Industrial Development Associates v. F.T.P., Inc.

• Decision Date: 31 May 1991
• Docket Number: No. A-3809-88T2,A-3809-88T2
• Parties: INDUSTRIAL DEVELOPMENT ASSOCIATES a/k/a Industrial Development Association, A New Jersey Limited Partnership, Plaintiff-Appellant, v. F.T.P., INC., A Corporation of the State of New Jersey, Defendant-Respondent, and Commercial Union Surplus Lines Insurance Company, A Corporation of the State of Delaware; Executive Excess Ltd.; Antonio Suarez d/b/a I.C.P.; Associated Financial Services, A New Jersey Corporation; P.P.G., Industries, Inc., A Corporation of the State of Pennsylvania and Pugliese Swimming Pools Corporation, A New Jersey Corporation, Defendants.
• Court: New Jersey Superior Court — Appellate Division

Page 468

248 N.J.Super. 468

591 A.2d 682

INDUSTRIAL DEVELOPMENT ASSOCIATES a/k/a Industrial

Development Association, A New Jersey Limited Partnership, Plaintiff-Appellant, v. F.T.P., INC., A Corporation of the State of New Jersey,

Defendant-Respondent,

and

Commercial Union Surplus Lines Insurance Company, A

Corporation of the State of Delaware; Executive Excess

Ltd.; Antonio Suarez d/b/a I.C.P.; Associated Financial

Services, A New Jersey Corporation; P.P.G., Industries,

Inc., A Corporation of the State of Pennsylvania and

Pugliese Swimming Pools Corporation, A New Jersey

Corporation, Defendants.

No. A-3809-88T2

Superior Court of New Jersey,

Appellate Division.

Argued Oct. 23, 1990.

Decided May 31, 1991.

Glenn A. Bergenfield, for plaintiff-appellant (Michael F. Chazkel, attorney and on the brief), East Brunswick.

Robert H. Tell, Mountainside, for defendant-respondent, attorney for respondent (Lynch, Martin & Philibosian, attorneys, North Brunswick).

Before Judges MICHELS, GRUCCIO and D'ANNUNZIO.

The opinion of the court was delivered by

GRUCCIO, J.A.D.

Following our remand pursuant to our decision in Industrial Development Assoc. v. Commercial Union, 222 N.J.Super. 281, 536 A.2d 787 (App.Div.1988), plaintiff Industrial Development Association (I.D.A.) appeals from the decision of the trial court granting defendant F.T.P., Inc.'s (F.T.P.) motion for judgment notwithstanding the verdict (j.n.o.v.). For the purposes of this opinion, we adopt the facts as presented in our earlier opinion with the exception that defendant Antonio Suarez remains a defendant. See id. at 284-87, 536 A.2d 787. We here address the narrow issue of whether I.D.A. was required to present expert testimony to establish the standard by which F.T.P. broker Thomas Guthrie's conduct should be judged. As to the issue of the necessity for expert testimony, we reverse. Accordingly, the verdict of the jury is reinstated.

On remand, the jury found that "defendant F.T.P. failed to exercise on plaintiff's behalf the requisite degree of skill, knowledge and care in obtaining the insurance policy in question." However, the trial judge granted defendant's motion for j.n.o.v. holding that expert testimony was necessary to establish the duty of F.T.P.'s broker Guthrie. We disagree and find the trial judge's holding in direct conflict with the well-established duty of an insurance broker as laid out in New Jersey case law. As early as 1900, New Jersey has held that

[a] broker is a specialist employed as a middleman to negotiate between the parties to a sale or other business contract, and they must exercise customary skill in the preparation of such documents as are required to effectuate the business which they have in hand.

Milliken v. Woodward, 64 N.J.L. 444, 448, 45 A. 796 (1900); see Barton v. Marlow, 47 N.J.Super. 255, 259, 135 A.2d 670 (App.Div.1957); Marano v. Sabbio, 26 N.J.Super. 201, 205-06, 97 A.2d 732 (App.Div.1953). As an insurance broker invites his clients to rely upon his expertise in procuring insurance that best suits their particular requirements,

[o]ne 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.

Rider v. Lynch, 42 N.J. 465, 476-77, 201 A.2d 561 (1964); Bates v. Gambino, 72 N.J. 219, 224-25, 370 A.2d 10 (1977).

In Cox v. Santoro, 98 N.J.Super. 360, 237 A.2d 491 (App.Div.1967), we found that three circumstances existed in which a prima facia case of negligence could be established against a broker.

An insurance broker may be held liable for his failure to exercise the requisite skill or diligence if he fails to issue the insurance policy he has promised to procure, Marano v. Sabbio, 26 N.J.Super. 201 (App.Div.1953); if he assures the insured that he is covered whereas he is not, Barton v. Marlow, 47 N.J.Super. 255 (App.Div.1957), or if he procures a policy which is materially deficient, Rider v. Lynch, supra, [42 N.J. at 476, 201 A.2d 561].

Cox, supra, 98 N.J.Super. at 365, 237 A.2d 491. However, a broker's liability is not necessarily limited to these three circumstances. Bates, supra, 72 N.J. at 225 n. 2, 370 A.2d 10.

Where a broker fails to meet the established minimum standards, expert testimony is not necessary to establish the culpability of the broker. DiMarino v. Wishkin, 195 N.J.Super. 390, 394, 479 A.2d 444 (App.Div.1984). In Bates, the Supreme Court found 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 conduct falls below a certain standard, establishing the standard of competence generally expected of like practitioners becomes irrelevant." Bates, supra, 72 N.J. at 225, 370 A.2d 10.

At trial, the jury found that F.T.P. had been contributorily negligent and allocated to F.T.P. 15% of fault. Presumably, this was based on Guthrie's failure to take any action upon his alleged discovery of I.D.A.'s inoperative sprinkler system. Both the trial court and counsel for F.T.P. seem to base their assertions that expert testimony is needed on the lack of clarity as to exactly what action Guthrie should have taken. This lack of clarity led the trial court to the conclusion that expert testimony is required to set out for the jury what Guthrie should have done. The trial court factually distinguished Bates from the case at hand. While we agree that factual differences exist, we, nevertheless, find that the principles applied in Bates and early cases dealing with broker liability should be applied to this case.

The record here contains sufficient...