Brynildsen v. Ambassador Ins. Co.

• Citation: 113 N.J.Super. 514,274 A.2d 327
• Parties: Robert H. BRYNILDSEN, Plaintiff, v. AMBASSADOR INSURANCE COMPANY, a corporation of the State of Vermont doing business in the State of New Jersey, Defendant.
• Decision Date: 16 February 1971
• Court: Superior Court of New Jersey

Page 514

113 N.J.Super. 514

274 A.2d 327

Robert H. BRYNILDSEN, Plaintiff, v. AMBASSADOR INSURANCE COMPANY, a corporation of the State of Vermont doing business in the State of New Jersey Defendant.

Superior Court of New Jersey Law Division.

Feb. 16, 1971.

[274 A.2d 328] Lee Trucker, Somerville, for plaintiff (Norris, McLaughlin & Trucker, Somerville, attorneys).

Allan Maitlin, Newark, for defendant (Feuerstein, Sachs & Maitlin, Newark, attorneys).

BEETEL, J.C.C. (temporarily assigned).

This case comes before the court on cross-motions for summary judgment brought by the parties under R. 4:46--2. There appearing to be no genuine issue as to the facts involved, it would appear that this matter is ripe for determination.

On or about April 17, 1968 one Stanley Lenzner purchased a fire insurance policy from defendant on premises owned by him at 292 Peshine Avenue in Newark, New Jersey. The face amount of the policy was $5,000, and it ran from April 17, 1968 to April 17, 1969. Attached to the body of the policy and made a part thereof was a 'warranty endorsement' ¹ by which the insured party warranted that there was 'in full force and effect, covering the same property insured hereunder a policy of insurance identical with this policy in all respects, * * * issued by Jefferson Insurance Co. in the amount of $10,000.00.' Another policy of insurance in the amount of $5,000, issued by the Cumberland Insurance Co., was also in effect when the policy written by defendant became effective, but no reference to the Cumberland policy appears in the warranty clause or elsewhere in defendant's policy.

On November 15, 1968 plaintiff purchased the premises from Lenzner. In December 1968 the Jefferson policy was cancelled, and when voluntary placement could not be made, it was replaced by a $20,000 policy issued by Aetna Insurance Company through the 'Fair Plan' or assigned risk plan. Plaintiff's attorney frankly conceded at the hearing on the motion that no notice of the cancellation by Jefferson or the obtaining of the Aetna policy was given to Ambassador by plaintiff or plaintiff's attorney, and does not contend that it had no opportunity to do so.

On January 28, 1969 the insured property was damaged by fire to the extent of approximately $18,000.00. Defendant has refused to admit liability, maintaining that the warranty endorsement was breached by the cancellation without notification.

I

Plaintiff urges that since defendant's position under its contract of insurance was strengthened rather than prejudiced by the substitution of the Aetna policy for the Jefferson policy, in that its potential liability was clearly diminished, this court should prevent Ambassador from denying liability by following the rationale set forth in Cooper v. Government Employees Insurance Co., 51 N.J. 86, 237 A.2d 870 (1968).

Defendant, on the other hand, urges that since there are no ambiguities contained in the language of the warranty, and since plaintiff admits there was no notification of change of insurance company or amount of coverage, the warranty was plainly breached and the policy coverage therefore was voided. Defendant alleges that whether its position was hindered or helped by the activities is irrelevant when dealing with the question of breach of an express warranty.

This court is in accord with the general principle of the law of insurance that forfeitures are not looked upon with favor, and is disposed to avoid forfeiture if by reasonable interpretation it can do so. Neilson v. American Mut. Liab. Ins. Co., 111 N.J.L. 345, 168 A. 436 (1933). It would appear to be the duty of this court to construe a forfeiture clause in such a manner as to confer coverage, where an interpretation defeating forfeiture is reasonably deducible from the terms or words used. Hampton v. Hartford Fire Ins. Co., 65 N.J.L. 265, 47 A. 433 (1900); 3 Williston on Contracts, §§ 620 and 790; 3 Corbin on Contracts 115, § 552. See also Rockmiss v. New Jersey Mfrs., etc., Co., 112 N.J.L. 136, 169 A. 663 (1933). The insurer having in most cases drawn the particular policy, all doubt as to the construction of terms in an insurance policy is to be construed most strongly against the insurer and in favor of the insured. Jorgensen v. Metropolitan Life Ins. Co., 136 N.J.L. 148, 151, 55 A.2d 2 (1947); Connell v. Commonwealth Cas. Co., 96 N.J.L. 510, 115 A. 352 (E. & A.1921).

The words of an insurance policy, however, must be given their ordinary and usual meanings and if there is no ambiguity, a strained or distorted construction will not be applied. If it is consistent with public policy, the terms of an insurance will be enforced. Jorgensen v. Metropolitan Life Ins. Co., above; Downs v. N.J. Fidelity & Plate Glass Ins. Co., 91 N.J.L. 523, 103 A. 205 (1917). See also Schneider v. New Amsterdam Casualty Co., 22 N.J.Super. 238, 242--243, 92 A.2d 66 (App.Div., 1952).

The current approach to insurance contract interpretation is to be found in Allen v. Metropolitan Life Ins. Co., 44 N.J. 294, 295, 306, 208 A.2d 638 (1965), and Kievit v. Loyal Protective Life Ins. Co., 34 N.J. 475, 170 A.2d 22 (1961). Cooper v. Government Employees Insurance Co., 51 N.J. 86, 94, 237 A.2d 870 (1968), urged by plaintiff to be controlling in the case at hand, is factually distinguishable from the case at bar in that it considers a 'condition' in a policy and not a 'warranty,' although it does demonstrate the tendency of the modern judiciary to protect the consumer from unreasonably strict construction of adhesion contracts.

The Allen case points that

While insurance policies and binders are contractual in nature, they are not ordinary contracts but are 'contracts of adhesion' between parties not equally situated. (Citing cases). The company is expert in its field and its varied and complex instruments are prepared by it unilaterally whereas the assured or prospective assured is a layman unversed in insurance provisions and practices. He justifiably places heavy reliance on the knowledge and good faith of the company and its representatives and they, in turn, are under correspondingly heavy responsibility to him. His reasonable expectations in the transaction may not justly be frustrated and courts have properly molded their governing interpretative principles with that uppermost in mind. Thus we have consistently construed policy terms strictly against the insurer and where several interpretations were permissible, we have chosen the one most favorable to the assured. (Citing cases)

In Kievit v. Loyal Protective Life Ins. Co., 34 N.J. 475, 170 A.2d 22 (1961), we left little doubt as to our current approach by using this pertinent language: 'When members of the public purchase policies of insurance they are entitled to the broad measure of protection necessary to fulfill their reasonable expectations. They should not be subjected to technical encumbrances or to hidden pitfalls and their policies should be construed liberally in their favor to the end that coverage is afforded to the full extent that any fair interpretation will allow.' Francis, J. in Danek v. Hommer, 28 N.J.Super. 68, 76, 100 A.2d 198 (App.Div.1953), aff'd 15 N.J. 573, 105 A.2d 677 (1954) (44 N.J. at 305--306, 208 A.2d at p. 644.)

The tendency of our courts to construe liberally rather than strictly adhesion contracts can be readily seen in areas other than insurance, the most notable example being the landmark decision in Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 389, 161 A.2d 69 (1960), where the Supreme Court looked with extreme disfavor on the uniform automobile warranty of the Automobile Manufacturer Association, used at the time by all major automobile manufacturers. Thus the perimeter of public policy appears to be ever increasing, and although courts continue to recognize that persons should not be unnecessarily restricted in their freedom to contract, there is an increased willingness to invalidate contractual provisions which clearly tend to injure the public in some way. See Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 538, 554, 236 A.2d 843 (1967).

II

Keeping in mind the general tendency toward liberal construction indicated by the decisions above, we must turn now to the 'warranty endorsement' and the admitted breach thereof. The terms of...