Glezerman v. Columbian Mut. Life Ins. Co.

• Decision Date: 10 September 1991
• Docket Number: No. 90-5818,90-5818
• Citation: 944 F.2d 146
• Parties: Wanda GLEZERMAN, Trustee, Appellant, v. COLUMBIAN MUTUAL LIFE INSURANCE COMPANY; CMS Companies; Robert E. Spivak, individually, jointly, severally and/or in the alternative.
• Court: U.S. Court of Appeals — Third Circuit

Page 146

944 F.2d 146

Wanda GLEZERMAN, Trustee, Appellant, v. COLUMBIAN MUTUAL LIFE INSURANCE COMPANY; CMS Companies;

Robert E. Spivak, individually, jointly, severally

and/or in the alternative.

No. 90-5818.

United States Court of Appeals, Third Circuit.

Argued March 4, 1991.

Decided Sept. 10, 1991.

Charles I. Tighe, III (argued), Chatburn & Tighe, Mt. Laurel, N.J., for appellant.

Richard M. Eittreim (argued), McCarter & English, Newark, N.J., for Columbian Mut. Life Ins. Co.

Norman K. Zeiner (argued), Law Offices of Thomas Dempster, III, Mt. Laurel, N.J., for CMS Companies.

Frank A. Luchak (argued), Duane, Morris & Heckscher, Marlton, N.J., for Robert E. Spivak, et al.

Before BECKER, NYGAARD and HIGGINBOTHAM, Circuit Judges.

OPINION OF THE COURT

A. LEON HIGGINBOTHAM, Jr., Circuit Judge.

Appellee, Robert Spivak ("Spivak"), is an insurance broker who handled the insurance needs of Benjamin and Wanda Glezerman for the period of approximately twenty years prior to Benjamin Glezerman's death. Benjamin Glezerman died on September 14, 1988. Prior to that date, Wanda Glezerman handled most of the communications regarding the policy at issue in this case.

The present litigation was brought by Wanda Glezerman, as trustee for her husband's estate, for damages based on appellee Columbian Mutual Life Insurance Company's ("Columbian") failure to pay death benefits on a Columbian policy sold to Benjamin Glezerman by Spivak. Wanda Glezerman is suing Spivak, CMS Companies ("CMS") (the firm that serviced the policy), and Columbian. The district court granted appellees' motion for summary judgment on the ground that the appellees owed no duty to Glezerman in the circumstances of this case. We affirm in part, vacate in part, and remand for further proceedings in accordance with this opinion.

BACKGROUND

Spivak had a close affiliation with CMS. The Glezermans received letters signed by Spivak on CMS letterhead, and Wanda Glezerman testified that she thought Spivak was a partner in CMS. See Appendix ("App.") at 7. Spivak acknowledged that he placed all his business with CMS, and that CMS provided all the servicing of Spivak's accounts. See id. at 8-9. Spivak's offices were in the same building as CMS, and he shared CMS staff. See id. at 9.

The life insurance policy at issue became effective on September 14, 1979. Each annual premium was set out in the policy. The premium increased from $9,313.20 in the first year to $37,026.60 in the twentieth year, see App. at 34, and was payable in two semiannual installments, one due in September and one due in March. For the year in question, the annual premium was $18,064.80. The policy provided for a thirty-one day grace period in which the insured could pay the premium after the due date and still retain coverage. See App. at 29; see also N.J.S.A. § 17B:25-3 (mandating a minimum of thirty days as a grace period prior to cancellation of a life insurance policy). Finally, the policy provided terms for reinstatement in the event of cancellation for non-payment of premiums. In order to qualify for reinstatement, the insured was required to provide proof of insurability, and then pay all overdue premiums at 5% interest. See App. at 39.

For purposes of summary judgment, the following facts concerning the relationship between the Glezermans and Spivak are taken as true. Columbian sent premium statements to CMS, not the Glezermans. See App. at 20. There was no set procedure for the Glezermans to follow when making premium payments. Premiums were occasionally paid to Spivak's office, and occasionally to Columbian. On some occasions, CMS paid the premium, billing the Glezermans later. See App. at 15. One of the premiums paid by CMS was $15,000. Further, the amount in the premium statement was not always the amount actually due, because Spivak advised the Glezermans to occasionally borrow against their policies to make premium payments. See App. at 14. Spivak also told the Glezermans from which of their financial accounts to pay the premium. See Supplemental Appendix ("Supp.App.") at 23-24.

Finally, because each premium payment represented a large sum of money, the Glezermans had established a special procedure wherein CMS would notify them as the grace period drew to a close so that they could pay at the very last minute. The servicing department of CMS monitored the Glezermans' premium payments. Spivak acknowledges this procedure was agreed to and followed by appellees. See App. at 20, 23. As Wanda Glezerman described it:

From the beginning of time, I always got the notice from [Spivak] first and then he would catch up with the grace period and they will tell me when to send the check Supp.App. 71-72.

and how much to send, whether there was a difference or there wasn't [in the amount owed from the amount on the statement] and from what account to pay it.

In the spring of 1986, the Glezermans received notification from Columbian, via CMS, indicating that the premium on Benjamin Glezerman's life insurance policy was due. See Supp.App. at 22. That notification specified both the due date for the premium payment, and the end of the grace period. See Supp.App. at 118. ¹ Soon thereafter, Spivak telephoned Wanda Glezerman and discussed the payment with her. Spivak told Glezerman not to worry about the payment because she still had time to pay. See App. at 45. The next communication the Glezermans received notified them that the policy had lapsed. See App. at 84.

CMS and Spivak had received notice that the Glezermans' policy had lapsed from Columbian shortly after the end of the grace period. That notice included a late payment offer to bring the policy back into force. See App. at 46. Apparently no action was taken pursuant to this notice, and there is no evidence in the record as to whether the Glezermans were informed of Columbian's late payment offer.

On May 6, Wanda Glezerman sent two checks that had been previously prepared in anticipation of April 14, the end of the grace period. See Supp.App. at 132. Per the instructions of a CMS employee, these checks were back dated to the last day of the grace period, although they were actually written on May 6. Wanda Glezerman was told that the policy would be reinstated. See App. at 48. Instead of automatically reinstating the policy, however, Columbian required the Glezermans to file a request for reinstatement, and a medical form to be completed with reference to Benjamin Glezerman.

Also in the beginning of May, Spivak contacted the general agent at Columbian and tried to get the policy reinstated. See App. at 51. CMS employees originally gave Spivak a reason to believe that Columbian was prepared to reinstate the policy without further medical evidence, see id. at 52, but by the end of May or the beginning of June, Spivak knew that Columbian did not want to reinstate the policy because of medical reasons. See id. at 53. On June 9, 1986, Spivak wrote to the Glezermans and told them that Columbian had reinstated the policy. See id. at 54. Spivak now admits that the policy was never reinstated after the lapse in March. The premium checks that Wanda Glezerman sent to Columbian on May 6, were returned by Columbian to CMS in July of 1986, and from CMS to the Glezermans in October of 1986. See App. 60-62.

The only replacement policies that the Glezermans were able to purchase were those that conditioned payment of death benefits on the insured surviving a certain period of time. Benjamin Glezerman died on September 14, 1988, prior to the end of the stated period necessary to make the replacement policies effective. His estate received only the premiums that had been paid on the replacement policies.

DISCUSSION

A. Duty Owed by Broker to Client

Wanda Glezerman argues that during their long term relationship Spivak assumed responsibilities, in addition to those normally associated with the client-broker relationship, from which a legal duty arose. Under New Jersey law,

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 the insurance, the law holds him to the skill, care and diligence in the execution of his commission.... If he neglects to procure the insurance or if the policy is materially deficient ... because of his failure to exercise the requisite skill or diligence, he becomes liable.

Rider v. Lynch, 42 N.J. 465, 201 A.2d 561, 567 (1964); see Sobotor v. Prudential Insurance brokers are held to a high standard by New Jersey courts:

                Property & Cas. Ins. Co., 200 N.J.Super. 333, 491 A.2d 737, 739 (App.Div.1984) (a broker owes to those engaging its services reasonable skill, care and diligence);  Avery v. Arthur E. Armitage Agency, 242 N.J.Super. 293, 576 A.2d 907, 910 (App.Div.1990);  Johnson v. Mac Millan, 233 N.J.Super. 56, 558 A.2d 24, 26 (App.Div.1989).   This duty is clearly breached when a broker fails to procure a policy he promised, when the broker assures that there is coverage when there is not, or when the broker procures a deficient policy.   The New Jersey Supreme Court, however, has held that, "[w]e do not read the case as limiting the establishing of a broker's liability to these three circumstances, and as is apparent from today's decision, we would not impose any such limitation."  Bates v. Gambino, 72 N.J. 219, 370 A.2d 10, 14 n. 2 (1977)
                

It is not necessary for the client in order to establish a breach of duty to prove that he laid out for the broker the elements of a contract of insurance. It is sufficient to show that he authorized procurement of the insurance needed to cover the risks indicated and that the broker agreed to do so but failed or neglected to perform his duty. Moreover, if the broker agrees to try to obtain or to try to obtain the coverage he knows or should know the principal seeks, and he finds that he cannot procure it, he is bound to notify the...