THOSE CERTAIN UNDERWRITERS AT LLOYD'S, LONDON SUBSCRIBING TO POLICY NUMBER BUY1780, Plaintiff-Respondent/ Cross-Appellant,
CLEOPATRA, LLC, d/b/a EDEN ROC MOTEL and AFFIFA MICHAEL, Defendants/Third Party Plaintiffs-Appellants/ Cross-Respondents,
KK INSURANCE AGENCY, INC. and KIRAN M. SONDHI, Third-Party Defendants-Respondents.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 4, 2013
On appeal from the Superior Court of New Jersey, Law Division, Cape May County, Docket No. L-0645-10.
Nancy L. Goldstein argued the cause for appellants/cross-respondents (Mark J. Hill & Associates, P.C., attorneys; Mark J. Hill and Ms. Goldstein, on the brief).
Joseph M. Powell argued the cause for respondents/cross-appellants (Powell & Roman, L.L.C., attorneys; Mr. Powell, on the brief).
Michael C. Salvo argued the cause for respondents (Ahmuty, Demers & McManus, attorneys; Mr. Salvo, on the brief).
Before Judges Parrillo, Harris, and Guadagno.
This appeal arises out of a property insurer's denial of a claim resulting from wind and water damage to a Wildwood motel allegedly caused by 2009's Hurricane Ida and related nor'easter. The dispute involves claims, counterclaims, and third-party claims among insured Cleopatra, LLC d/b/a Eden Roc Motel (Cleopatra); Cleopatra's owner, Affifa Michael; property insurer Those Certain Underwriters at Lloyd's, London subscribing to Policy No. BUY1780 (Lloyd's); insurance broker KK Insurance Agency, Inc. (KK); and one of KK's agents, Kiran M. Sondhi. We affirm in part, reverse in part, and remand for further proceedings.
At all relevant times, Michael —— a sixty-year old Egyptian immigrant with a high school education —— owned Cleopatra, which operated The Eden Roc Motel, located on Atlantic Avenue in Wildwood. Sondhi —— employed as an "underwriter" by KK —— assisted Michael with her insurance needs for several years. KK was instrumental in obtaining one-year liability and property insurance policies for the motel in July 2007, and again in July 2008, both of which were underwritten by non-party Seneca Specialty Insurance Company (Seneca).
In January 2008, prior to the weather events that are the subject of the present appeal, the motel sustained water damage resulting from high winds and heavy rains. After having the damage appraised, Cleopatra submitted its claim to KK, who then sent a loss notice to Seneca seeking reimbursement under the extant policy. Seneca determined that the amount of damages incurred was $5, 685, but denied coverage due to the policy's windstorm or hail exclusion, resulting in Cleopatra's out-of-pocket payment to fund repairs.
Cleopatra elected to change insurance brokers for the ensuing policy year. After selecting the Schick Insurance Agency (Schick), Michael submitted an application on Cleopatra's behalf for liability and property insurance in July 2008. An unrelated syndicate at Lloyd's underwrote the subsequent commercial property policy that was issued for a one-year term.
In March 2009, the motel suffered a $6, 740 loss, described in Schick's April 15, 2009 property loss notice as "wind damaged roof & water leaked into room 13 & room 29 & hallway – 2nd floor." In June 2009, the motel was paid $5, 740 for the claimed damages by the insurer.
A second claim, seeking $4, 595, alleged that on June 10, 2009, a pipe burst in the bathroom ceiling of room eleven, "causing a water loss to unit[s] 10 & 11." On December 3, 2009, the insurer paid $3, 407.68 with respect to the loss.
Meanwhile, beginning in April 2009, KK —— through Sondhi, operating on his own initiative because Cleopatra was then no longer KK's client —— sought to procure insurance for the motel. On April 9, 2009, as part of the unsolicited application process initiated by Sondhi, a commercial insurance application was prepared on behalf of Cleopatra with respect to the motel. The application required a "Prior Carrier History, " which was completed to disclose the Seneca and other Lloyd's syndicate policies. The application also contained a "Loss History" section that read:
Enter all claims or losses (regardless of fault and whether or not insured) or occurrences that may give rise to claims for the prior 5 years (3 years in KS & NY).
KK's response to this section of the application indicated, "None."
Lloyd's used Bass Underwriters (Bass) to underwrite its new property insurance policies. Although Bass was able to issue a policy quote, binding coverage was not possible without a signed insurance application accompanied by proof that an applicant's "loss record is clean." On June 19, 2009, in furtherance of procuring insurance for Cleopatra, KK sent an e-mail and a proposed application to Bass underwriter Julia Sauceda requesting a quote. After not hearing from Sauceda, Sondhi sent another e-mail to Sauceda eleven days later, on June 30:
Subject: "Urgent!!! Cleopatra LLC DBA EDEN ROCK MOTEL . . . eff. d[a]te 07/12/09[.]
On the above account I am just wondering if you need any further information or if you have the quote yet.
Please let us know the quote ASAP.
Let me know if you have any questions.
K.K. Insurance Agency
Sauceda immediately sent the following response:
Kiran, I can get you this quote today . . . I was trying to get it approved by management first because there was some unfavorable info we found online. If loss record is clean. I can push this through. Do you happen to have either loss runs or can you give me confirmation that there have been no losses?
Let me know and we'll take it from there.
Sondhi's assistant responded to Sauceda, stating, "Right now we do not have the loss run and as per our record, there is [sic] no losses. We will try to get the current loss history later." Sondhi claimed he later sent loss run statements to Sauceda before the present Lloyd's policy was issued, but Sauceda stated that she —— and therefore Lloyd's —— never received those statements.
On June 30, 2009, Sauceda sent the Lloyd's insurance quote to Sondhi for "Package W-Wind" Coverage for Cleopatra for a one-year term to commence on July 12, 2009. The insurance quote specifically stated:
In accordance with the instructions of the below mentioned insurer, which has acted in reliance upon the statements made in the retail broker's submission for the insured, the ...