January 10, 2012
ANDRES ESPINOZA, PLAINTIFF-APPELLANT,
DARNELL R. THOMPSON, DARNELL M. THOMPSON, AMERICAN TRANSPORTS INSURANCE CORPORATION AND SHORT TERM AUTO RENTAL INCORPORATED, DEFENDANTS, AND GRM ENTERPIRSES, INC., U-SAVE AUTO RENTAL A/K/A ALMOST NEW RENTALS, AND LINCOLN GENERAL INSURANCE COMPANY, DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-2142-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 20, 2011 -
Before Judges Messano, Yannotti and Espinosa.
Plaintiff Andres Espinoza appeals from the Law Division's order of September 16, 2010, granting summary judgment to GRM Enterprises, Inc., U-Save Auto Rental a/k/a Almost New Rentals (collectively GRM), and Lincoln General Insurance Company (LGI) (collectively, defendants). We have considered the arguments made in light of the record and applicable legal standards. We affirm.
On June 12, 2007, plaintiff was injured when the bicycle he was riding struck the passenger door of a vehicle operated by defendant, Darnell R. Thompson, and owned by GRM. Thompson had rented the car from GRM.
Darnell M. Thompson was a passenger in the car at the time, although it is unclear from the record whether he opened the door that struck plaintiff. Plaintiff filed a negligence complaint against Darnell R. Thompson and GRM.
Discovery revealed that when he rented the vehicle, Thompson purchased a supplemental liability insurance (SLI) policy. The vehicle was also covered by a mandatory minimum liability policy issued to GRM by LGI. Plaintiff's unsuccessful attempts to obtain discovery, including information from GRM regarding the SLI policy and any premium payments GRM may have made to the policy's issuer, led to an order striking GRM's answer and defenses.
On June 26, 2009, plaintiff filed an amended complaint naming both Darnell M. and Darnell R. Thompson, GRM, LGI, American Transports Insurance Corporation (ATIC), and Short Term Auto Rental Incorporated (Short Term) as defendants. In addition to the negligence count, plaintiff alleged: 1) he was a third-party beneficiary of the SLI policy purchased by Thompson; 2) GRM violated the Consumer Fraud Act, N.J.S.A. 56:8-1 to -184 (the CFA), by "falsely represent[ing] that . . . plaintiff . . . would be indemnified for losses and damages arising from the use and operation of the rental vehicle" by Thompson; 3) common law fraud against GRM; and 4) all defendants violated the Racketeer Influenced and Corrupt Organizations statute, N.J.S.A. 2C:41-1 to -6.2 (RICO). On September 3, defendants answered the amended complaint. No answer was filed on behalf of either Thompson, ATIC or Short Term.
On February 5, 2010, defendants were granted leave to deposit $15,000, the policy limits under the LGI policy, with the court. On March 19, their motion to restore their answer and defenses was granted over plaintiff's objection. On July 26, defendants moved for summary judgment, on their own behalf, and on behalf of Darnell M. Thompson, claiming the amended complaint was filed beyond the statute of limitations.
The motion judge entertained oral argument on September 16. Noting discovery had ended, the judge concluded that plaintiff "ha[d] to present something more" regarding defendants' potential liability. He observed that GRM had produced a policy procured from ATIC, and, despite plaintiff's assertion that the policy was "a sham," the judge concluded plaintiff failed to "present facts" permitting an inference that the policy "[wa]s not a real policy." He granted defendants summary judgment.*fn1
Plaintiff moved to enter defaults against the Thompsons and ATIC. On October 12, the court entered final default judgment in favor of plaintiff against the Thompsons and ATIC in the amount of $250,000. This appeal followed.*fn2
Plaintiff first contends that it was error to grant summary judgment on his third-party beneficiary claim because GRM procured "an insurance policy with a nonexistent carrier that [wa]s not authorized to do business in the State of New Jersey."*fn3
Intrinsic to this argument is plaintiff's claim that GRM acted as an insurance broker or agent in procuring the SLI policy.
The record reveals that Thompson purchased the SLI policy when he rented the vehicle from GRM. He was charged an additional $8.95 per day for the coverage. Pursuant to the rental agreement, the vehicle was to be returned on June 11, 2007, the day before the accident.
Kathryn E. Coon, the owner of GRM, testified at deposition that she first became aware of plaintiff's accident when she received a letter on his behalf from an attorney. It was GRM's practice to supply the customer with a brochure explaining the SLI coverage. The brochure indicated that the SLI policy provided coverage in the amount of $950,000, the difference between the policy limit of $1,000,000 and the "minimum required $50,000" coverage "provided in [the] rental agreement." It is undisputed that the LGI policy only provided liability coverage in the amount of $15,000 per person and $30,000 per accident.
The SLI policy was furnished by ATIC, and Coon procured it through an insurance broker, Paul Sweeney, who represented a company called "Cars.com" or "Cars, Inc." A declaration page issued to GRM revealed that ATIC was headquartered in Pago Pago, American Samoa, and the limit of liability coverage under the SLI policy was $1,000,000.
Coon testified that she remitted premium payments for the SLI policy, although she could not produce documents to support the assertion at the deposition. There were no claims ever presented to GRM implicating the ATIC policy or any other SLI policy GRM had purchased. Coon was distressed over the problems that arose during this litigation regarding ATIC's policy, noting, "when I buy insurance, if I sign for something, I expect the insurance company to provide that coverage in a time of need."
In a certification filed in support of plaintiff's motion to amend the complaint, plaintiff's counsel certified that he called the offices of ATIC, spoke to a "Russell Wilson," notified him of plaintiff's claim, and sought written confirmation of the ATIC policy. Counsel's requests to confirm the existence of the ATIC policy were unsuccessful because Wilson never responded thereafter.*fn4
It is universally accepted that an insured has a viable claim for professional negligence against an insurance broker or agent who fails to procure the policy requested. See President v. Jenkins, 180 N.J. 550, 568-69 (2004) (stating the general duty of brokers and agents and collecting cases applying the principle). The duty imposed on a broker or agent includes an obligation to investigate the financial viability of the insurer. Carter Lincoln-Mercury, Inc. v. Emar Group, Inc., 135 N.J. 182, 200 (1994). The duty of a broker or agent extends beyond the insured to those who "are within the zone of harm emanating from a broker's negligence." Id. at 203; see also, Werrmann v. Aratusa, Ltd., 266 N.J. Super. 471, 475 (App. Div. 1993) (noting that "it is reasonably foreseeable, from the viewpoint of an insurance agent or broker, that an innocent party who is injured by the tortious conduct of the insured may be left without a means of redress if the insured's liability policy is allowed to lapse").
We express no disagreement with these precedents or others cited by plaintiff. However, every case is premised upon the professional duty owed by an insurance broker or agent. Therefore, in this case, plaintiff's claim against GRM rests upon a showing that it acted as an insurance broker or agent. In this regard, plaintiff failed.
GRM was in the business of renting cars, not selling insurance. GRM was itself the named insured on the ATIC policy. By choosing the optional coverage, Thompson became an additional insured under the ATIC policy.
Plaintiff has secured a judgment against ATIC. If indeed the policy was a sham, plaintiff may have a cause of action against Sweeney. The undisputed testimony is that Coon procured the policy on GRM's behalf through Sweeney, a broker who solicited her business. Arguably, Sweeney did not perform his duties in a professional manner. However, under the facts presented, plaintiff's third-party claim against GRM for allegedly failing to procure SLI insurance when Thompson rented the vehicle was properly dismissed.
Next, plaintiff argues that summary judgment should not have been granted on his CFA, common law fraud, and RICO claims. Again, we disagree.
A violation of the CFA can arise in three different settings. Gennari v. Weichert Co. Realtors, 148 N.J. 582, 605 (1997). An affirmative misrepresentation, even if unaccompanied by knowledge of its falsity or an intention to deceive, is sufficient. Ibid. (citing Strawn v. Canuso, 140 N.J. 43, 60 (1995)). An omission or failure to disclose a material fact, if accompanied by knowledge and intent, is also sufficient to violate the CFA. Ibid. (citing Cox v. Sears Roebuck & Co., 138 N.J. 2, 18 (1994)). Lastly, "[t]he third category of unlawful acts consists of violations of specific regulations promulgated under the [CFA]. In those instances, intent is not an element of the unlawful practice, and the regulations impose strict liability for such violations." Cox, supra, 138 N.J. at 18.
In this case, plaintiff asserted only that GRM affirmatively misrepresented the existence of SLI coverage. We note initially that plaintiff had no contact with GRM, and so his theory of liability is premised upon the attenuated claim that GRM made its misrepresentation to Thompson. Plaintiff has failed to cite any authority that supports the proposition that he can assert a CFA claim that arguably rests with Thompson.
We need not consider that issue, however, because plaintiff's proofs regarding any alleged affirmative misrepresentation by GRM were non-existent. GRM produced the ATIC policy. Coon testified that she remitted policy premium payments to Sweeney. Plaintiff's assertions regarding inconsistencies between the ATIC policy, the LGI policy and earlier policies Coon identified that provided general minimum liability coverage do not give rise to a colorable claim that GRM misrepresented the existence of SLI coverage to anyone, or that the ATIC policy produced was a forgery. The motion judge properly determined that plaintiff's proof was insufficient, and he appropriately granted summary judgment.
Plaintiff's common law fraud claim fails for the same reasons. "The five elements of common-law fraud are: (1) a material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the other person; and (5) resulting damages." Gennari, supra, 148 N.J. at 610 (citation omitted). As already noted, plaintiff failed to demonstrate that there was a misrepresentation regarding the existence of SLI coverage.
Plaintiff's argument that his RICO claim presented a colorable jury issue lacks sufficient merit to warrant discussion. R. 2:11-3(e)(1)(E). "The gravamen of a RICO violation . . . is the involvement in the affairs of an enterprise through a pattern of racketeering activity." State v. Ball, 141 N.J. 142, 155 (1995), cert. denied sub nom., Mocco v. New Jersey, 516 U.S. 1075, 116 S. Ct. 779, 133 L. Ed. 2d 731 (1996). "A 'pattern of racketeering activity' requires '[e]ngaging in at least two incidents of racketeering conduct' that 'embrace criminal conduct' and are interrelated." Franklin Med. Assocs. v. Newark Pub. Schs., 362 N.J. Super. 494, 513 (App. Div. 2003) (alteration in original) (citing N.J.S.A. 2C:41-1(d)). It suffices to say that plaintiff failed to demonstrate that GRM engaged in criminal conduct.
Plaintiff next argues it was error for the motion judge to restore defendants' pleadings because they failed to comply with his discovery demands. In two interlocutory orders entered on March 19, 2010, the judge granted defendants' motion to restore, finding they supplied "sufficient responses" to the delinquent discovery. The order permitted plaintiff "to seek to compel more sufficient response[s]." There is no indication that plaintiff moved for more responsive answers to his discovery demands before the motion for summary judgment was made.
The judge entered a second order denying plaintiff's request to suppress the pleadings with prejudice. In support of that motion, plaintiff asserted that the earlier order striking defendants' pleadings without prejudice remained in effect, and they had not supplied the delinquent discovery. See R. 4:23-5(a)(2) ("If an order of dismissal or suppression without prejudice has been entered . . . and not thereafter vacated, the party entitled to the discovery may, after the expiration of 60 days from the date of the order, move on notice for an order of dismissal or suppression with prejudice."). However, in denying plaintiff's motion, the judge noted that defendants had moved to restore their pleadings and supplied the discovery. See St. James AME Dev. Corp. v. City of Jersey City, 403 N.J. Super. 480, 485 (App. Div. 2008) (noting that a motion to reinstate should be granted if accompanied by fully responsive discovery served prior to the hearing on the motion to dismiss with prejudice). In short, the judge did not mistakenly exercise the broad discretion accorded to him regarding discovery issues. See Rivers v. LSC P'ship, 378 N.J. Super. 68, 80 (App. Div.) (noting that we generally will not disturb the decision unless it reflects "a mistaken understanding of the applicable law"), certif. denied, 185 N.J. 296 (2005).
Plaintiff raises two final arguments. He contends that the $250,000 judgment entered against the Thompsons and ATIC should be entered against defendants. And, because the SLI policy limits assumed a minimum of $50,000 coverage under the rental agreement, and the LGI policy only provided $15,000, judgment should be entered against defendants for the difference, i.e., $35,000. Neither of these arguments was raised before the motion judge. We refuse to consider them for the first time on appeal. See Nieder v. Royal Indemn. Ins. Co., 62 N.J. 229, 234 (1973) ("It is a well-settled principle that our appellate courts will decline to consider questions or issues not properly presented to the trial court when an opportunity for such a presentation is available . . . .").