Heake v. Atlantic Cas. Ins. Co.
| Decision Date | 31 May 1954 |
| Docket Number | No. A--136,A--136 |
| Citation | 15 N.J. 475,105 A.2d 526 |
| Parties | HEAKE v. ATLANTIC CAS. INC. CO. GARGANO v. AUTOMOBILE ASS'N OF NEW JERSEY et al. |
| Court | New Jersey Supreme Court |
Harry Green, Little Silver, for appellants.
James Hunter, III, Camden, for respondents (Joseph C. Haines, Camden, for respondent Martha H. Heake; Archer Greiner, Hunter & Read, Camden, for respondent Edward Gargano).
The opinion of the court was delivered by
On January 14, 1952 John H. Heake, Jr. was killed in a collision between two motor vehicles in which the automobiles involved were operated by Edward Gargano and Gerald Cohen. Martha H. Heake, the widow of the deceased and executrix of his will, instituted a suit in the Superior Court, Law Division, under the Death Act against both Gargano and Cohen, resulting in a judgment in her favor against both the defendants in the amount of $15,000. Of this judgment $5,000 was paid on Cohen's behalf, leaving a balance due of $10,000, which Atlantic Casualty Insurance Company, Gargano's insurer, refused to pay.
Martha H. Heake then filed a complaint against Atlantic to recover the balance of her judgment under the combination automobile policy which it had previously issued to Gargano, asserting Atlantic's liability thereunder and seeking reformation of the policy by the deletion of certain endorsements contained therein on which Atlantic relied in denying liability. Edward Gargano also instituted suit against Atlantic, as well as against the Automobile Association of New Jersey, which was obligated under an automobile service contract issued to Gargano and which was the general agent of Atlantic in the issuance of Atlantic's policy. Gargano sought damages from Atlantic for its failure to perform its obligations under its policy and reformation by the deletion of the endorsements to the policy, as well as damages from the Association for its failure to perform its obligations under its automobile service contract, and for its fraud and breach of warranty. Atlantic's motion in the Heake case for summary judgment was denied and the two cases were then consolidated for trial without a jury.
The evidence disclosed that on April 2, 1951, Edward Gargano, then aged 17, applied for the obtained his first automobile driver's license. The license was stamped with the word 'initial' and revealed the licensee's correct age. In June of the same year Gargano purchased an automobile in his own name. Through the automobile agency that had sold him his car the representatives of Atlantic and the Association learned that Gargano wished to obtain insurance coverage and as a result George D. Preiksat, a licensed solicitor of the Association, which was admittedly the general agent of Atlantic, called at Gargano's house for the express purpose of selling Gargano insurance. As a result of a conversation between Gargano and Preiksat it was agreed that Atlantic would issue its automobile liability policy which among other things was to provide for coverage up to $10,000 for any person injured. Preiksat then requested Gargano to furnish information concerning his age and certain data regarding the car. Gargano gave oral answers to all these questions and then produced and handed over to Preiksat his registration card and his initial driver's license showing his age as 17. After making notes from these Preiksat returned them to Gargano and handed him a blank application with instructions to sign it. Gargano signed it in blank and was told by Preiksat that the insurance was effective immediately.
Several days later Gargano received in the mail combination automobile policy No. 608644 of Atlantic and the service contract of the Association. Gargano looked at the first page which contained the typewritten declarations as to coverage, was satisfied that it was in accordance with his statements to Preiksat and then turned it over to his mother who placed it in a safe where it remained until after the accident. The declarations in the policy correctly set forth the agreement of the parties with respect to coverage and also truly stated Gargano's name, address, occupation, employer, description of the car, the fact that it was financed, that no insurer had cancelled or refused to issue any automobile insurance for Gargano, and that neither his driver's license nor registration had ever been revoked or suspended. Neither the application nor any copy thereof was annexed to the policy, nor was it referred to in the policy.
The second page of the policy contained the usual provision that it was issued 'in consideration of the payment of the premium and in reliance upon the statements in the declaration.' Paragraph 25 of the policy provided:
'Declarations: By acceptance of this policy the named insured agrees that the statements in the declarations are his agreements and representations, that this policy is issued in reliance upon the truth of such representations and that this policy embodies all agreements existing between himself and the company or any of its agents relating to this insurance.'
Attached to the policy were two endorsements both entitled 'Limitation of Use.' The first read:
'It is agreed that such insurance as is afforded by the policy does not apply whenever automobile described in the policy is operated by any person licensed to operate an automobile for less than one year.
'Newly licensed drivers may be added on with the written permission of the insurance company.'
The second stated:
'It is agreed that such insurance as is afforded by the policy does not apply when said automobile is being driven by any person under the age of twenty-five (25) except
The policy is unusual in several respects. First of all, the pages measure 5 1/2 8 1/2 inches instead of the usual 8 1/2 11 or 8 1/2 13, and accordingly the print is fine. Secondly, the policy contains eight pages instead of the customary four or five pages used in a combination automobile policy. Thirdly, the endorsements here are attached to the third page whereas in most policies such endorsements are annexed to the first page with the other typewritten material where they will naturally attract attention. The whole policy seems complicated even to one familiar with insurance policies.
The service contract, which was issued for a separate premium, was an agreement by the Association to furnish services to Gargano, such as emergency repairs, towing, bail bonds, and legal services in connection with traffic violations. This contract consisted of six pages of the same size and type as the policy. The only typewritten material was on the first page and was identical to that on the first page of the policy except of course that it had no typewritten provisions as to limits of insurance liability.
Thus the endorsements attached to the policy on which the defendant seeks to avoid liability were embedded on the inside of 14 pages of fine print instead of appearing, as such limitations generally do, on the first page of the policy.
Following the accident in question Gargano sent a report to Atlantic which shortly thereafter notified him by letter that it disclaimed liability because in his application for the insurance he had stated that he was 23 years of age and that no driver licensed less than one year would operate the car, both of which statements were untrue. The letter concluded by stating that in view of these misrepresentations by Gargano the insurer was cancelling the policy and service contract and was returning to him the premium which he had paid. In the suit instituted by Mrs. Heake against Gargano Atlantic defended the action on his behalf, but did so under an agreement that such action on its part did not constitute a waiver of its disclaimer of liability. The actions by Mrs. Heake and Gargano against Atlantic and Association assert breach of contract and...
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