April 13, 2012
ELLIOTT KOMINSKY, PLAINTIFF-APPELLANT,
C.B. PLANNING SERVICES CORPORATION, MONTE SPERLING, ROBERT BLOCK, INSURANCE INNOVATIONS AGENCY, INC., JOSEPH STRACZEWSKI AND NORMAN FELD, DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-797-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted February 1, 2012
Before Judges Fuentes, J. N. Harris and Koblitz.
Plaintiff Elliott Kominsky appeals from the February 9, 2011 order entered after a plenary hearing granting summary judgment to defendants C.B. Planning Services Corporation (C.B.), Monte Sperling, Robert Block, Insurance Innovations Agency, Inc. (IIA), Joseph Straczewski and Norman Feld. The judge found that Kominsky's complaint was time-barred by the six-year limitation of actions. N.J.S.A. 2A:14-1. Plaintiff maintains that the hearing judge erred in finding the cause of action accrued in March 2001 and in refusing to apply the discovery rule. Plaintiff further asserts the judge made inappropriate credibility findings. After considering the issues in light of the facts and prevailing law, we affirm.
Kominsky filed a complaint on June 14, 2007, alleging claims of professional malpractice, breach of fiduciary duty, and consumer fraud*fn1 against C.B., Sperling, Block, IIA, Straczewski, and Feld. Defendant brokers sold Kominsky life insurance policies in 1989, 1992 and 1995. Kominsky claims the brokers failed to discuss with him the availability of a waiver of disability premium option in those policies. On October 9, 2009, summary judgment was entered in defendants' favor. We reversed the trial court's dismissal of Kominsky's complaint and directed the court to hold an evidentiary hearing pursuant to Lopez v. Swyer, 62 N.J. 267 (1973), on the issue of whether Kominsky's complaint was time-barred under N.J.S.A. 2A:14-1, or whether the discovery rule should be applied to toll the statute. Elliott Kominsky v. C.B. Planning Services Corporation, Monte Sperling, Robert Block, Insurance Innovations Agency, Inc., Joseph Straczewski And Norman Feld, A-1344-09T3 (App. Div. September 9, 2011).
The Lopez hearing revealed the following facts. Kominsky obtained two Transamerica life insurance policies in 1989 from Sperling and Block, both of whom were employed at the time by C.B. Section 4(e) of the applications listed four additional coverage options with instructions to place a check next to the desired option. One of the options was a "Waiver of Premium." Sperling testified that he informed Kominsky of the additional coverage options. Sperling stated he did so because the inclusion of such an option in a policy would increase his commission. Kominsky, on the other hand, testified that neither Sperling nor Block informed him of the additional coverage options. He further testified that Sperling asked him certain questions and filled out the application. Kominsky stated that he then signed the applications without reading them. The signature page to the applications signed by Kominsky includes a declaration, which states in part:
It is represented that I have read the statements and answers given in this application and they are true, complete, and correctly recorded to the best of my knowledge and belief.
The two policies were issued on December 18, 1989.
Straczewski testified to replacing the 1989 policies in 1992 with a policy from the Hartford Insurance Company. He further testified to completing the insurance application by asking Kominsky the questions and filling in his answers. On the first page of the application was a section titled "Additional Benefits." Within that section was a "Waiver of Premium" option. Straczewski attested to discussing this option with Kominsky, including its significant cost, but Kominsky declined the option. Attached to that policy was a "Waiver of Premium Rider," which explains the terms and conditions associated with incorporating that option into the policy.
Feld testified that Kominsky approached him in 1995 to purchase a life insurance policy through CNA to replace the 1992 Hartford policy. He stated they had a detailed discussion about the waiver of premium option. Feld also submitted office notes, which he alleged memorialized this discussion. On August 12, 1995, after completing the application for the CNA life insurance policy, Kominsky suffered a massive heart attack. He testified to deciding at that point to retain both the Hartford and CNA policies.
After his heart attack, Kominsky ceased working for about three weeks. He collected disability benefits pursuant to disability policies he had at the time. During that period, he spoke with a friend, Bruce Mactas, also an insurance broker. Kominsky acknowledged that during their conversation, Mactas informed him that he did not have to pay the premiums on his disability policies while collecting benefits. After he ceased collecting benefits, he resumed paying the premiums. He testified that he did not inquire if his life insurance premiums would be waived in case of disability.
Kominsky suffered another health setback during 2000 and 2001. He testified that his doctor informed him that the stress of working was causing irreparable damage to his heart. Kominsky stated that he ceased working pursuant to his doctor's advice on June 29, 2001, the date on which he sold his business.
Kominsky never purchased a waiver of premium option on any of the life insurance policies. He also testified that he never read his policies. He maintained throughout his testimony that he had never heard anything about a waiver of premium option for life insurance until another meeting with Mactas in 2002. During the 2002 meeting, Kominsky claimed that Mactas reviewed his life insurance policies and pointed out the lack of a waiver of disability premium. Kominsky then asked Feld about the waiver option, who Kominsky claims responded by stating that he did not feel it was necessary because of the numerous disability policies Kominsky had in place. Kominsky took no legal action at that time.
Kominsky then testified to contacting Block in 2005. Kominsky submitted a handwritten note into evidence, which he asserts memorializes the content of their discussion. It states that in speaking to Block at 5:00 PM on November 11, 2005, Block informed him that they "did not offer, push or sell a waiver on premiums on disability policies in the million dollar [amount][;] only on small policies." The note is initialed and dated by Kominsky.
Our standard of review is well-recognized. We review the record to determine whether the facts as found by the trial judge are supported by substantial credible evidence. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974). If so, we then proceed to determine whether the judge properly applied the law to the facts as found. Ibid. No deference is owed to the trial judge's interpretation of the law or "to the legal consequences that flow from established facts." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). Instead, questions of law are reviewed de novo. Yellen v. Kassin, 416 N.J. Super. 113, 119 (App. Div. 2010).
The judge found that Kominsky's professional malpractice and breach of fiduciary duty claims accrued in March 2001 when he was "advised" by his physician that he was permanently disabled, and thus it was at that point that the statute of limitations commenced to run. Kominsky argues that the judge failed to correctly apply the governing standard. He further challenges the judge's finding of a March 2001 accrual date on grounds that no legally cognizable injury existed at the time, and "there was never any testimony, documentation, or other evidence in the record" to support such a finding.
Professional malpractice arises from the theory of negligence.*fn2 Grunwald v. Bronkesh, 131 N.J. 483, 492 (1993). Mere knowledge of negligence, however, does not cause a professional malpractice claim to accrue. Olds v. Donnelly, 150 N.J. 424, 437 (1997). Such a claim accrues "'when: (1) the claimant suffers an injury or damages; and (2) the claimant knows or should know that its injury is attributable to the professional negligent advice.'" Vision Mortg. Corp., Inc. v. Patricia J. Chiapperini, Inc., 307 N.J. Super. 48, 55 (App. Div. 1998) (quoting Circle Chevrolet Co. v. Giordano, Halleran & Ciesla, 142 N.J. 280, 296 (1995)).
Kominsky argues first that the judge's determination of the accrual date focused solely on prong two of the accrual test. That is, he asserts the trial judge "focused on when [Kominsky] knew or should have known that an injury was attributable to negligent professional advice," but neglected to address whether Kominsky actually suffered injury and, if he did, when.*fn3
Contrary to Kominsky's assertion, the judge did address the first prong. He found that in March 2001, the claim starts to come home in terms of a potential real loss . . . it seems to the [c]court there's certainly injury, even if the damages have not yet actually started to flow, but there's certainly knowledge that I'm [going to] have to continue to pay premiums and maybe I shouldn't. . . . [this] seems to be sufficient injury to . . . [have] made this case a real one.
The judge clarifies later that Kominsky's "injury" was "the obligation to make the [premium] payments" after being informed by the doctor of his disability. Thus, Kominsky's contention that the judge did not address the accrual test's first prong is inaccurate.
Kominsky further argues that the judge erred in finding the date of injury to be the March 2001 date on which the doctor advised him of his medical condition. Kominsky maintains that no injury occurred until his circumstances satisfied the insurance policy's definition of "totally disabled."
The Hartford insurance policy defined "total disability" as "a disability which: a) results from bodily injury or disease;
b) begins while this policy and this rider are in force; c) has existed continuously for at least 6 months; and d) prevents the insured from engaging in an occupation." Prior to the satisfaction of these elements, Kominsky avers, he was not totally disabled under the policy, and thus he would not have been entitled to a waiver of premiums. Therefore, in Kominsky's view, there was no legally cognizable injury resulting from defendants' conduct on which to base a claim for malpractice until he ceased working on June 29, 2001.
The judge cited Grunwald in finding that a cause of action can accrue "even if the chickens have not yet fully come home to roost." Thus, the judge determined that once Kominsky had knowledge of his disability, and either knew or should have known of defendants' alleged negligent conduct and its potential consequences, his claim sprang to life, even though he had yet to experience any quantifiable damages as a result.
The issue in Grunwald was whether the statute of limitations on a legal malpractice claim begins to run after the claimant suffered an adverse judgment in the trial court or after the completion of the appellate process. Grunwald, supra, 131 N.J. at 487. In Grunwald, the client paid the attorney for legal representation to draft and execute certain documents. Id. at 487-88. The client then suffered an adverse judgment in reliance on the attorney's negligent advice. Id. at 488-89. The damages incurred through the adverse judgment included the fees paid to the attorney, which the Court recognized as legally cognizable damages. Id. at 495. The Court ultimately determined that the statute of limitations commenced to run after judgment in the trial court. Id. at 500. Although the extent of actual damages is unclear at that stage, an adverse judgment notifies a party of the facts underlying a legal malpractice cause of action (i.e., damage and discovery that the damage is attributable to the attorney's negligent advice). Id. at 499-500. Such notice is sufficient to trigger its accrual. Id. at 500.
The circumstances here are not sufficiently distinct to nullify Grunwald's precedential effect. Kominsky incurred no measurable damages until he made his first premium payment after being "totally disabled" under the policy's definition. It was not until that time that he began to incur actual damages attributable to defendants' alleged negligent advice. However, "'[i]t is not necessary that all or even the greater part of the damages . . . occur before the cause of action arises.'" Vision Mortg., supra, 156 N.J. at 586 (quoting Grunwald, supra, 131 N.J. at 494) Legally cognizable damages are sufficient to trigger a claim's accrual. See Grunwald, supra, 131 N.J. at 495.
In an attorney malpractice case, "[l]egally cognizable damages occur when a plaintiff detrimentally relies on the negligent advice of an attorney." Grunwald, supra, 131 N.J. at 495. In such a case, the attorney's affirmative act of giving negligent advice has an immediate effect, even if the extent of the negative consequences remains uncertain. See Vision Mortg. Corp. v. Patricia J. Chiapperini, Inc., supra, 156 N.J. at 586 (noting that accrual of a cause of action is not delayed because damages are uncertain).
The judge found that Kominsky was informed in March 2001 that he would be unable to continue working. It was at this time, the judge stated, that Kominsky, "as a sophisticated businessman . . . would've been well on notice . . . that he had an issue that needed to be addressed," and thus his cause of action accrued. See Holmin v. TRW, Inc., 330 N.J. Super. 30, 35 (App. Div. 2000) (reiterating that "the date when a cause of action is deemed to have "'accrued'" is the date upon which the right to institute and maintain a suit first arises.") (quoting Hartford Accident & Indem. Co. v. Baker, 208 N.J. Super. 131, 135-36 (Law Div. 1985)) (internal quotations and citation omitted). We agree that a legally cognizable harm arose at the moment when Kominsky should have known he had not been given sound advice in executing his insurance contracts.
Kominsky further alleges that the judge erred in refusing to apply the "discovery rule" to the applicable statute of limitations. The statute governing the accrual of a cause of action and the filing time limits for the claims alleged by Kominsky sets forth a six-year statute of limitations. See Fraser v. Bovino, 317 N.J. Super. 23, 34 (App. Div. 1998). This period may be extended, however, pursuant to the discovery rule. See, e.g., Grunwald, supra, 131 N.J. at 492; Lopez, supra, 62 N.J. at 272.
The discovery rule delays accrual of a cause of action "'until the injured party discovers, or by an exercise of reasonable diligence and intelligence should have discovered that he may have a basis for an actionable claim.'" R.L. v. Voytac, 199 N.J. 285, 299 (2009) (quoting Lopez, supra, 62 N.J. at 272). "'The linchpin of the discovery rule is the unfairness of barring claims of unknowing parties.'" Caravaggio v. D'Agostini, 166 N.J. 237, 245 (2001) (quoting Mancuso v. Neckles, 163 N.J. 26, 29 (2000)). The party "claiming the indulgence of the rule" bears the burden of proving its application is warranted. Lopez, supra, 62 N.J. at 276.
The rule's focus is directed "upon an injured party's knowledge concerning the origin and existence of his injuries as related to the conduct of another person." Mant v. Gillespie, 189 N.J. Super. 368, 373 (1983) (quoting Lynch v. Rubacky, 85 N.J. 65, 70 (1981)). "Such knowledge involves two key elements, injury and fault." Lynch, supra, 85 N.J. at 70.
When a plaintiff seeks a right to relief from the bar of the statute of limitations pursuant to the discovery rule, "the question as to whether such relief is properly available shall be deemed an issue for determination by the court rather than by the jury." Lopez, supra, 62 N.J. at 272. The judge's determination "should ordinarily be made at a preliminary hearing . . . ." Id. at 275.
A Lopez hearing is intended to assist a judge in determining whether a party "is equitably entitled to the benefit of the discovery rule." Id. at 275. Because the discovery rule is, at its core, a rule of equity, the court "must consider elements of fairness pertaining to all parties, not just to those asserting the benefits of the rule." Lapka v. Porter Hayden Co., 162 N.J. 545, 558 (2000). Thus, "not every belated discovery . . . will justify an application of the rule lifting the bar of the limitations statute." Lopez, supra, 62 N.J. at 275. The court must consider "[t]he interplay of the conflicting interests of the competing parties . . . ." Ibid. The decision of whether to apply the rule should therefore "be made by a judge and by a judge conscious of the equitable nature of the issue before him [or her]." Ibid. (footnote omitted).
In assessing whether to apply the rule, [a]ll relevant facts and circumstances should be considered. The determinative factors may include but need not be limited to: the nature of the alleged injury, the availability of witnesses and written evidence, the length of time that has elapsed since the alleged wrongdoing, whether the delay has been to any extent deliberate or intentional, whether the delay may be said to have peculiarly or unusually prejudiced the defendant.
[Id. at 275-76.]
The task before the judge was to conduct an evidentiary hearing, after which he was directed to "apply Lopez and its progeny to the circumstances of this case[.]" The judge first addressed the nature of the injury. He determined the injury to be Kominsky's continued obligation to make premium payments after learning of his disability. He found this injury was a direct result of Kominsky's failure to read his policies and develop a clear picture of their practical implications in light of his changing circumstances.
The judge next considered the length of time since the alleged wrongdoing. Given his findings that the policies at issue were obtained in 1989, 1992, and 1995, he opined that allowing Kominsky to benefit from the discovery rule after waiting until 2007 to file his complaint would "stretch . . . the equitable policies of the. . . discovery rule . . . beyond recognition."*fn4
The judge then acknowledged that both the witnesses and the written evidence relating to the matter remain available. He discarded this factor, however, by reiterating that the passage of time since the alleged wrongdoing was a "very persuasive factor."
In assessing whether the delay was deliberate or intentional, the judge concluded that it was intentional. The judge cited to Kominsky's testimony regarding a 2005 conversation between Kominsky and Block. Kominsky testified that he contacted Block to inquire as to why Block never informed him of the waiver of premium option. The judge found that Kominsky contacted Block with knowledge of defendants' potential wrongdoing. Thus, in his view, the delay was intentional, as there "was no reason not to have filed suit a lot earlier" than 2007.
As to the last factor mentioned in Lopez, the judge determined that the delay prejudiced defendants. He explained that a jury would likely have difficulty resolving the dispute because of the delay. He further opined that the delay would impact defendants' ability to mount an adequate defense.
In light of his findings as to each of these factors, the judge concluded that "it would be inequitable to force the defendants to go to trial in this matter at this point."
After considering "[t]he interplay of the conflicting interests of the competing parties," Id. at 275, the judge found that a majority of the Lopez factors weighed in defendants' favor.
Kominsky bore the burden to prove that the facts and circumstances warrant application of the discovery rule. After considering the testimony and written evidence, the judge found that Kominsky failed to sustain that burden and dismissed his complaint as time-barred. The judge acted within his discretion in reaching this conclusion.
Kominsky contends in his third argument that the judge erroneously made credibility assessments as to the ultimate issue in the case; whether the defendants had advised Kominsky on the availability of the waiver of premiums option. After hearing the testimony, the judge indicated that he thought Kominsky was informed of the waiver of premiums option when obtaining the life insurance policies in 1992 and 1995, but noted that finding would be a jury question if not for the statute of limitations issue. The judge found, based largely on Kominsky's own testimony, that Kominsky was aware that a waiver of premiums option was available when his doctor told him to stop working in March 2001. Thus, the judge determined that Kominsky failed to sustain his burden of proving why the facts and circumstances warrant application of the discovery rule so as to extend the statute of limitations.
On remand, we instructed the court to assess the credibility of the parties and other witnesses, to identify, evaluate, and weigh the equitable claims of the parties, and to conduct a Lopez hearing to determine if the discovery rule should be applied. The judge acted in accordance with our instructions.