly, plaintiff admitted receiving the renewal packages, reading the declaration sheets to verify that the name, address, policy number and policy limits were correct, and read nothing further. The declaration sheets listed the selected income continuation benefits of PIP Option 8.
Beginning in 1989, Allstate's coverage selection form included PIP Option 16. Mrs. Kirk did not select that option. Instead, she apparently submitted a coverage selection form selecting PIP Option 8, which replaced the one-year period of income continuation benefits she had selected in 1977. She apparently continued selecting that PIP Option 8 after 1989 because that option appears on the declarations sheet processed on June 17, 1997, for the policy period July 27, 1997, to January 27, 1998. Up until the time of trial, plaintiff never changed that option.
Plaintiff claimed that around 1996, when his son was about to begin driving, he met with Dawkins to obtain additional motor vehicle coverage, specifically desiring adequate UM/UIM coverage; however, he never said he and Dawkins specifically discussed that coverage. Instead, they discussed a $3 million and $5 million PUP policy, which plaintiff claimed Dawkins said "covered everything[,]" and they never discussed coverage available from other insurance companies. They also briefly discussed one- and two-year income continuation options but never discussed PIP Option 16.
According to Dawkins, he knew the PUP policy did not provide excess UM/UIM coverage, and he did not specifically lead plaintiff to believe otherwise; rather, he merely advised generally that the policy "affords excess liability coverage." Plaintiff's expert admitted that (1) Dawkins made clear in his deposition testimony that even without looking at the PUP policy, he knew it did not include excess UM/UIM coverage; (2) the policy contains no exclusions; (3) the insuring agreement governs the terms of the policy's coverage; and (4) UM/UIM is a first party benefit beyond the terms of the insuring agreement. Plaintiff purchased the $5 million PUP policy. He admitted receiving a copy of the policy every year, but never read it before his accident in 1997.
Allstate renewed its PUP policies yearly. Forty days prior to renewal it sent the policyholder the renewal declaration sheet, which lists only one limit for excess liability coverage. Plaintiff admitted that, unlike the declaration sheet for his automobile policy, there were no words referencing UM/UIM coverage on this declaration sheet.
On December 17, 1997, plaintiff sustained injuries in an automobile accident. He applied for and received PIP benefits, including the $700 weekly income continuation benefit, which he received for two years.*fn3 He also sought UM/UIM benefits under the PUP policy, which Allstate denied because the policy provided no such coverage.
The trial judge found that Allstate made its last PIP payment to plaintiff in December 2000, and plaintiff did not file his complaint until 2005. Accordingly, the judge concluded the PIP two-year statute of limitations, N.J.S.A. 39:6A-13.1, barred plaintiff's request to reform the automobile policy to include PIP Option 16.
Addressing the merits of plaintiff's claim to reform the automobile insurance policy to include PIP Option 16, the judge concluded defendants were entitled to immunity pursuant to N.J.S.A. 17:28-1.9 because Allstate complied with its statutory obligation to apprise the plaintiff of the available coverage options. The judge found circumstantially that Allstate sent plaintiff the Buyer's Guide and coverage selection form, and that plaintiff had twenty-six opportunities to review those documents but failed to do so.
Addressing plaintiff's request to reform the PUP policy to include excess UM/UIM coverage, the judge concluded that: (1) the policy clearly excluded coverage for any occurrence arising out of bodily or personal injury to an insured; (2) Dawkins knew the policy did not provide excess UM/UIM coverage; (3) there was no evidence that Dawkins advised plaintiff that the policy provided excess UM/UIM coverage; and (4) Dawkins was an insurance agent for Allstate, not an insurance broker, and he could not sell policies of other companies. The judge also concluded plaintiff was legally chargeable with knowledge of the contents of the PUP policy and the declarations page, and should have read them. This appeal followed.
We first address plaintiff's request to reform the automobile insurance policy to include PIP Option 16. Plaintiff contends the trial judge erroneously applied the two-year PIP statute of limitations, N.J.S.A. 39:6A-13.1, to bar this claim. Relying on Pizzullo v. N.J. Mfrs. Ins. Co., 391 N.J. Super. 113 (App. Div. 2007), rev'd, 196 N.J. 251 (2008), and its subsequent history, he also argues defendants are not entitled to statutory immunity because Dawkins was grossly negligent in failing to advise him of the availability of PIP Option 16, and there is no evidence that Allstate sent him the Buyer's Guide and coverage selection form.
We will not "'disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice.'" Klumpp v. Borough of Avalon, 202 N.J. 390, 412 (2010) (quoting Abtrax Pharm. Inc. v. ElkinsSinn, Inc., 139 N.J. 499, 517 (1995)). "Deference to a trial court's fact-findings is especially appropriate when the evidence is largely testimonial and involves questions of credibility." In re Return of Weapons to J.W.D., 149 N.J. 108, 117 (1997). "However, '[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference[,]'" and is subject to de novo review. Mountain Hill, L.L.C. v. Twp. Comm. of Middletown, 403 N.J. Super. 146, 193 (App. Div. 2008) (first alteration in original) (quoting Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)), certif. denied, 199 N.J. 129 (2009).
Applying these standards, we conclude the trial judge mistakenly applied the two-year PIP statute to bar plaintiff's claim to reform the automobile insurance policy. Plaintiff did not assert a claim for PIP benefits. He asserted a reformation of contract claim, which is subject to a six-year statute of limitations. See Weinisch v. Sawyer, 123 N.J. 333, 342 (1991) (indicating that breach of duty claim giving rise to reformation claim resounds in contract); N.J.S.A. 2A:14-1 (indicating that actions for recovery on contractual claims have a six-year statute of limitations). Plaintiff filed his complaint within the six-year period.
Nevertheless, we agree that defendants are entitled to immunity pursuant to N.J.S.A. 17:28-1.9, which provides, in pertinent part:
a. . . . [N]o person . . . shall be liable in an action for damages on account of the election of a given level of motor vehicle insurance coverage by a named insured as long as those limits provide at least the minimum coverage required by law or on account of a named insured not electing to purchase underinsured motorist coverage, collision coverage or comprehensive coverage. Nothing in this section shall be deemed to grant immunity to any person causing damage as the result of his willful, wanton or grossly negligent act of commission or omission.
b. The coverage selection form required pursuant to [N.J.S.A. 39:6A-23] shall contain an acknowledgment by the named insured that the limits available to him for uninsured motorist coverage and underinsured motorist coverage have been explained to him and a statement that no person . . . shall be liable in an action for damages on account of the election of a given level of motor vehicle insurance coverage by a named insured as long as those limits provide at least the minimum coverage required by law or on account of a named insured not electing to purchase underinsured motorist coverage, collision coverage or comprehensive coverage, except for that person causing damage as the result of his willful, wanton or grossly negligent act of commission or omission.
The statute immunizes an insurer and its agents against claims that an insured was not adequately apprised of all available coverage options. Pizzullo v. N.J. Mfrs. Ins. Co., 196 N.J. 251, 266-67 (2008), rev'g, Pizzullo, supra, 391 N.J. Super. 133; Avery v. Wysocki, 302 N.J. Super. 186, 190 (App. Div. 1997). An election for optional income continuation benefits also falls under the statute's immunity. Mackenzie v. N.J. Auto. Full Ins. Underwriting Ass'n, 299 N.J. Super. 112, 122-23 (App. Div.), certif. denied, 151 N.J. 72 (1997). Thus, immunity applies as long as the insurer establishes each of the following criteria:
(1) the named insured's coverage limits were at least the minimum coverage required by law; (2) the named insured's alleged damages were not caused by a "willful, wanton or grossly negligent act of commission or omission;" and (3) the carrier complied with the coverage selection requirements of N.J.S.A. 17:28-1.9(b). [Baldassano v. High Point Ins. Co., 396 N.J. Super. 448, 453-54 (App. Div. 2007); see also N.J.S.A. 17:28-1.9a.]
There is no dispute that the coverage limits here were at least the minimum coverage required by law. Thus, the issue is whether Dawkins committed a grossly negligent act of commission or omission, and whether Allstate complied with the coverage selection requirements of N.J.S.A. 17:28-1.9(b).
"Gross negligence is the want or absence of, failure to exercise slight care or diligence." Model Jury Charge (Civil), 5.12, "Gross Negligence" (2004). "Gross negligence is an act or omission, which is more than ordinary negligence, but less than willful or intentional misconduct." Ibid. To find gross negligence, "[i]t must appear that the injury was not the result of [mere] inattention, mistaken judgment or the failure to exercise ordinary or reasonable care" in advising plaintiff. Ibid. (emphasis added).
We are satisfied that Dawkins's conduct was nothing more than ordinary negligence. Although PIP Option 16 was available when Dawkins met with plaintiff in 1996, he failed to offer it to plaintiff based on his good-faith mistake about the availability of such coverage.
As for the third criteria, the statutory immunity afforded an insurer "is based on the assumption that the insurer will have complied with the dictates of N.J.S.A. 39:6A-23 by providing the insured with an adequate description of available coverages and their limits." Avery, supra, 302 N.J. Super. at 190. Completion and execution of the coverage selection form by the insured satisfies this requirement. Baldassano, supra, 396 N.J. Super. at 455-56.
We agree that there is strong circumstantial evidence that from 1989 to 1997, Mrs. Kirk completed and executed the coverage selection form, selecting PIP Option 8. Thus, whether plaintiff actually read the Buyer's Guide or coverage selection form is irrelevant. The completion and return of the coverage selection form binds the insured to his choice "'absen[t] . . . evidence showing that he was misled or that there were other circumstances excusing him from scrutinizing the document.'" Dancy v. Popp, 114 N.J. 570, 572 (1989) (citation omitted). No such evidence or circumstances are present here.
Even if statutory immunity did not apply, reformation of the automobile insurance policy is not appropriate in this case. While reformation is available as a remedy for an insurer's failure to comply with notice requirements, see Craig and Pomeroy, New Jersey Auto Insurance Law § 29:2 (2011), plaintiff still bears the obligation of proving his entitlement to that remedy. Therefore, Allstate's failure to send a Buyer's Guide does not equate with proof that reformation is appropriate.
Reformation is an equitable remedy that should only be granted where the party seeking reformation is able to prove by clear and convincing evidence that there is "mutual mistake or unilateral mistake by one party and fraud or unconscionable conduct by the other [party]." St. Pius X House of Retreats, Salvatorian Fathers v. Diocese of Camden, 88 N.J. 571, 577, 580 (1982); Dugan Constr. Co. v. N.J. Tpk. Auth., 398 N.J. Super. 229, 243 (App. Div.), certif. denied, 196 N.J. 346 (2008). Reformation will not be granted based upon a mistake resulting from "the complaining party's own negligence." Millhurst Milling & Drying Co. v. Auto. Ins. Co., 31 N.J. Super. 424, 434 (App. Div. 1954). This is "particularly applicable [when the negligence is related] to the duty imposed upon an insured to examine his policy upon receipt, and if its terms are found to deviate from the original contract agreed upon, to notify the insurer immediately and refuse to accept the policy." Id. at 435.
Since reformation will not be granted based upon a mistake resulting from a plaintiff's own negligence, our inquiry focuses on whether plaintiff's conduct precludes this remedy. In cases like this, where inequitable conduct by the insurer is alleged, "'the insured is bound only to make such examination as would be reasonable for the average person under the particular circumstances[.]'" Dancy, supra, 114 N.J. at 572 (citation omitted). Our Supreme Court has recognized that "'the one page most likely to be read and understood by the insured is the declarations sheet.'" Pizzullo, supra, 196 N.J. at 272 (quoting Zacarias v. Allstate Ins. Co., 168 N.J. 590, 603 (2001)). Because it is "the one page of the policy tailored to the particular insured and not merely boilerplate," the declarations sheet is recognized as a basis for defining "the insured's expectations of coverage." Lehrhoff v. Aetna Cas. & Sur. Co., 271 N.J. Super. 340, 347 (App. Div. 1994). Therefore, at a minimum, the insured must act as "conscientious policyholder," and, upon receipt, "examine the declaration page to assure himself that the coverages and their amounts . . . are accurate and in accord with his understandings of what he is purchasing." Id. at 346-47. The information that appears on the declarations sheet is, therefore, critical to evaluating a reformation request because it is tied to the insured's affirmative duty to examine the insurance policy as issued and notify the company of any inconsistencies uncovered in the examination. See Martinez v. John Hancock Mut. Life Ins. Co., 145 N.J. Super. 301, 310 (App. Div. 1976), certif. denied, 74 N.J. 253 (1977). Here, plaintiff received the renewal packages, which his expert conceded, absent evidence otherwise, contained the Buyer's Guide. Plaintiff also received and reviewed the declaration sheets to verify that the name, address, policy number and policy limits were correct, but did nothing further. His failure to take any action to correct the income continuation benefits precludes reformation of the automobile insurance policy to include PIP Option 16.
For these same reasons, we conclude that plaintiff is not entitled to reformation of the PUP policy to include excess UM/UIM coverage. Reformation is also inappropriate here because plaintiff received the PUP policy but never read it. "[A] policyholder is obliged to read the policy he receives and is bound by the clear terms thereof." Millbrook Tax Fund, Inc. v. P.L. Henry & Assocs., 344 N.J. Super. 49, 53 (App. Div. 2001); see also Martinez, supra, 145 N.J. Super. at 313 (indicating that reformation is inappropriate where the insured failed to properly examine his policy).