Coro Brokerage, Inc. v. Rickard

• Decision Date: 10 March 1959
• Docket Number: No. A--50,A--50
• Citation: 148 A.2d 817,29 N.J. 295
• Parties: CORO BROKERAGE, INC., a corporation of the State of New York, authorized to do business in the State of New Jersey, Plaintiff-Appellant, v. Madlyn RICKARD and James Rickard, d/b/a Grove Transportation Company, Defendants-Respondents.
• Court: New Jersey Supreme Court

Page 295

29 N.J. 295

148 A.2d 817

CORO BROKERAGE, INC., a corporation of the State of New York, authorized to do business in the State of New Jersey, Plaintiff-Appellant, v. Madlyn RICKARD and James Rickard, d/b/a Grove Transportation Company, Defendants-Respondents.

No. A--50.

Supreme Court of New Jersey.

Argued Feb. 16, 1959.

Decided March 10, 1959.

Thomas E. Weinstock, Newark, argued the cause for appellant (Bendit & Weinstock, Newark, attorneys).

Michael M. Hochman, Jersey City, argued the cause for respondents (Abraham Miller, Jersey City, attorney).

David M. Satz, Jr., Trenton, argued the cause for David D. Furman, Atty. Gen., amicus curiae.

Edward Krowen, Newark, argued the cause for Insurance Brokers Ass'n of New Jersey, amicus curiae (Lewis C. Stanley, Trenton, on the brief).

Harold D. Feuerstein and Marvin A. Sachs, Newark, filed a brief for New Jersey Ass'n of Insurance Agents, amicus curiae.

The opinion of the court was delivered by

PROCTOR, J.

The plaintiff appealed to the Appellate Division of the Superior Court from a judgment which the Hudson County District Court had entered in favor of the defendants. We granted certification under R.R. 1:10--1(a).

The plaintiff, a New York corporation, is an insurance broker and licensed to do business in New Jersey. The defendants, James Rickard and Madlyn Rickard, husband and wife, owned and operated a fleet of nine taxicabs in Jersey City. On April 11, 1957, because of adverse accident experiences, their policy of liability insurance was cancelled, effective April 16, 1957. Because of statutory requirements the defendants were compelled to obtain a new liability policy prior to the latter date or suspend their operations. Faced with this situation the defendants communicated with the plaintiff through its president, Ostertag. On April 11 it was agreed in a telephone conversation between Ostertag and the defendant James Rickard that the plaintiff would place the necessary insurance for the defendants with an insurance company on an assigned risk basis within the five-day period, provided that the defendants pay the plaintiff a service charge of 10% Of the premium on the policy in addition to any commission that would be paid to the plaintiff by the insurance company. Later that day the above agreement was reduced to writing and signed by James Rickard. The plaintiff was successful in placing the insurance through the New York Assigned Risk Bureau in New York City, and within the five-day period a policy was issued to the defendants by the Lincoln Mutual Casualty Insurance Company. Later the policy was cancelled by Lincoln for the defendants' failure to make payment of the premium. The defendants did not pay the plaintiff the 10% Service charge and the plaintiff brought the present action which is for $837.05, representing 10% Of the total premium for the insurance coverage.

At the trial the defendants contended that they had agreed with an agent of the plaintiff that the premium for the new policy would not exceed a 25% Increase over the premium of their cancelled policy, whereas the policy obtained from Lincoln required a 35% Increase. The trial judge found as a fact that the plaintiff had not so agreed. This determination is not an issue on this appeal. The trial judge found that 'the written agreement to pay the service charge of 10% Is in fact the agreement of the parties,' but held that the agreement was unenforceable under N.J.S.A. 17:29A--15 (L.1944, c. 27, § 15).

The principal issue on this appeal is whether the above statutory provision precludes a broker from receiving a service charge from the insured in addition to a commission from the insurer. The trial judge was of the view that 'the rating System' and 'rate making' process includes the amount that a broker becomes entitled to upon placement of an insurance policy, and that as the rating system approved by the Commissioner of Banking and Insurance does not include a service charge, such a charge cannot be made.

In order to determine the applicability of N.J.S.A. 17:29A--15 to the present question it is necessary to consider the role that that section plays in the overall act regulating the making and applying of insurance rates. L.1944, c. 27; N.J.S.A. 17:29A--1 to 28. The act is a comprehensive statutory scheme designed to regulate and standardize the rates which insurance companies may charge for various forms of insurance coverage. The administrative control necessary to further the statutory objective is vested in the Commissioner of Banking and Insurance. This control is made operative by the Commissioner's authority to determine whether insurance rates are reasonable and adequate, and not unfairly discriminatory. In making such determination the Commissioner is directed to consider

'* * * the factors applied by insurers and rating organizations generally in determining the bases for rates; the financial condition of the insurer; the method of operation of such insurer; the loss experience of the insurer, past and prospective, including where pertinent, the conflagration and catastrophe hazards, if any, both within and without this State; to all factors reasonably related to the kind of insurance involved; to a reasonable profit for the insurer, and, in the case of participating insurers, to policyholders' dividends. * * *' N.J.S.A. 17:29A--11.

Rate-making may be engaged in by rating organizations which consists of two or more insurers engaged in the business of rate-making, N.J.S.A. 17:29A--2; N.J.S.A. 17:29A--1(f), or by individual insurers, N.J.S.A. 17:29A--4. Rate-making is defined in N.J.S.A. 17:29A--1(c) as follows:

'Rate-making' means the examination and analysis of every factor and influence related to and bearing upon the hazard and risk made the subject of insurance; the collection and collation of such factors and influences into rating systems; and the application of such rating-systems to individual risks.'

The rate-making process culminates in a rating system which must be filed with and approved by the Commissioner. N.J.S.A. 17:29A--6, 7. When so approved the rating systems establish the rates to be charged for the various types of insurance coverage. N.J.S.A. 17:29A--7. 'Rate' is defined in the statute as 'the unit charge by which the measure of exposure or the amount of insurance specified in a policy of insurance or covered thereunder is multiplied to determine the premium.' N.J.S.A. 17:29A--1(a).

When the Commissioner has approved a rating system, the insurer, the agent and the broker are then governed by N.J.S.A. 17:29A--15, which provides:

'No insurer or employee thereof, and no broker or agent shall knowingly charge, demand or receive a premium for any policy of insurance except in accordance with the respective rating-systems on file with and approved by the commissioner. No insurer, or employee thereof, and no broker or agent shall pay, allow, or give, or offer to pay, allor, or give, directly or indirectly, as an inducement to insurance, or after insurance has been effected, any rebate, discount, abatement, credit, or reduction of the premium named in a policy of insurance, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement whatever, not specified in the policy of insurance, except to the extent that such rebate, discount, abatement, credit, reduction, favor, advantage or consideration may be provided for in rating-systems filed by or on behalf of such insurer and approved by the commissioner. No insured named in a policy of insurance, nor any employee of such insured, shall knowingly receive or accept, directly or indirectly, any such rebate, discount, abatement, or reduction of premium, or any such special favor or advantage or valuable consideration or inducement. Nothing herein contained shall be construed as prohibiting the payment of commissions or other compensation to regularly appointed and licensed agents and to...