Bates v. Gambino

• Decision Date: 15 February 1977
• Citation: 370 A.2d 10,72 N.J. 219
• Parties: John BATES and Virginia Bates, Plaintiffs-Respondents, v. Vincent J. GAMBINO, Defendant-Appellant.
• Court: New Jersey Supreme Court

Page 219

72 N.J. 219

370 A.2d 10

John BATES and Virginia Bates, Plaintiffs-Respondents, v. Vincent J. GAMBINO, Defendant-Appellant.

Supreme Court of New Jersey.

Argued Nov. 5, 1975.

Decided Feb. 15, 1977.

John S. Triarsi, Roselle Park, for defendant-appellant (Pisano & Triarsi, Roselle Park, attorneys).

John L. McGuire, Jr., Elizabeth, for plaintiffs-respondents (Stein, Stein, Hughes & McGuire, Elizabeth, attorneys).

Edward Krowen, Rockaway, filed a brief on behalf of amicus curiae Ins. Brokers Ass'n of N.J. (Stephen C. Gilbert, Newark, on the brief).

PER CURIAM.

Plaintiffs seek damages from defendant, a licensed insurance broker, charging him with breach of contract and negligence in processing an application for fire and extended coverage insurance for their home. Coverage was applied for through the New Jersey Insurance Underwriting Association (N.J.I.U.A.). The application was in fact approved and the appropriate notice went to plaintiffs on June 28, 1970, twelve days after their home was destroyed by fire. At the time of the disaster there was no fire insurance covering the premises.

The trial judge, sitting without a jury, concluded there was 'no breach of duty or contract' and found for defendant. The Appellate Division reversed and remanded the cause, instructing the trial judge to enter judgment in favor of plaintiffs and assess damages. 133 N.J.Super. 162, 336 A.2d 1 (1975). We granted certification to review that determination, 68 N.J. 166, 343 A.2d 454 (1975), and now affirm substantially for the reasons set forth in Judge Morgan's opinion for the Appellate Division.

Before this Court defendant argues that (1) 'the existence of a reliance by plaintiffs on defendant' is not supported by the evidence, (2) the defendant was not negligent as a matter of law in the absence of 'proof of a standard of professionalism' alleged to have been violated by defendant, and (3) plaintiffs were contributorily negligent by their 'failure to procure insurance through another broker.' The Appellate Division opinion's resolution of the last of these issues (133 N.J.Super. at 168, 336 A.2d 1) is quite sufficient and requires no further elaboration. As to the first and second grounds of appeal--no proof of plaintiffs' reliance on defendant, and plaintiffs' failure to establish a standard of professionalism--we augment the opinion below as follows, taking the points in inverse order.

I

The specific negligence charged against defendant was his failure to have been aware of the immediate availability of coverage through a temporary binder on June 6, 1970, some ten days prior to the fire, and to have informed plaintiffs of the same. Defendant's position was that he could not have known such coverage was available since he had not received from N.J.I.U.A. a copy of the rule (Regulation H.--Temporary Binder), promulgated about a year prior to the application in question by the Commissioner of Banking and Insurance, which provided for issuance of a temporary binder when an applicant was not notified of acceptance or rejection of his application for insurance within 25 days after its receipt.¹ Although the trial judge decided this issue adversely to defendant, he went on to hold that absent any indication by the broker that he was effecting or could effect insurance, and absent any reliance by plaintiffs to the contrary, liability could not attach to defendant.

The Appellate Division perceived this holding as erroneous and correctly identified the central issue in the case as whether defendant possessed the necessary skill and knowledge required of one who holds himself out to the public as an insurance broker when he admittedly did not know such temporary coverage as was provided by Regulation H was available. It said:

(D)efendant was under a duty to know the rules governing the Association's issuance of policies which the judge found were in defendant's possession at the time and to advise plaintiffs, whom he then knew were uninsured, that immediate coverage was available. His admitted failure to know and to advise did constitute a breach of duty even though plaintiffs, too, knew they were, at the time, uninsured. They thought they were uninsured because immediate coverage was unavailable. That information was inaccurate insofar as it pertained to the period of time following 25 days of inaction after the Association's receipt of plaintiffs' application. (133 N.J.Super. at 167, 336 A.2d at 4.)

and went on to hold that

(i)n these circumstances judgment in plaintiff's favor for the damages suffered as a result of defendant's dereliction in duty should have been entered as a matter of law. (Id.)

That holding is not vulnerable on account of plaintiffs' failure to establish by independent proof the professional standard which defendant broker allegedly violated. An early expression of the standard the law imposes upon insurance brokers is found in Milliken v. Woodward, 64 N.J.L. 444, 45 A. 796 (Sup.Ct.1900). There the defendant brokers misrepresented to the insurance company the information given them by the plaintiffs. The company denied coverage and plaintiffs sued. Finding the defendants as fire insurance brokers had held themselves out as possessing sufficient skill requisite to the calling, the court stated that 'if ordinary skill and diligence is (sic) not exercised, the neglect is actionable if it proximately results in loss or damage.'

A broker is a specialist employed as a middleman to negotiate between the parties to a sale or other business contract, and they (sic) must exercise customary skill in the preparation of such documents as are requisite to effectuate the business which they have in hand. (Id. at 448, 45 A. at 798.)

The Milliken court itself established the standard without requiring plaintiffs to do so. Judge Conford recognized this in Barton v. Marlow, 47 N.J.Super. 255, 135 A.2d 670 (App.Div.1957) (defendant broker negligently failed to keep plaintiffs insured for automobile damage coverage). 'With respect to establishment of the defendant's duty, there was no necessity of proving a standard of professional care, within the Dictim in Milliken v. Woodward * * *.' Id. at 259--60, 135 A.2d at 672.

Both Milliken and Barton v. Marlow involve what might be considered more flagrant negligence than the present defendant's. However, this Court in Rider v. Lynch, 42 N.J. 465, 201 A.2d 561 (1964), set forth a standard of care that seems almost tailored to the facts in this case.

One who holds himself out to the public as an insurance broker is required to have the degree of skill and knowledge requisite to the calling. When engaged by a member of the public to obtain insurance, the law holds him to the exercise of good faith and reasonable skill, care and diligence in the execution of the commission. He is expected to possess reasonable knowledge of the types of policies, their different terms, and the coverage available in the area in which his principal seeks to be protected. If he neglects to procure the insurance or if the policy is void or materially deficient or does not provide the coverage he undertook to supply, because of his failure to exercise the requisite skill or diligence, he becomes liable to his principal for the loss sustained thereby. (Id. at 476, 201 A.2d at 567 (emphasis added).)

Our case law, then, has already established the professional, or more accurately, legal requirements of a broker.² Tested against the emphasized language above, which specified a general level of competence against which to measure a broker's conduct, defendant's failure to meet that level is readily apparent. In the circumstances before us the 'standard of professionalism' was not required to be proven by plaintiffs. Defendant failed to meet the expectations of the law and his negligence was established.

It follows from this that plaintiffs were not obligated to present evidence of what a similarly situated competent broker in the community would have done under the circumstances. Where condust falls below a certain standard, establishing the standard of competence generally expected of like practitioners becomes irrelevant. What usually is done may be evidence of what ought to be done, but what ought to be done is fixed by a standard of reasonable prudence, whether it usually is complied with or not. (Texas & P.R. Co. v. Behymer, 189 U.S. 468, 470, 23 S.Ct. 622, 623, 47 L.Ed. 905, 906 (1903) (Holmes, J.).)

That statement reflects a principle in the substantive law of negligence: there exists a fixed standard of conduct irrespective of the actual conduct of others. See generally 2 Wigmore, Evidence (3d Edition 1940), § 461 at 488--501. Thus our pertinent cases frame this legal standard in terms of requisite skill and diligence, see Milliken v. Woodward, supra at 448, 45 A. 796. Where the finding is made that defendant lacked the knowledge required by law and this ignorance resulted in damage to plaintiffs, inquity into the level of competence expected of the industry is pointless....