(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in
the interests of brevity, portions of any opinion may not have been summarized).
(NOTE: The Court wrote no full opinion in this case. Rather, the Court's affirmance of the judgment of the Appellate Division is based substantially on the reasons expressed in Judge Coburn's opinion below.)
Argued November 27, 2000 -- Decided December 13, 2000
PER CURIAM
This appeal deals with a title insurance company's right to recover against a bond issuer for theft of funds
by a sole shareholder of the insured corporation.
Conestoga, a title insurance company, authorized Premier Title Agency, Inc. (Premier) to issue title
insurance policy commitments on its behalf. In connection therewith, Conestoga required Premier to obtain fidelity
insurance. Premier obtained that insurance from Old Republic. The fidelity bond issued by Old Republic insured
Premier against dishonest acts of its “employees,” which was defined as “any natural person . . . in your service . . .
[w]hom you compensate directly by salary . . . ; and [w]hom you have the right to direct and control while
performing services for you[.]. The bond further provided that “this insurance is for your benefit only. It provides
no rights or benefits to any other person or organization.”
Robert M. Wurster was the sole director, president, and shareholder of Premier, which had two other
employees. In that capacity, he supervised numerous title closings during which he issued Conestoga title
commitments and received checks payable to Premier from home purchasers. Those funds were to be held in trust
and used by Premier to satisfy existing mortgages on the purchased properties. Instead of paying off the existing
mortgages on the properties, Wurster stole the funds. Conestoga reimbursed Premier's clients, obtained judgment
against Premier, and obtained an assignment of whatever rights Premier might have against Old Republic under the
fidelity bond.
The trial judge found as fact that Wurster, the thief, was the alter ego of Premier. While recognizing that
“coverage should not be afforded in 'alter ego' situations unless such coverage was part of the bargain,” the trial
judge concluded that based on the application for coverage and on testimony that applications were used to set
premiums, Old Republic had agreed to provide coverage for embezzlements committed by Wurster in respect of
funds held in trust by Premier. The trial judge further sustained Conestoga's right to proceed against Old Republic
based solely on its status of assignee of Premier's rights. The court entered judgment in favor of Conestoga. Old
Republic appealed.
On appeal, the Appellate Division recognized that as a general rule, in determining whether particular acts
of a true employee are covered, fidelity bonds indemnifying employers against dishonest acts of their employees
should be broadly construed. However, the Appellate Division more narrowly identified the issue in this matter to
be whether Wurster was an employee of Premier as defined in the fidelity bond. The panel noted that although New
Jersey courts have not yet addressed the issue, numerous other courts have held that this common definition of
“employee” in corporate fidelity bonds (persons whom you have the right to direct and control while performing
services for you) is unambiguous and means that thefts by corporate alter egos are not covered. The panel noted
that to allow the corporation to recover for the owner's fraudulent or dishonest conduct would essentially allow the
corporation to recover for its own fraudulent or dishonest acts. Thus, the Appellate Division concluded that the
fidelity bond issued by Old Republic did not cover the acts of Wurster, who essentially owned Premier. Since
Conestoga's only rights were as assignee, the panel held that it was not entitled to judgment on the bond. The panel
further determined that the application for the policy did not fortify Conestoga's position in any respect. It reversed
the judgment of the trial court and remanded the matter for entry of judgment in favor of Old Republic dismissing
the complaint with prejudice.
The Supreme Court granted Conestoga's petition for certification.
HELD: Judgment of the Appellate Division is AFFIRMED substantially for the reasons expressed by the
Appellate Division in its written opinion. The language in Old Republic's fidelity bond covering Premier for
dishonest acts of its employees did not cover the thefts committed by Wurster, the sole shareholder of the
corporation. Thus, because Conestoga's rights were as assignee, it is not entitled to judgment on the bond.
CHIEF JUSTICE PORITZ and JUSTICES STEIN, COLEMAN, VERNIERO, and LAVECCHIA
join in this PER CURIAM opinion. JUSTICES LONG and ZAZZALI did not participate.
SUPREME COURT OF NEW JERSEY
A-
111 September Term 1999
CONESTOGA TITLE INSURANCE
CO.,
Plaintiff and Third
Party Plaintiff-
Appellant,
v.
PREMIER TITLE AGENCY, INC.,
f/k/a STEWART TITLE AGENCY OF
SALEM COUNTY, ROBERT M.
WURSTER, PATRICIA J. WURSTER,
GEORGE HAMPTON, BEVERLY
HAMPTON, KEVIN MARK MARINI,
WILLIAM McINTYRE, JANET M.
McINTYRE, PATRICIA J.
McMAHON, MARGARET M. McMAHON,
RICHARD K. HUMPHREYS, SHERRY
J. HUMPHREYS, JOHN T. SEGICH,
LAURA M. SEGICH, FREDERICE
HUMPHREYS, WILLIAM T. SMITH,
SUSAN P. SMITH, BANK UNITED
OF TEXAS, FSB, d/b/a
COMMONWEALTH UNITED MORTGAGE,
Defendants,
and
OLD REPUBLIC INSURANCE
COMPANY a/k/a OLD REPUBLIC
SURETY COMPANY,
Third Party Defendant-
Respondent.
Argued November 27, 2000 -- Decided December 13, 2000
On certification to the Superior Court,
Appellate Division, whose opinion is
reported at
328 N.J. Super. 460 (2000).
R. James Kravitz argued the cause for
appellant (Fox, Rothschild, O'Brien &
Frankel, attorneys; Jonathan D. Weiner, of
counsel).
Roger P. Sauer argued the cause for
respondents (Lindabury McCormick &
Estabrook, attorneys; Mr. Sauer and Eric B.
Levine, on the brief).
Andrew S. Kent submitted a letter in lieu of
brief on behalf of amici curiae, The Surety
Association of America and American
Insurance Association (Wolff & Samson,
attorneys).
PER CURIAM
The judgment is affirmed, substantially for the reasons
expressed in Judge Coburn's opinion of the Appellate Division,
which is reported at
328 N.J. Super 460 (2000).
CHIEF JUSTICE PORITZ and JUSTICES STEIN, COLEMAN, VERNIERO, and LaVECCHIA join in this opinion. JUSTICES LONG and ZAZZALI did not participate.
NO. A-111 SEPTEMBER TERM 1999
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
CONESTOGA TITLE INSURANCE
CO.,
Plaintiff and Third
Party Plaintiff-
Appellant,
v.
PREMIER TITLE AGENCY, INC.,
etc., et al.,
Defendants,
and
OLD REPUBLIC INSURANCE
COMPANY a/k/a OLD REPUBLIC
SURETY COMPANY,
Third Party Defendant-
Respondent.
DECIDED December 13, 2000
Chief Justice Poritz PRESIDING
OPINION BY PER CURIAM
CONCURRING OPINION BY
DISSENTING OPINION BY