SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
A-4672-96T1
HAROLD RAYMOND MANN and
REGIONAL TRUCKING COMPANY, INC.,
Plaintiffs-Appellants,
v.
INTERSTATE FIRE & CASUALTY COMPANY,
Defendant-Respondent,
and
SCIARRA INSURANCE AGENCY, INC.,
McCONAGHY SPECIAL RISKS, INC.,
and DOROTHY KISAL, Administrator
ad Prosequendum and General
Administrator of the Estate of
Guy Kisal, Deceased,
Defendants.
Argued December 16, 1997 - Decided January
23, 1998
Before Judges Stern, Kleiner and Kimmelman.
On appeal from the Superior Court of
New Jersey, Law Division, Essex County.
Francis X. Garrity argued the cause for
appellants (Garrity, Graham, Favetta & Flinn,
attorneys; Mr. Garrity, of counsel; Jo Ann
Katzban, on the brief).
Richard D. Picini argued the cause for
respondent (Picillo Caruso, attorneys; Mr.
Picini, of counsel; Adrienne Matthews, on the
brief).
The opinion of the court was delivered by
KLEINER, J.A.D.
Upon leave to appeal, plaintiffs, Harold Raymond Mann and
Regional Trucking Company, Inc. (Regional), appeal from the grant
of summary judgment to defendant, Interstate Fire & Casualty
Company (Interstate), in a declaratory judgment action seeking
indemnification and a defense in a wrongful death action. We
conclude that the motion judge failed to properly consider the
issues of dual agency and apparent authority and failed to
recognize that defendant's potential liability to plaintiffs
raised sufficient material issues of fact warranting submission
of the issue to the trier of fact after a plenary hearing. We
reverse.
On February 10, 1992, Guy Kisal, a Pennsylvania resident,
was killed when he was struck by a tandem tractor/trailer owned
by defendant Regional and operated by its employee, plaintiff
Mann. On January 27, 1994, Dorothy Kisal, as administrator ad
prosequendum and general administratrix of the Estate of Guy
Kisal, instituted suit in the Superior Court, Law Division, Essex
County against both Regional and Mann. Regional demanded that
Interstate afford insurance coverage and pay on behalf of
Regional and Mann all sums in excess of primary underlying
coverage which they may become obligated to pay as damages to
Kisal. Interstate denied coverage, thus prompting this
declaratory judgment action.
Regional is engaged as an ICC certified carrier in the
hauling of goods in interstate commerce. Prior to February 10,
1992, Regional was affiliated with two other ICC certified
carriers, R.G. Truck Leasing and Reisch Trucking &
Transportation. All three companies utilized the Sciarra Agency
as their insurance broker.
From March 20, 1991, to March 20, 1992, Interstate afforded
excess coverage to R.G. Truck Leasing under a policy issued in
Pennsylvania providing liability coverage for accidents resulting
in bodily injury in excess of $1 million and up to $4 million.
Since Interstate was not then an admitted insurance company in
Pennsylvania, it was required to comply with the Pennsylvania
Surplus Lines Law, 40 Pa. Cons. Stat. § 991.1615, which requires
that any Interstate policy be issued through a certified Surplus
Lines Agent.See footnote 1
Interstate's insurance policy with R.G. Leasing was procured by the Sciarra Agency through McConaghy Special Risk, Inc. (McConaghy), which had offices in Collingswood, New Jersey. McConaghy is identified on the declaration page of the Interstate policy issued to R.G. Truck Leasing as "Agent or Broker." It is undisputed in the record on appeal that Sciarra Agency was not an approved broker or surplus lines agent for Interstate. Thus, Sciarra Agency, in order to purchase an Interstate policy on behalf of one of its customers, was required to deal with a surplus lines broker or agent for Interstate.See footnote 2 It is undisputed
that when R.G. Truck Leasing secured its Interstate excess
policy, it contacted Sciarra Agency, who then contacted
McConaghy, who then communicated with Interstate.
While the Interstate excess policy insuring R.G. Truck
Leasing was in place prior to Kisal's death, R.G. Truck Leasing's
operations were taken over by Regional. Regional contacted
Sciarra Agency and requested that the Interstate policy be
amended to reflect Regional as the named insured. In accord with
prior practice, Sciarra Agency requested, both orally and by
facsimile, McConaghy to either secure an appropriate amendment to
the Interstate policy changing the name of the named insured or
to provide it with a new application for excess insurance to be
completed by Regional for transmission to Interstate.
As of the date of Kisal's death, McConaghy had not acted on
Sciarra Agency's request.See footnote 3 Thus, when Regional demanded
indemnification and a defense of Kisal's wrongful death
complaint, Interstate denied coverage.
In the Law Division, Regional contended that McConaghy acted
as a dual agent. It contended that McConaghy had a duty to act
with the requisite degree of skill and knowledge to procure
requested excess insurance coverage as the agent of Sciarra
Agency, who was the agent of Regional. It also contended that
McConaghy was acting as the agent of Interstate in processing
applications for insurance and providing information to
Interstate relating to prospective customer's risks. It
contended that when McConaghy failed to communicate with
Interstate after being first contacted by the Sciarra Agency, it
breached its obligation to both Regional and Interstate and thus,
to the extent that Regional would have been afforded coverage,
Interstate was obligated to indemnify and defend it in Kisal's
wrongful death claim. As noted, on cross-motions for summary
judgment, the Law Division concluded that McConaghy was not the
agent of Interstate for the purpose of transmitting Regional's
request for excess coverage to Interstate and thus that
Interstate was not vicariously liable for McConaghy's negligence.
An analysis of the factual contentions submitted by both parties in support of their respective motions and cross-motions for summary judgment turns on the special relationship between the parties and the roles and responsibilities of the several parties in securing an excess insurance policy for Regional.
In an effort to buttress its contentions, Regional provided
the motion judge with excerpts of deposition testimony. Justin
Sciarra of Sciarra Agency testified that in order to obtain an
Interstate policy for a putative insured, its customer, his
agency was required to contact McConaghy to discuss the risk and
to provide McConaghy with the customer's loss information, the
nature of the business and extent of its business as reflected in
its income, identification of the customer's primary insurance
coverage, and the number of vehicles owned or operated by the
customer. The requisite information then would be forwarded by
McConaghy to Interstate. Once an application for excess
insurance was evaluated, Interstate would quote a rate to
McConaghy and McConaghy would transmit the rate information to
Sciarra Agency. If the rate was accepted by the prospective
insured, Interstate would bill McConaghy, and upon receipt of
payment by the insured, McConaghy would pay a commission to
Sciarra Agency.
In July 1991, Regional took over the business operations of
R.G. Truck Leasing. It retained all of R.G. Truck Leasing's
customers. All trucks that had been leased to R.G. Truck Leasing
were either owned or under long term lease to Regional. Owners
and operators under contract to R.G. Leasing were given new
contracts with Regional. On July 26, 1991, Sciarra Agency
procured primary insurance coverage for Regional with New
Hampshire Insurance Company.See footnote 4 On September 17, 1991, Sciarra
Agency contacted McConaghy, as noted above, to amend the
Interstate excess insurance policy to reflect that Regional was
the named insured or to request a new application for insurance
if required by Interstate.
The record is clear that although McConaghy did not recall
his conversation with the Sciarra agency on September 17, 1991,
he did receive a facsimile on the same date confirming the
conversation and requesting either a policy amendment or a new
insurance application to be used by Regional.
At depositions, James Pye, an underwriter and executive of
Interstate, admitted that Interstate was not "open to the general
brokerage public" and it only dealt with approved brokers with
whom it had a brokerage contract. He recognized that McConaghy
was an approved broker.See footnote 5
When Interstate declined coverage to Regional, it indicated
that McConaghy did not provide information that R.G. Truck
Leasing had been taken over by Regional, that R.G. Truck
Leasing's policy of primary insurance with Traveler's insurance
Company had been canceled, or that Regional had secured primary
insurance coverage with New Hampshire Insurance Company.
To a substantial extent this analysis is similar to and is guided by our Supreme Court's decision in Sears Mortgage Corp. v. Rose, 134 N.J. 326 (1993). In Sears, the Court concluded that a closing real estate attorney retained by a purchaser of land may be found to be the agent of the title-insurance company for the purpose of applying moneys to satisfy and cancel an existing mortgage, securing clear title for the purchaser, and obtaining from the carrier a title-insurance policy covering that title. Id. at 337. The Supreme Court specifically concluded that despite an agreement between parties specifying the nature of their relationship, "the law will look at their conduct and not to their intent or their words as between themselves but to their factual relation." Ibid. (citing Henningsen v. Bloomfield Motors, 32 N.J. 358 (1960)). Thus, the written brokerage agreement between Interstate and McConaghy, defining McConaghy as a broker "without authority . . . to act in any way as an agent of Interstate," but which also designates McConaghy as an "independent contractor," supra note 2, is not dispositive of the issues requiring disposition.
In determining whether defendant was entitled to summary judgment, the motion judge was compelled to analyze the totality of the facts presented by the pleadings, certifications, and
deposition testimony. The judge was obligated to discern from
all the evidence presented whether, despite the written brokerage
agreement between Interstate and McConaghy, there existed facts
which clothed McConaghy with the apparent authority based on
manifestations of that authority by the principal, or implied
authority inferred from the nature or extent of the function to
be performed, the general course of conducting the business, or
from the particular circumstances in the case. Sears, supra, 134
N.J. at 338 (citing Carlson v. Hannah,
6 N.J. 202, 212 (1951)).
Our law recognizes that an agent or broker can act as both the
agent of the insured and the insurer during a particular
transaction. Spilka v. South America Managers, Inc.,
54 N.J. 452, 463 (1969). As stated in American Well Works v. Royal
Indemnity Co.,
109 N.J.L. 104 (E. & A. 1932):
The rule is that the principal is bound
by the acts of his agent within the apparent
authority which he knowingly permits the
agent to assume, or which he holds the agent
out to the public as possessing. The
question in every case depending upon the
apparent authority of the agent is whether
the principal has by his voluntary act placed
the agent in such a situation that a person
of ordinary prudence, conversant with
business usages and the nature of the
particular business, is justified in
presuming that such agent has authority to
perform the particular act in question; and
when . . . the party, relying upon such
apparent authority, presents evidence which
would justify a finding in his favor, he is
entitled to have the question submitted to
the jury.
[Id. at 108.]
See also Applemann, 16 Insurance Law and Practice, § 8736 (1981)
("It is not unusual for an insurance agency to represent both
insurer and insured . . .").
This same concept was recently discussed in Rodriguez v.
Hudson County Collision Co.,
296 N.J. Super. 213 (App. Div.
1997), where this court stated that "[a]pparent authority arises
when a principal `acts in such a manner as to convey the
impression to a third party that the agent has certain power
which he may or not [sic] possess.'" Id. at 220 (quoting Lampley
v. Davis Machine Corp.,
219 N.J. Super. 540, 548 (App. Div.
1987)). We particularly noted in Rodriguez:
Liability will be imposed upon the principal
in cases involving apparent authority where
the actions of a principal have misled a
third party into believing that a
relationship of authority existed and where
the third party has relied upon this belief
to his or her detriment.
[Id. at 221 (citations omitted).]
Here, the facts as presented by the certifications and deposition testimony clearly reveal that the general public may not deal directly with Interstate to secure a policy of excess insurance. In fact, licensed insurance agents or brokers may not obtain a policy of excess insurance from Interstate by direct contact with an Interstate underwriter or executive. Interstate only accepts applications for excess insurance from approved designated "brokers" who are defined as "independent contractors." Yet, under the Pennsylvania Surplus Lines Law, 40 Pa. Cons. Stat. § 991.1604 and § 991.1615, Interstate is required
to appoint a surplus lines agent in Pennsylvania to issue
insurance. Despite the title or status of McConaghy, as
contractually designated by Interstate, or as denominated under
Pennsylvania statutes, it seems clear that McConaghy has the
designated responsibility delineated by, and under the control
of, Interstate, to receive on behalf of Interstate all
applications for excess insurance, to process those applications
together with required information gathered from the putative
customer, and the additional responsibility of communicating the
rate for insurance which Interstate agrees to write for the
potential customer. It appears, therefore, that McConaghy was
serving in a dual capacity: as the agent for the prospective
customer and the agent for Interstate to process applications for
insurance and to effectuate the completed insurance policy
purchase.
To the degree that McConaghy negligently processed Sciarra
Agency's request to amend the policy of insurance issued to R.G.
Truck Leasing to reflect Regional as a named insured or,
alternatively, to obtain an application for insurance to enable
Regional to apply for a new excess insurance policy, its
negligence may be chargeable to Interstate under a theory of
respondeat superior. See Sears, supra, 134 N.J. at 346
(concluding that a title insurance company was liable for a theft
committed by its designated closing attorney even though the
attorney was retained to represent the purchaser).
As Sears instructs: "Of particular importance is whether a
third party has relied on the agent's apparent authority to act
for a principal." Id. at 338 (citing N. Rothenberg & Son v.
Nako,
49 N.J. Super. 372, 382-83 (App. Div. 1958)). Although the
motion judge failed to consider the reliance issue, it seems
clear from the record that Sciarra Agency clearly relied on
McConaghy to accomplish one of three intended goals: either (1)
to secure an amendment to the R.G. Truck Leasing excess insurance
policy to reflect a change in the named insured; or (2) to obtain
an application which would permit Regional to apply for a new
policy providing excess insurance coverage; or (3) to obtain a
prompt reply from Interstate of its intent not to underwrite a
policy of excess insurance, thus permitting Regional to seek
coverage with another excess lines carrier. Reliance appears
obvious, as under the facts presented, Sciarra Agency was
required by Interstate to deal with McConaghy.
Our decision does not reach the ultimate question to be
determined, that is, whether Regional was actually damaged by the
alleged defalcation of duty by McConaghy. Stated differently,
had McConaghy communicated with Interstate in a timely fashion,
would Interstate have amended the R.G. Truck Leasing policy to
reflect Regional as the named insured? In the alternative, would
it have required Regional to apply for its own policy of surplus
insurance and, if so, would Interstate have issued a new policy
to Regional based on its application? These issues were not
briefed or argued on the motion for summary judgment and may not
be addressed in this opinion. Nieder v. Royal Indem. Ins. Co.,
62 N.J. 229, 234 (1973). Additionally, we need not address
Regional's additional argument that Interstate is liable to it
regardless of the change in primary coverage. Although raised by
Regional before the motion judge, the issue raised was not
addressed by the judge, as he concluded that McConaghy was not
Interstate's agent.
We conclude that Rule 4:46-2 precluded the grant of summary
judgment on the agency issue because the pleadings, depositions,
and certifications demonstrate that there were genuine issues of
material fact presented on the agency issue sufficient to warrant
submission of this issue to the trier of fact. Brill v. Guardian
Life Insurance Co.,
142 N.J. 520, 540 (1995).
Reversed and remanded for further proceedings consistent
with this opinion.
Footnote: 1 Pennsylvania Surplus Lines Law, 40 Pa. Cons. Stat. §
991.1615, entitled "Licensing of surplus lines licensee,"
provides:
(a) No agent or broker licensed by the
department shall transact surplus lines
insurance with any nonadmitted insurer unless
such agent or broker possesses a valid
surplus lines agent's license issued by the
department.
(b) The department shall issue a surplus
lines agent's license to any resident of this
Commonwealth who is a qualified holder of a
current property and casualty broker's
license, but only when the broker has
complied with the following:
(1) Remitted the license fee to the
department.
(2) Submitted a properly completed
license application on a form supplied
by the department.
(3) Passed a qualifying examination approved by the department, except that
all holders of a license prior to the
effective date of this article shall be
deemed to have passed such an
examination.
(4) Filed with the department and
maintained concurrent with the term of
the license, in force and unimpaired, a
bond in favor of the Commonwealth of
Pennsylvania in the penal sum of at
least fifty thousand ($50,000) dollars,
aggregate liability, with corporate
sureties approved by the department.
The bond shall be conditioned that the
surplus lines licensee will conduct
business in accordance with the
provisions of this article and will
promptly remit the taxes as provided by
law. No bond shall be terminated except
for nonpayment of premiums. Termination
notice shall be given to the surplus
lines licensee and to the department at
least thirty (30) days prior to the
termination date.
(c) Corporations and partnerships shall be
eligible to be resident surplus lines
licensees, upon the following conditions:
(1) The corporation or partnership
licensee shall list all employees,
including at least one active officer or
partner, who have satisfied the
requirements of this article to become
surplus lines licensees.
(2) Only those employees resident in
this Commonwealth holding a certificate
of eligibility may transact surplus
lines insurance.
(d) Each surplus lines license shall expire
on the last day of February of each year and
shall be renewed before March 1 of each year
upon payment of the annual fee, in compliance
with other provisions of this section. Any
surplus lines licensee who fails to apply for
renewal of a license before expiration of the
current license shall pay a penalty of two
times the license fee and be subject to other
penalties as provided by law before his
license will be renewed.
Footnote: 2 Interstate and McConaghy are parties to a "Broker
Agreement" effective July 26, 1988, in which McConaghy is
designated a "broker." Under that agreement, a "Broker" is
defined as an "independent contractor." The agreement
specifically provides, in part:
The BROKER agrees that, except the prior
written authorization of INTERSTATE, the
BROKER has no authority:
* to issue binders, policies, endorsements
or insurance certificates or to otherwise
bind coverage on behalf of INTERSTATE; or
* to waive or extend any condition of a
policy or application or to make, alter, vary
or discharge any policy contract; or
* to make representations on behalf of
INTERSTATE including, but not limited to,
representations regarding the application of
coverage to specific situations; or
* to extend time for payment of premiums; or
* to insert any advertisement regarding INTERSTATE in any publication whatsoever or
to issue or cause to have issued any letter,
circular, pamphlet or other publication or
statement referring to INTERSTATE; or
* to incur any liability on behalf of
INTERSTATE; or
* to act in any way as an agent of
INTERSTATE.
Footnote: 3 Regional's brief on appeal asserts that both the Sciarra Agency and McConaghy are no longer in business and that neither agency maintained an errors and omissions insurance policy. Footnote: 4 Under the Interstate excess insurance policy issued to R.G. Truck Leasing, Travelers Insurance Company was designated as its primary insurance carrier. Footnote: 5 Although Pye did not know whether Interstate would have issued a policy in excess to the primary policy issued by New Hampshire Insurance Company, evidence in the record reflects that during 1991 New Hampshire Insurance Company was rated A+ (superior) by A.M. Best. We recognize that this issue requires resolution and anticipate that the issue would be one to be considered at a plenary hearing.