Weinisch v. Sawyer

• Decision Date: 14 March 1991
• Citation: 123 N.J. 333,587 A.2d 615
• Parties: Bibi WEINISCH, a/k/a Bob Wayne, Plaintiff-Respondent and Cross-Appellant, v. Thomas E. SAWYER and Allstate Insurance Company, Defendants-Appellants and Cross-Respondents.
• Court: New Jersey Supreme Court

Page 333

123 N.J. 333

587 A.2d 615

Bibi WEINISCH, a/k/a Bob Wayne, Plaintiff-Respondent and Cross-Appellant, v. Thomas E. SAWYER and Allstate Insurance Company Defendants-Appellants and Cross-Respondents.

Supreme Court of New Jersey.

Argued Nov. 27, 1990.

Decided March 14, 1991.

David J. D'Aloia, for defendants-appellants and cross-respondents (Saiber, Schlesinger, Satz & Goldstein, attorneys; David J. D'Aloia and Joan M. Schwab, on the briefs).

Christopher J. Hanlon, for plaintiff-respondent and cross-appellant (Gross & Hanlon, attorneys; Gary S. Bernstein, on the briefs).

The opinion of the Court was delivered by

POLLOCK, J.

This case requires us to decide whether reformation is the appropriate remedy when an insurance agent negligently fails to inform an insured about available coverage, and if so, whether the insured is nonetheless entitled to a jury trial. Plaintiff, Bibi Weinisch, a/k/a Bob Wayne, sued his insurer, Allstate Insurance Company (Allstate), and its agent, Thomas E. Sawyer, for their failure to inform him of the availability of higher underinsured motorist (UIM) coverage under his automobile insurance policy. The trial court granted defendants' motion to strike plaintiff's jury demand, and after trial entered a judgment for defendants. The Appellate Division reversed and remanded, holding that reformation was not plaintiff's sole remedy and that the underlying issues justified a jury trial. 237 N.J.Super. 195, 567 A.2d 259 (1989). We granted certification, 121 N.J. 658, 583 A.2d 345 (1990), and now reverse the judgment of the Appellate Division and reinstate the judgment of the trial court. We hold that when an insured sues the insurer and its agent for the agent's failure to inform the insured of available coverage, the proper remedy is reformation, to which a right to trial by jury does not attach.

-I-

Many of the material facts are undisputed. Plaintiff sustained personal injuries and automobile damage when his car was struck from the rear on May 25, 1984. He sued the negligent driver and settled with her insurance company for the policy limits of $100,000. Plaintiff alleges that the settlement did not fully compensate him for his injuries. He was insured by Allstate under an automobile policy with liability coverage of $250,000 per person, $500,000 per event, and a $1,000,000 liability umbrella. His uninsured/underinsured (UM/UIM) motorist coverage, however, was only $15,000 per person or $30,000 per event, the statutory minimum. Plaintiff contends that Allstate and Sawyer breached a duty to inform him of the availability of optional higher limits of UM/UIM coverage.

From 1966 to 1983, Allstate automatically renewed plaintiff's automobile policy on a yearly basis. In 1969, plaintiff instructed Sawyer to increase his bodily injury liability coverage to the highest available amount, $250,000/500,000. In 1973, pursuant to a change in New Jersey law, N.J.S.A. 17:28-1.1, every automobile policy, including plaintiff's policy with Allstate, was amended to include a minimum amount of uninsured motorist coverage. In 1980, Allstate offered UIM coverage to all insureds, including plaintiff.

In 1982, Allstate had mailed to plaintiff information describing UM/UIM coverage, and in 1983, Allstate notified plaintiff of the availability of additional UIM coverage. A 1984 statute required insurers to provide all policyholders with a coverage-selection form and a buyer's guide in order to inform insureds about both insurance-law changes and policy limits, including UM/UIM coverage. New Jersey Automobile Insurance Freedom of Choice and Cost Containment Act of 1984, L. 1983, c. 362 (codified in relevant part at N.J.S.A. 39:6A-23); see also N.J.A.C. 11:3-15.1 to 3-15.9 (regulations promulgated by Commissioner of Insurance to implement statute). By May 1984, Allstate had mailed guides and forms to all of its insureds, including plaintiff. Plaintiff acknowledges that before the accident he received the 1984 packet of documents from Allstate, including information about available coverage and a coverage-selection form that he was to complete and return.

At this point, the parties' factual versions diverge. According to plaintiff, in May 1984 he telephoned Sawyer, an Allstate sales and service agent, concerning the documents. Plaintiff testified that Sawyer advised him to ignore the documents unless he wanted to reduce his coverage or lower his premiums. Purportedly following Sawyer's advice, plaintiff claims he discarded the Allstate packet. Plaintiff said that he did not read the brochures because he felt that his premiums were high enough to provide plenty of coverage. He testified that he relied on Sawyer to let him know if he needed any additional coverage.

Sawyer's testimony contradicted plaintiff's version. Sawyer did not recall the May 1984 conversation with plaintiff. Sawyer's usual practice was to answer specific questions when policyholders called about those documents. When callers indicated that they did not understand the form, Sawyer reviewed the entire form with them and line by line explained the coverages or changes. According to Sawyer, he never would have advised plaintiff not to complete and return the forms. If a policyholder had UM/UIM coverage lower than the policyholder's liability coverage, Sawyer would recommend an increase to the level of that coverage. Sawyer stated that if plaintiff had called him, he would have advised plaintiff to purchase additional UM/UIM coverage.

The complaint alleged that plaintiff's UIM coverage, when combined with his $100,000 settlement, was inadequate to compensate him for his injuries. Plaintiff sought to reform his policy and to recover compensatory and punitive damages. Alleging negligence, breach of contract, and breach of statutory duty, he demanded a jury trial.

Defendants denied plaintiff's allegations and moved to strike his jury demand on the ground that the case was essentially equitable. Relying on a policy provision requiring arbitration if Allstate and the insured could not agree on the amount of damages, defendants also moved to limit the trial to liability. The court granted defendants' motions to strike the jury demand and to so limit the trial. It also severed the punitive damage claim.

At the bench trial, the court found plaintiff's version to be incredible and his testimony "contrived":

To be more specific, I do not believe the plaintiff's testimony that he relied in any way on Sawyer as his insurance consultant to arrange for the best and the highest coverage.

* * * * * *

I do not believe plaintiff's testimony that early May of 1984 that plaintiff called Sawyer with respect to the mailings plaintiff received from Allstate and that Sawyer told the plaintiff not to mail back the coverage selection form and that Sawyer would take care of it, or words to that effect.

By contrast, the court accepted Sawyer's description of his usual business practices. Based on that resolution of the credibility question, the court found that plaintiff did not rely on Sawyer as his insurance consultant to arrange for the highest coverages available; rather, plaintiff himself determined the extent of coverage and used Sawyer to implement the coverages plaintiff had selected. The court also found that plaintiff received from Allstate sufficient information to inform him of the availability of increased UIM coverage. In sum, the court found that the documents that Allstate had sent to plaintiff sufficed to alert him to the availability of additional UM/UIM coverage and that plaintiff had failed to establish that either Sawyer or Allstate was negligent. The court therefore entered judgment in favor of defendants.

The Appellate Division reversed. 237 N.J.Super. at 205, 567 A.2d 259. Convinced that plaintiff was entitled to bring an action directly against Sawyer for money damages and that "the kinds of issues raised by plaintiff's claims are those historically determined by a jury in an action at law," id. at 203, 567 A.2d 259, the court held that plaintiff was entitled to a jury trial under article I, paragraph 9 of the New Jersey Constitution.

-II-

In concluding that plaintiff was entitled to a jury trial, the Appellate Division proceeded on the erroneous premise that he was entitled to relief other than reformation. The court also erred in emphasizing the underlying issues rather than the relief requested.

-A-

Contrary to the Appellate Division, we believe that the appropriate remedy for plaintiff, if he had prevailed on his claim, would have been reformation of his policy. No matter how described, plaintiff's claim amounts to a request that the court reform the policy to provide higher UIM coverage. Because Sawyer is an Allstate agent rather than an independent insurance broker, plaintiff's claim is properly directed at Allstate for reformation of the policy.

The appropriateness of reformation and the corresponding inappropriateness of damages in this case derive initially from the distinction drawn by New Jersey law between insurance agents, such as Sawyer, and insurance brokers. Compare N.J.S.A. 17:22A-2f (defining insurance agent) with N.J.S.A. 17:22A-2g (defining insurance broker); see also 16 J. Appleman, Insurance Law & Practice § 8725 (1981) (Appleman) (discussing distinction between agents and brokers). An insurance agent owes a fiduciary duty to the insurance company, see Bohlinger v. Ward & Co., 34 N.J.Super. 583, 591, 113 A.2d 38 (App.Div.1955), aff'd, 20 N.J. 331, 120 A.2d 1 (1956), and acts not for the insured but for the insurer as its employee. See Volker v. Connecticut Fire Ins. Co., 22 N.J.Super. 314, 325, 91 A.2d 883 (App.Div.1952). An insurance broker, on the other hand, owes a duty directly to his or her principal, the insured. See John Roach, Jr., Inc. v. Pingpank, 39 N.J.Super. 336, 339, 121 A.2d 32 (App.Div.1956); Appleman, supra, § 8725 at 332-33. Notwithstanding the similarity of their activities,...