NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-2846-15T4
JULIUS AND EVA SESZTAK,
Plaintiffs-Appellants,
v.
GREAT NORTHERN INSURANCE CO., INC., and WALTER B. HOWE AGENCY, INC.,
Defendants-Respondents. __________________________________
Argued April 24, 2018 – Decided November 14, 2018
Before Judges Yannotti, Mawla and DeAlmeida.
On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-8318-12.
Eva Sesztak, appellant, argued the cause pro se (Frank M. Crivelli, on the brief). 1
1 Crivelli & Barbati, LLC, filed a merits brief on behalf of plaintiffs. Eva Sesztak thereafter filed a substitution of attorney indicating that she was proceeding pro se, and presented oral argument on her behalf. Julius Sesztak, although present at oral argument, declined to make an argument. Thomas McKay, III argued the cause for respondent Great Northern Insurance Co., Inc. (Cozen O'Connor, attorneys; Thomas McKay, III, of counsel and on the brief; Charles J. Jesuit, Jr., on the brief).
Frederick M. Klein argued the cause for respondent Walter B. Howe Agency, Inc. (Sullivan & Klein, LLP, attorneys; Frederick M. Klein, on the brief).
The opinion of the court was delivered by
DeALMEIDA, J.A.D.
Plaintiffs Julius Sesztak and Eva Sesztak appeal the March 1, 2016 and
April 15, 2016 orders of the Law Division granting judgment notwithstanding
the verdict to defendants Great Northern Insurance Co., Inc. (GNIC) and Walter
B. Howe Agency, Inc. (Howe). We affirm.
I.
The following facts are taken from the record. Plaintiffs are married. In
1972, they purchased a home at 55 Bedens Brook Road in Montgomery
Township. In 2004, the couple purchased the adjacent property at 49 Bedens
Brook Road, on which they constructed a large, single-family residence. The
home was completed in August 2008.
In 2008, plaintiffs obtained a mortgage on 49 Bedens Brook Road from
Hudson City Savings Bank (HCSB). In the mortgage application, plaintiffs
stated that "[a]fter today, we will live at 49 Bedens Brook Road" and that "[w]e
A-2846-15T4 2 have never owned any property which is next to this property." Julius testified
that the couple moved from 55 Bedens Brook Road to the new house "to get the
money," because the mortgage was issued based on their representation that they
resided there. According to the couple, they lived in the basement and in one
upstairs bedroom of 49 Bedens Brook Road from the time they obtained the
mortgage until August 2009, when they moved back to the home at 55 Bedens
Brook Road. At that time, 49 Bedens Brook Road was rented to another couple
who remained as tenants at the property until August 2010.
When the rental began, plaintiffs had State Farm Insurance Company
(State Farm) homeowners policies in place for both 55 and 49 Bedens Brook
Road. Homeowners policies cover only the principal residence of the property
owners. When State Farm discovered that it insured both homes, the company
compelled plaintiffs to declare which house was their principal residence. Eva2
declared 55 Bedens Brook Road as the couple's principal residence. As a result,
State Farm cancelled the homeowners policy for 49 Bedens Brook Road,
effective June 10, 2010.
According to the trial testimony, the risk of property damage is greatly
increased when a dwelling is not owner occupied because vacant dwellings have
2 Because plaintiffs share a last name, we will refer to them by their first names. A-2846-15T4 3 a higher experience of property loss and damage from fire, pipe breaks, and
vandalism. In addition, tenants do not take as serious an interest in protecting
their homes as do homeowners, raising the risk of loss when a home is rented.
As a result, premiums charged for unoccupied or rented dwellings are higher
than those charged on an owner's principal residence. Plaintiffs had previously
obtained rental property coverage from State Farm for an income-producing
property they owned in Hopewell. They were, therefore, aware that policies for
rented homes have higher premiums than do homeowners policies. Eva testified
that the couple had financial difficulties in June 2010, and could not afford the
premiums for coverage of 49 Bedens Brook Road as a rental property.
On June 10, 2010, Eva visited the offices of Howe, an insurance broker
with whom plaintiffs had a professional relationship, and met with Howe's Vice
President, Bradley Keith. Eva was seeking insurance coverage for 49 Bedens
Brook Road. She testified that she told Keith that she and her husband did not
live at the house, but intended to move there in September 2010, or later that
autumn. Keith's notes from the meeting, however, indicate several times that 49
Bedens Brook Road was plaintiffs' principal residence.3
3 Keith died prior to trial. He gave a recorded statement during the investigation of plaintiffs' insurance claim, the audio of which was played for the jury and
A-2846-15T4 4 On June 21, 2010, Eva signed an application for homeowners insurance
from FMI Insurance Co. (FMI) for 49 Bedens Brook Road. The application
twice represented that the home was her only residence. Keith presented the
application to FMI, which issued a homeowners policy for the property with a
dwelling coverage limit of $1.5 million. Eva admitted repeatedly that she
requested only $1.5 million in coverage and acknowledged that because Julius
is a builder, the couple was concerned only with coverage sufficient to satisfy
the mortgage on the home. At that time, plaintiffs were trying to sell 49 Bedens
Brook Road for $3.5 million. In August 2010, FMI advised Eva that it was
cancelling the policy, effective September 20, 2010, because plaintiffs failed
FMI's credit check.
On September 17, 2010, Keith, acting as plaintiffs' agent, contacted a
representative of GNIC to request issuance of a homeowners policy covering 49
Bedens Brook Road. Based on Eva's representations, Keith told the GNIC
representative that the home was plaintiffs' principal residence, and was not
rented or vacant. The GNIC representative confirmed with Keith that the house
was not vacant, was not rented, and was occupied as plaintiffs' primary
entered into evidence pursuant to N.J.R.E. 804(b)(6). Keith stated that Eva told him that plaintiffs resided at 49 Bedens Brook Road, and that she decided not to renew the State Farm policy because of an increase in premiums. A-2846-15T4 5 residence. Relying on these statements, GNIC issued a homeowners policy to
plaintiffs for the property for the period September 20, 2010 to September 20,
2011, with a dwelling coverage limit of $1.5 million. GNIC would not have
issued the policy had the company been informed that 49 Bedens Brook Road
was not plaintiffs' principal residence, or was vacant and listed for sale.
On November 8, 2010, a GNIC appraiser inspected 49 Bedens Brook
Road. Eva was present during the inspection and said that the house was
plaintiffs' principal residence. The inspector saw no personal effects in the
house. She testified that the home was unheated, and appeared to be for sale, as
the limited furniture there looked staged for purchasers. She concluded that
plaintiffs did not reside there.
In addition, the inspector found the house to be underinsured, given that
the $1.5 million in coverage was well below the house's value of approximately
$3.225 million. The inspector testified that Eva told her that she did not want
to raise the coverage limit because she needed only to cover the mortgage on the
home. According to GNIC's guidelines, in order to obtain a homeowners policy,
at least ninety percent of the property's replacement cost must be insured, the
home cannot be vacant, and cannot be the owner's second residence unless GNIC
also insures the owner's primary residence.
A-2846-15T4 6 The inspector reported her findings to GNIC, which took immediate action
to cancel the policy. On November 19, 2010, GNIC issued a notice of
cancellation effective December 24, 2010, at 12:01 a.m. 4
On December 17, 2010, seven days prior to the cancelation date of the
GNIC policy, a fire of undetermined cause destroyed the house at 49 Bedens
Brook Road. The policy was still in effect and plaintiffs submitted a claim for
$1.5 million, which included the replacement cost of the dwelling and personal
items they claim were in the house at the time of the fire.
In a sworn statement of proof of loss, Eva stated that 49 Bedens Brook
Road was "owner occupied" at the time of the fire. Julius did not sign the
statement. Eva's statement contradicted an application for a mortgage on 55
Bedens Brook Road plaintiffs completed on December 13, 2010, four days
before the fire. In that application, plaintiffs stated under penalty of perjury that
they had lived at 55 Bedens Brook Road for at least the two years prior to the
application and intended to live there as their primary residence. Julius testified
that he signed the mortgage application on instructions of his wife, and that he
neither read it beforehand, nor cared if the statements made in it were true.
4 At trial, Eva denied receiving the first page of the notice of cancellation. During discovery, however, her counsel produced the entire notice. A-2846-15T4 7 During the investigation of plaintiffs' claim, Eva told an investigator that
State Farm canceled its policy on 49 Bedens Brook Road because "you cannot
have two home[s] on that policy at the same agency." She specifically denied
that State Farm canceled the policy because the home was not owner occupied.
This misrepresentation appeared designed to hide the fact that 49 Bedens Brook
Road was not owner occupied at the time that Eva applied for insurance from
GNIC. In addition, during the investigation, Eva swore under oath that as of
October 2010, ninety percent of plaintiffs' clothing and shoes were at 49 Bedens
Brook Road, along with eighty percent of their toiletries, towels, and other
personal items. A November 2010 photograph of the master bedroom, taken
during the GNIC inspection, depicts no personal items.
On February 15, 2012, GNIC denied plaintiffs' claim and voided and
rescinded the policy ab initio after its investigation determined that plaintiffs
obtained the policy by fraudulent misrepresentation, and made
misrepresentations of material fact during the investigation. GNIC returned the
premiums plaintiffs had paid on the policy. Notwithstanding the cancelation of
the policy, GNIC was obligated to give HCSB, the innocent mortgagee,
$1,400,033.36 to pay off the debt on plaintiffs' mortgage on 49 Bedens Brook
Road. GNIC took an assignment of the mortgage from HCSB.
A-2846-15T4 8 On December 17, 2012, plaintiffs filed a complaint in the Law Division
against GNIC and Howe. They alleged against GNIC causes of action for breach
of contract, vicarious liability, reformation, bad faith, gross negligence and
willful misconduct, and consumer fraud. Against Howe, plaintiffs alleged
causes of action for negligence, bad faith, gross negligence and willful
misconduct, breach of fiduciary duty, and consumer fraud. Plaintiffs allege that
Howe failed to obtain adequate insurance coverage for 49 Bedens Brook Road,
and failed to properly investigate plaintiffs' loss claim.
On March 25, 2013, GNIC asserted counterclaims against plaintiffs for
rescission of the policy based on equitable, legal, and common law fraud; unjust
enrichment and restitution for GNIC's payment of plaintiffs' mortgage to HCSB;
and violation of the New Jersey Insurance Fraud Prevention Act, N.J.S.A.
17:33A-1 to -30 (NJIFPA). On April 10, 2013, Howe asserted cross-claims
against GNIC for contribution, indemnification, and contractual indemnification
based on an agency agreement.
On February 4, 2015, GNIC moved to sever its equitable fraud
counterclaim seeking rescission of the policy from the remaining claims. GNIC
argued that plaintiffs are not entitled to a jury trial on the counterclaim, and
A-2846-15T4 9 sought a separate bench trial. The trial court did not decide GNIC's motion, but
permitted the counterclaim to go to the jury for an advisory opinion.
After discovery, both defendants moved for summary judgment. On
September 25, 2015, the trial court entered an order granting GNIC's motion for
summary judgment, in part, and dismissed plaintiffs' claims for bad faith,
consumer fraud, and counsel fees against GNIC. The trial court also granted
summary judgment in favor of Howe, in part, and dismissed all causes of action
asserted against it except for negligence.
The matter was tried before a jury in January 2016. During trial, the court
granted GNIC's motion to voluntarily dismiss its counterclaim for rescission of
the policy based on legal fraud. After trial, GNIC moved for a directed verdict
in its favor on its equitable fraud counterclaim, and for dismissal of plaintiffs'
vicarious liability and reformation claims. The trial court denied that motion
without prejudice, noting that although plaintiffs did not have a right to a jury
trial on the equitable fraud counterclaim, the court would allow that
counterclaim to go to the jury because plaintiffs had a right to a jury trial on
GNIC's other counterclaims. The trial court later stated that it would reconsider
GNIC's equitable fraud counterclaim after the jury rendered its verdict.
A-2846-15T4 10 On January 15, 2016, the jury returned its verdict. With respect to GNIC,
the jury found that plaintiffs proved only breach of contract and awarded
plaintiffs damages of $269,052.14, representing $24,966.94 for the dwelling and
$244,085.20 for the contents of the dwelling. The jury found against GNIC on
its counterclaims for equitable fraud, unjust enrichment, and violation of the
NJIFPA. With respect to Howe, the jury found plaintiffs proved their negligence
claim and awarded them $1,000,000 in damages. The jury rejected plaintiffs'
claim of vicarious liability against Howe.5
On February 3, 2016, GNIC moved for judgment in its favor on all claims
decided against it notwithstanding the verdict, judgment on its equitable fraud
counterclaim, or in the alternative, a new trial. The following day, Howe moved
for judgment in its favor notwithstanding the verdict on all claims decided
against it, or in the alternative, for a new trial. The court interpreted plaintiffs'
opposition to these motions to constitute a motion to modify the amount of the
award for dwelling damages.
On March 1, 2016, the trial court granted defendants' motions and entered
judgment in favor of defendants on all claims decided against them
5 The trial court reduced the verdict against GNIC to $174,966.94 based on evidence of the value of the house's contents. Defendants agreed not to address their cross-claims at trial. A-2846-15T4 11 notwithstanding the verdict. After a careful review of the record, the court
concluded that, accepting as true all evidence supporting plaintiffs' position, and
according them the benefit of all legitimate inferences from such evidence,
reasonable minds could not differ on: (1) plaintiffs having made material
misrepresentations in connection with the issuance of the GNIC homeowners
policy insuring 49 Bedens Brook Road, and during the subsequent investigation
of the fire, entitling GNIC to rescission of the policy; (2) the absence of a breach
of contract by GNIC; and (3) the lack of negligence on the part of Howe. In
addition, the trial court noted that the jury was inappropriately influenced by
matters Eva raised in her summation, including the death of her son, and Julius's
experience in escaping communism and being held in a concentration camp .
On April 15, 2016, the trial court amended the judgment, on application
of GNIC, to add a money judgment in favor of GNIC for restitution on its unjust
enrichment counterclaim of $1,400,033.36, the amount GNIC paid to HCSB,
plus interest under Rule 4:42-11, and to affirm GNIC's right to retain the
promissory note and mortgage it received from HCSB. This appeal followed.
II.
We review de novo the trial court's judgment with respect to GNIC's
equitable fraud counterclaim seeking rescission of the homeowners policy.
A-2846-15T4 12 Zaman v. Felton, 219 N.J. 199, 216 (2014). A party opposing a claim for
rescission of a contract based on equitable fraud does not have a right to a jury
trial. Weintraub v. Krobatsch, 64 N.J. 445, 455 (1974) (citations omitted). The
trial court's findings of fact will not be disturbed "when supported by adequate,
substantial and credible evidence." Zaman, 219 N.J. at 215 (quoting Toll Bros.,
Inc. v. Twp. of W. Windsor, 173 N.J. 502, 549 (2002)).
In order to rescind an insurance contract on grounds of equitable fraud, a
party must demonstrate: (1) a material misrepresentation of a presently existing
or past fact; (2) the maker's intent that the other party rely on the
misrepresentation; and (3) detrimental reliance by the other party. First Am.
Title Ins. Co. v. Lawson, 177 N.J. 125, 136-37 (2003) (quoting Liebling v.
Garden State Indem., 337 N.J. Super. 447, 453 (App. Div. 2001)).
Unlike legal fraud, to rescind an insurance policy under equitable fraud
an insurer need not prove that the insured had knowledge of the falsity and
intended to deceive. See Ledley v. William Penn Life Ins. Co., 138 N.J. 627,
635 (1995); Jewish Ctr. of Sussex Cty. v. Whale, 86 N.J. 619, 624-25 (1981).
"Even an innocent misrepresentation can constitute equitable fraud justifying
rescission." Ledley, 138 N.J. at 635. The elements of rescission must be
A-2846-15T4 13 established by clear and convincing evidence. See Olesak v. Cent. Mut. Ins.
Co., 215 N.J. Super. 155, 159 (App. Div. 1987).
The proofs in the trial court record clearly show that Eva's false and
misleading statements to GNIC, through her agent Howe, satisfy the elements
of equitable fraud. According to Eva's testimony, when seeking issuance of the
relevant homeowners policy she told Keith in June 2010, that plaintiffs intended
to move into 49 Bedens Brook Road as their primary residence in September
2010, or later that autumn. The evidence overwhelmingly shows this
representation to be false.
On or about June 25, 2010, a realtor was enlisted to assist plaintiffs' efforts
to sell 49 Bedens Brooks Road. The realtor testified she advised plaintiffs to
put furniture in the house because a vacant home is less appealing to potential
purchasers than one that is partially furnished. The realtor took photographs of
the home, which depict the staged furniture and show most rooms completely
empty of furniture. Photographs of the bathrooms in the house, including th e
bathroom in the master bedroom, are devoid of personal effects, including toilet
paper. On June 27, 2010, Eva signed a Sellers' Property Condition Disclosure
Statement that stated that plaintiffs did not occupy 49 Bedens Brook Road. The
realtor had a for-sale or rental listing of 49 Bedens Brook Road from June 2010
A-2846-15T4 14 until the time of the fire, and was actively trying to sell or rent the home until it
was destroyed. The realtor testified that she observed no beds or any of Eva's
clothing at 49 Bedens Brook Road. Plaintiffs produced no evidence that they
moved into the vacant residence at any point, or that they had taken any
affirmative steps towards leaving their longtime home at 55 Bedens Brook Road.
Indeed, on the morning of the fire Eva spoke to Keith via telephone.
According to Keith's notes, she admitted that plaintiffs did not occupy 49 Bedens
Brook Road, stating that they had a bed and some furniture in the house. Keith
noted that Eva apologized for having told him that the couple would move into
the home and said "I hope you don't think we did this on purpose."
The record also makes clear that Eva's misrepresentations were material.
Information provided to an insurer is material if "a reasonable insurer would
have considered the misrepresented fact relevant to its concerns and important
in determining its course of action." Palisades Safety & Ins. Ass'n v. Bastien,
175 N.J. 144, 148 (2003) (quoting Longobardi v. Chubb Ins. Co. of N.J., 121
N.J. 530, 542 (1990)). It is undisputed that GNIC would not have issued a
homeowners policy to plaintiffs had it been informed that the house was vacant
and listed for sale or rent. GNIC policy prohibits issuance of a homeowners
policy for a residence not occupied by its owner as a primary residence. This is
A-2846-15T4 15 so because premium rates on homeowners policies do not reflect the higher risk
of loss associated with a vacant home or a residence occupied by tenants.
In addition, although an intent to deceive is not a necessary element of
equitable fraud, the evidence in the trial court record clearly establishes an intent
on the part of Eva to mislead GNIC. Plaintiffs were well aware of the higher
premiums associated with insuring a home that is not owner occupied. At the
time that they obtained the homeowners policy on 49 Bedens Brook Road,
plaintiffs were paying insurance on a rental property they owned with premiums
higher than those applicable to an owner-occupied residence. Prior to seeking
insurance from GNIC, plaintiffs were notified by State Farm that the
homeowners policy on the house was canceled because it was not owner
occupied. Eva concealed the reason for the State Farm termination from Keith
by telling him that plaintiffs were about to move into the home when it was, in
fact, listed for sale. We see no cause to disturb the trial court's conclusion that
GNIC was entitled to rescission of the policy due to plaintiffs' equitable fraud.
In light of GNIC's entitlement to rescission of the policy, the trial court
correctly found that the jury verdict in favor of plaintiffs on their breach of
contract claim against GNIC and negligence claim against Howe could not
stand. We apply the same standard as the trial court to determine whether a
A-2846-15T4 16 moving party is entitled to judgment notwithstanding the verdict. Riley v.
Keenan, 406 N.J. Super. 281, 298 (App. Div. 2009). We have described the
court's review function as "quite a mechanical one" of determining
[w]hether "the evidence, together with the legitimate inferences therefrom, could sustain a judgment in . . . favor" of the party opposing the motion; i.e., if, accepting as true all the evidence which supports the position of the party defending against the motion and according him the benefit of all inferences which can reasonably and legitimately be deduced therefrom, reasonable minds could differ . . . .
[Judge v. Blackfin Yacht Corp., 357 N.J. Super. 418, 424 (App. Div. 2003) (quoting Dolson v. Anastasia, 55 N.J. 2, 5 (1969)).]
A judgment notwithstanding the verdict will be denied where the verdict
is based primarily on credibility determinations. Alves v. Rosenberg, 400 N.J.
Super. 553, 566 (App. Div. 2008) (citation omitted). However,
[s]uch credibility determinations . . . may be removed from the jury's purview and a directed verdict granted when the testimony provided is uncontradicted and reliable, i.e., the testimony "is not improbable, extraordinary or surprising in its nature, or [where] there is no other ground for hesitating to accept it as the truth . . . ."
[Ibid. (quoting Ferdinand v. Agric. Ins. Co. of Watertown, N.Y., 22 N.J. 482, 494, 498 (1956)).]
In Ferdinand, the Court explained,
A-2846-15T4 17 when the testimony of witnesses, interested in the event or otherwise, is clear and convincing, not incredible in the light of general knowledge and common experience, not extraordinary, not contradicted in any way by witnesses or circumstances and so plain and complete that disbelief of the story could not reasonably arise in the rational process of an ordinarily intelligent mind, then a question has been presented for the court to decide and not the jury.
[22 N.J. at 494 (citations omitted).]
A "jury's factual determination will be disturbed only if we find that the jury
could not have reasonably used the evidence to reach its verdict." Sons of
Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 415 (1997).
Because Eva's misrepresentations warrant invalidation of the homeowners
policy, reasonable minds could not differ with respect to whether GNIC
breached that contract. Any contractual obligation GNIC may have had to
plaintiffs was obviated by the equitable remedy of rescission.
Moreover, even if the policy was in effect, no reasonable juror could have
found a breach of contract on GNIC's part, in light of the evidence adduced at
trial. It is undisputed that the homeowners policy had a concealment or fraud
provision that provided, "[t]his policy is void if you or any covered person has
intentionally concealed or misrepresented any material fact relating to this
policy before or after a loss."
A-2846-15T4 18 A concealment or fraud clause applies "not only to the insured's
misrepresentations made when applying for insurance, but also to those made
when the insurer is investigating a loss." Longobardi, 121 N.J. at 539. The
burden of proof for an affirmative defense of violation of a policy provision for
fraud or false swearing is by a preponderance of the evidence. Liberty Mut. Ins.
Co. v. Land, 186 N.J. 163, 177-78 (2006); Italian Fisherman, Inc. v. Commercial
Union Assurance Co., 215 N.J. Super. 278, 281-85 (App. Div. 1987).
As discussed at length above, even under Eva's version of events, when
obtaining the homeowners policy she made the material misrepresentation that
plaintiffs were soon to make 49 Bedens Brook Road their primary residence.
This false statement, intended to obtain insurance coverage at a premium rate
less than would be applicable to a vacant home, induced GNIC to issue the
policy. As a result, plaintiffs received coverage for a risk exceeding the risk
their premiums were calculated to cover. There is no reasonable way to interpret
the evidence to reach the conclusion that plaintiffs were entitled to this coverage
despite their violation of the concealment and fraud clause of the policy.
We turn to GNIC's unjust enrichment counterclaim for restitution for the
amount it paid to HCSB, which was rejected by the jury. Restitution for unjust
enrichment is an equitable remedy available when there is no adequate remedy
A-2846-15T4 19 at law. Nat'l Amusements, Inc. v. N.J. Tpk. Auth., 261 N.J. Super. 468, 478
(Law Div. 1992). To establish a claim for unjust enrichment a "plaintiff must
show both that the defendant received a benefit and that retention of that benefit
without payment would be unjust." VRG Corp. v. GKN Realty Corp., 135 N.J.
539, 554 (1994) (citations omitted).
GNIC was obligated under the "mortgage or loss payee" provision of the
homeowners policy to pay HCSB, an innocent mortgagee, $1,400,033.36. This
obligation arose because of plaintiffs' material misrepresentations to GNIC
when obtaining the homeowners policy. Plaintiffs benefitted because their debt
to HCSB was satisfied. Plaintiffs were unjustly enriched, even when all of the
evidence admitted at trial is viewed in the light most favorable to them. They
made no convincing argument to reverse the trial court's grant of judgment
notwithstanding the verdict on this claim.
The jury verdict that Howe was negligent in obtaining insurance coverage
for plaintiffs also does not withstand scrutiny. "It is fundamental that a case
sounding in negligence requires a showing of a duty, a breach of that duty and
foreseeable injury proximately caused by the breach." Anderson v. Sammy
Redd & Assocs., 278 N.J. Super. 50, 56 (App. Div. 1994) (citation omitted).
With respect to the duty of an insurance broker, the obligations are
A-2846-15T4 20 (1) to procure the insurance; (2) to secure a policy that is neither void nor materially deficient; and (3) to provide the coverage he or she undertook to supply. If an agent or broker fails to exercise the requisite skill and diligence when fulfilling those obligations, then there is a breach in the duty of care, and liability arises.
[President v. Jenkins, 180 N.J. 550, 569 (2004) (citing Rider v. Lynch, 42 N.J. 465, 476 (1964)).]
During trial, Eva repeatedly admitted that she requested Howe to obtain a
homeowners policy with $1.5 million in coverage. This is precisely the policy
and coverage Howe obtained for plaintiffs. Only once in her testimony did Eva
suggest that she did not ask specifically for $1.5 million in coverage. On her
last day of testimony, Eva testified that when she met with Keith she showed
him the declarations page of the canceled State Farm policy "and I told him,
match up that insurance, that's all I want. I didn't tell him, make it 1 million
500."
Yet, plaintiffs were issued not one, but two, policies with a $1.5 million
coverage limit after Eva's conversation with Keith. The policy obtained through
Howe from FMI had a $1.5 million coverage limit. Plaintiffs provided no
evidence that they objected to the coverage limit, or questioned Keith about it.
After the FMI policy was canceled, GNIC issued its policy with a $1.5 million
coverage limit. Again, plaintiffs did not object. Nor did they question Keith
A-2846-15T4 21 about it, or explain why, if they had requested a policy with a higher coverage
limit, Keith would have forgone the higher commission he would have earned
for such a policy. In fact, during post-trial arguments Eva conceded that she
accepted the GNIC policy and told Keith that "it's okay."
To the extent that $1.5 million was insufficient to cover the value of the
home, it is plaintiffs who took the risk of being underinsured. "[T]here is no
common law duty of a carrier or its agents to advise an insured concerning the
possible need for higher policy limits upon renewal of the policy." Wang v.
Allstate Ins. Co., 125 N.J. 2, 11-12 (1991). We see no reason why such a duty
would arise when an insured is obtaining coverage.
In Sobotor v. Prudential Prop. & Cas. Ins. Co., 200 N.J. Super. 333, 339
(App. Div. 1984), we held that a special relationship between an insured and a
broker may give rise to a duty for the broker to advise the insured of available
policies with more coverage than requested by the insured. We limited our
holding, however, to those instances in which an insured "knew nothing about
the technical aspects of insurance policies, [and] placed faith in," and relied on,
the broker's expertise. Ibid. Those circumstances are not present here.
To the contrary, the record is clear that Eva was well aware of the
difference between homeowners insurance and coverage for a home that is
A-2846-15T4 22 vacant or rented. At the time that she obtained insurance through Howe, she and
Julius were paying higher premiums on an income-producing home they owned.
In addition, the record is replete with evidence that Eva misrepresented the
nature of the occupancy and use of 49 Bedens Brook Road, and intentionally
sought coverage of only $1.5 million to cover the mortgage on the property. At
the same time, she was attempting to sell the home for more than $3 million,
evidencing that she was knowingly underinsuring the property. In addition,
plaintiffs did not allege a special relationship with Howe in their complaint. See
Wang, 125 N.J. at 15. We agree with the trial court's conclusion that there is no
evidence in the record to support a finding that Howe had a duty to advise
plaintiffs to seek a policy with a higher coverage limit.
Howe raises additional arguments regarding what it describes as Eva's
inappropriate remarks during summation. In addition to the comments noted by
the trial court, Howe contends that Eva sought compensation for torts not alleged
in the complaint, and, contrary to instructions from the court, stated "that the
defendants were using their financial strength to wear down" plaintiffs . In light
of our previously stated holdings, we do not address these arguments.
Affirmed.
A-2846-15T4 23