MacKenzie v. New Jersey Auto. Full Ins. Underwriting Ass'n

• Decision Date: 24 March 1997
• Parties: Michael MacKENZIE, Plaintiff-Respondent/Cross-Appellant, v. NEW JERSEY AUTOMOBILE FULL INSURANCE UNDERWRITING ASSOCIATION, Defendant-Appellant/Cross-Respondent, and New Jersey Shore Insurance Brokers, Inc., Theresa Cotugno and State Farm Insurance Company, Defendants.
• Court: New Jersey Superior Court — Appellate Division

Page 112

299 N.J.Super. 112

690 A.2d 668

Michael MacKENZIE, Plaintiff-Respondent/Cross-Appellant, v. NEW JERSEY AUTOMOBILE FULL INSURANCE UNDERWRITING ASSOCIATION, Defendant-Appellant/Cross-Respondent and New Jersey Shore Insurance Brokers, Inc., Theresa Cotugno and State Farm Insurance Company, Defendants.

Superior Court of New Jersey,

Appellate Division.

Argued Feb. 20, 1997.

Decided March 24, 1997.

Richard J. Mirra, Matawan, for appellant/cross-respondent (Boglioli, O'Mara & Mirra, attorneys; Mr. Mirra, on the brief).

Richard B. Ansell, Ocean, for respondent/cross-appellant (Ansell, Zaro, Grimm & Aaron, attorneys; Mr. Ansell, of counsel; Stephanie H. Hodach, on the brief).

Before Judges KING, CONLEY and LOFTUS.

The opinion of the court was delivered by

CONLEY, J.A.D.

This appeal arises from plaintiff insured's suit against his licensed broker, Theresa Cotugno /New Jersey Shore Insurance Brokers, Inc. (Shore), ¹ and against his insurer, the New Jersey Automobile Full Insurance Underwriting Association (JUA). ² Ultimately, plaintiff obtained a judgment against the JUA for reformation of his automobile policy and for $45,034.67 in counsel fees. We reverse.

The litigation was triggered by an automobile accident sustained by plaintiff. In 1988, plaintiff was a first-time insured and obtained a policy with the JUA through Shore. When he was injured as a result of the automobile accident which occurred while the JUA policy was in effect, plaintiff sought and obtained personal injury income protection (PIP) income continuation benefits. As submitted to JUA by Shore, plaintiff's insurance application and other necessary forms had contained a selection of option Q5 which provides for $400 per week with a maximum of $41,600 and plaintiff received that amount. There was available, however, at the time he completed and submitted his application an unlimited income continuation benefit option while disabled. See N.J.S.A. 39:6A-10. Plaintiff did not select this option and, thus, did not receive those benefits.

Plaintiff sued for reformation of his policy and/or damages arising from his failure to select the option for income continuation while disabled. He claimed Shore never told him of this option and that neither did the JUA. It is undisputed, however, that the application for insurance submitted by Shore to the JUA's servicing carrier included a signed "Coverage Selection Form" expressly acknowledging knowledge of the available options. Unbeknownst to the JUA, the signature on the form was not that of plaintiff, but his father whom he had requested to complete the insurance process for him and to pay the first installment on the required premium. It is not disputed that Shore had been supplied by JUA with the necessary forms that advised potential insureds of the available options.

In denying the JUA's motion for summary judgment, the motion judge essentially concluded that Shore was JUA's agent for the purpose of informing the first-time insured of the available options. He thus concluded: "to say that the JUA ought to get out of this case now that there's no chance of reformation of the policy against it now is ridiculous." We disagree. While there are other issues raised by this appeal and the JUA's cross-appeal arising from the proceedings and rulings following the denial of JUA's motion for summary judgment, we reverse the denial of the JUA's motion for summary judgment and do not address these other issues.

For the purposes of the motion, the JUA stipulated to the facts as alleged by plaintiff in his pretrial memo and as augmented by the deposition testimony of plaintiff's father. Plaintiff's factual contentions were as follows:

In late August of 1988, plaintiff, accompanied by his mother, went to the office of defendant, Jersey Shore Insurance Brokers, Inc., and inquired of one of its employees, defendant, Theresa Cotugno, about purchasing automobile insurance. After having asked plaintiff some general questions, defendant, Cotugno, inquired about the types of coverage plaintiff would like to purchase. Plaintiff explained that he was unfamiliar with the various options available and asked defendant, Cotugno, to explain. Defendant, Cotugno, explained various options and the cost to purchase. Plaintiff specifically asked defendant, Cotugno, what the most complete comprehensive income continuation benefit was that he could purchase. At no time did defendant, Cotugno, ever inform plaintiff that there were unlimited income continuation benefit options which could be purchased which would have been payable for as long as an insured remained disabled.

After plaintiff had reviewed all of the options that were made available, defendant, Cotugno, assured him that the option designated as Q-5 was the most complete and comprehensive income continuation benefit available for his purchase. Based on defendant, Cotugno's assurances, plaintiff chose the Q-5 option, believing it to be the most complete and comprehensive income continuation benefit available. On that date, plaintiff's personal information and insurance coverage selection were entered by defendant, Cotugno, into her files. Plaintiff was to return to the defendant, Jersey Shore Insurance's office on September 3, 1988, to pay the premium for this policy.

A few days later, on September 2, 1988, plaintiff's father went to the office of the defendant, Jersey Shore Insurance Brokers, Inc., to pay the first installment on the insurance chosen by plaintiff. Plaintiff's father signed the application form in plaintiff's name without plaintiff's prior knowledge that anything further was necessary.

At a later date, plaintiff was mailed a copy of his automobile insurance policy number J362457-CO2-30. This policy had been issued by defendant, N.J.A.F.I.U.A., through its servicing carrier, State Farm Insurance Company, effective September 2, 1988, through September 2, 1989. The policy issued and furnished to plaintiff listed only eight (8) income continuation options, all of which have limited maximum total benefits. The policy did not include any income continuation benefits options payable for as long as the insured was disabled.

Plaintiff's father confirmed at his deposition that he signed the application form and a coverage selection form, although he denied any knowledge as to what was contained in them. It is undisputed that the coverage selection form indicates that the insured is aware of the available options, including unlimited income continuation while disabled.

The JUA was created under the New Jersey Automobile Full Insurance Availability Act, N.J.S.A. 17:30E-1 to -24. Prior to October 1, 1990 ( N.J.S.A. 17:30E-7(e); N.J.S.A. 17:33B-11), it issued policies through its servicing carriers. N.J.S.A. 17:30E-7(e). Licensed insurance agents or brokers (producers) could submit applications for insurance on behalf of their prospective insureds to the servicing carriers and were authorized to issue binders. N.J.S.A. 17:30E-9(a).

The New Jersey Automobile Reparation Reform Act (No-Fault Law), N.J.S.A. 39:6A-1 to -35, requires that every automobile liability insurance policy afford personal injury protection (PIP) coverage regardless of fault, including basic income continuation benefits. N.J.S.A. 39:6A-4(b). It also requires that insurers make available optional PIP benefits, including income continuation benefits during disability. N.J.S.A. 39:6A-10. And see Werts v. New Jersey Mfrs. Ins. Co., 250 N.J.Super. 580, 588, 595 A.2d 1110 (App.Div.), certif. denied, 127 N.J. 554, 606 A.2d 366 (1991).

As to the insurers' obligations to notify insureds of available options, and as effective at the time of plaintiff's initial application, N.J.S.A. 39:6A-23(a) provides:

a. No new automobile insurance policy shall be issued on or after the 180th day following the effective date of P.L.1985, c. 520, unless the application for the policy is accompanied by a written notice identifying and containing a buyer's guide and coverage selection form. The buyer's guide shall contain a brief description of all available policy coverages and benefit limits, and shall identify which coverages are mandatory and which are optional under the State law as well as all options offered by the insurer.

....

The coverage selection form shall identify the range of premium rate credit or dollars savings, or both, and shall provide any other information required by the commissioner by regulation.

The applicant shall indicate the options elected on the coverage selection form which shall be signed and returned to the insurer. [Emphasis added.]

N.J.S.A. 39:6A-23, then, requires an insurance application to be "accompanied by a written notice identifying and containing a buyer's guide and coverage selection form." As to renewals, all notices thereof must be accompanied by the same information. N.J.S.A. 39:6A-23(c).

The JUA does not dispute that it had a statutory duty to offer such benefits and that, statutorily, all options must be identified and briefly discussed in a buyer's guide and coverage selection form to accompany each policy application and notice of renewal so as to give notice to the applicant of the options. N.J.S.A. 39:6A-23(a) and (c). ³ If actually provided, such notice is adequate to shield the insurer and broker from liability. Pinto v. Garretson, 237 N.J.Super. 444, 450, 568 A.2d 119 (App.Div.1989). "A properly completed and executed coverage selection form shall be prima facie evidence of the named insured's knowing election or rejection of any option." N.J.S.A. 39:6A-23(e). Here, when the JUA issued the policy to plaintiff it had an application and a coverage selection form that appeared to have been signed by the applicant.

The JUA contends that, as to new applicants in 1988, it satisfied its obligation under N.J.S.A. 39:6A-23(a) by supplying licensed brokers, such as Shore, with the necessary buyer's guide and forms to accompany the applications that the...