Title: President v. Jenkins, et al.

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

(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). Dr. Reginald Jenkins, a medical doctor specializing in obstetrics and gynecology, had hospital privileges at St. Barnabas Medical Center. In February 1987, he obtained medical malpractice coverage with Princeton Insurance Company (Princeton) under an occurrence policy that was renewed for successive one-year periods through February 1998. By letter dated January 9, 1998, however, Princeton notified Dr. Jenkins that his policy would be cancelled, retroactive to October 26, 1997, for failure to pay his overdue premium. In August 1997, Dr. Jenkins had discussed obtaining replacement medical malpractice insurance with Patrick O Brien, a sales representative for C&R Insurance Agency (C&R), and an agent for Zurich Insurance Company (Zurich). Dr. Jenkins informed O Brien that his policy with Princeton was due to expire at the beginning of February 1998. On January 8, 1998, Dr. Jenkins completed an insurance application with O Brien, indicating that his Princeton insurance policy would expire on February 1, 1998, and representing that his professional liability insurance had never been denied, cancelled, or not renewed. O Brien advised Dr. Jenkins to pay his final premium to Princeton, but Dr. Jenkins failed to do so and never informed O Brien that his Princeton policy was cancelled prior to February 1, 1998. Zurich issued Dr. Jenkins a binder, a certificate of insurance (certificate), and an additional insured physician s endorsement #1 (endorsement #1). The binder identified February 1, 1998, to April 1, 1998, as the binder period, January 1, 1998, to January 1, 1999, as the policy period, and February 1, 1998, as the retroactive date. The certificate set February 1, 1998, as the policy s effective date, and January 1, 1999, as the policy s expiration date. The endorsement set January 1, 1998, as the effective date of the policy, January 1, 1999, as the expiration date of the policy, and February 1, 1998, as the effective date of the endorsement. C&R mailed Dr. Jenkins the Zurich insurance policy in April 1998 and the policy s cover page displayed in bold print that the policy was written on a claims-made basis. The policy defined policy period, but the retroactive date was neither defined nor set forth in the policy. Dr. Jenkins also received a declarations page for a group policy listing the policy period from January 1, 1998, to January 1, 1999, with a retroactive date of January 1, 1997. On September 20. 1999, plaintiffs, Deborah and Perry President, filed a medical malpractice complaint against Dr. Jenkins based on injuries resulting from alleged negligence that occurred on January 3 and 4, 1998. Zurich declined coverage because the incident occurred prior to the policy s February 1, 1998, retroactive date. Plaintiffs amended their complaint to include additional defendants, including Princeton, Zurich and C&R. The claims were dismissed against all defendants except Dr. Jenkins. Dr. Jenkins amended his answer to include cross claims against Zurich and C&R. Zurich and C&R each moved for summary judgment and submitted documentation to demonstrate that Zurich provided no coverage prior to February 1, 1998, and that Dr. Jenkins informed C&R that his coverage with Princeton did not expire until February 1, 1998. Dr. Jenkins filed a cross-motion for summary judgment against Zurich and C&R. The trial court denied Dr. Jenkins s cross-motion for summary judgment and granted summary judgment in favor of both the insurer and the agent. The Appellate Division affirmed the trial court s judgment with one member of the panel dissenting. The majority concluded that Dr. Jenkins s malpractice insurance policy with Zurich did not cover plaintiffs claim and that C&R did not breach a professional duty of care in failing to bridge Dr. Jenkins s insurance coverage gap. The court found the policy clearly limited coverage to incidents that occurred on or after the February 1, 1998, retroactive date, which was exactly what Dr. Jenkins had requested. With respect to C&R, the majority faulted Dr. Jenkins for failing to inform C&R that his Princeton insurance policy was cancelled or in danger of being cancelled and found that there was no evidence from which a jury could reasonably conclude that Dr. Jenkins s insurance coverage gap was attributable to C&R s failure to exercise the requisite skill and diligence in procuring coverage. The dissent noted that none of the insurance documents defined retroactive date, or distinguished that term from the policy s effective date, rendering it ambiguous. Dr. Jenkins argues that the Zurich policy is ambiguous and should therefore be construed in his favor. He contends that the use of the term retroactive is misleading and that neither the agent nor the policy language explained its significance. He acknowledges he requested coverage starting February 1, 1998, but argues that he believed he would receive the benefit of retroactive coverage commonly associated with a claims made policy. Zurich argues that Dr. Jenkins received the coverage he expected claims made coverage after the retroactive date of February 1, 1998, when his Princeton occurrence policy was scheduled to terminate. Because of the dissent in the Appellate Division, the case is before the Supreme Court as a matter of right, R. 2:2-1(a)(2). Prior to argument, the Court accorded amicus curiae status to the Professional Insurance Agents of New Jersey (Agents). HELD: The insurance documents received by the insured were ambiguous and the evidence presented an issue of material fact concerning the insured s reasonable expectations. However, the insurance agent breached no duty of care to the insured. 1. When interpreting an insurance policy, courts should give the policy s words their plain, ordinary meaning. Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001). If the policy terms are clear, courts should interpret the policy as written and avoid writing a better insurance policy than the one purchased. Gibson v. Callaghan, 158 N.J. 682, 670 (1999). Nevertheless, ambiguous language in an insurance policy is often construed in favor of the insured. When an insurance policy s language fairly supports two meanings, one that favors the insurer, and the other that favors the insured, the policy should be construed to sustain coverage, consistent with the reasonable expectation of the insured. (Pp. 14-16) 2. The declarations page that accompanied the Zurich policy declared that the retroactive date was January 1, 1997. That is significant because our courts place particular emphasis on the declarations page when determining the reasonable expectations of the insured. Under Zurich s interpretation of its policy, whether the policy period began January 1, 1998, or February 1, 1998, the policy provided no retroactive coverage at all if the retroactive date was February 1, 1998. On the other hand, a retroactive date of January 1, 1997, as contained in the declarations page, would comport with the ordinary meaning of the term. In short, the presence of different retroactive dates, the failure to provide a clear definition of the term retroactive date and the different policy periods and effective dates, combined to render the policy ambiguous. (Pp. 18-20) 3. The fact finder must determine Dr. Jenkins s reasonable expectations. If the fact finder determines that Dr. Jenkins s reasonable expectations were that his claims made coverage would begin on or before January 1, 1998, the Zurich policy must provide coverage for plaintiffs claim that arose on January 3 and 4, 1998. However, if the fact finder concludes that Dr. Jenkins s reasonable expectations were to have claims made coverage effective February 1, 1998, for claims arising after that date, then plaintiffs claim is not covered under the policy. (Pp. 21-22) 4. Brokers and agents generally owe the same duties to an insured. This Court has defined the obligations of a broker as (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. Rider v. Lynch, 42 N.J. 465, 476 (1964). 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. Although Dr. Jenkins may have benefited from a more thorough explanation of the Zurich policy, he submitted no proofs to counter C&R s expert s opinion that C&R s actions were consistent with customary industry practice. The trial court properly granted summary judgment in favor of C&R. (Pp. 22-25) We AFFIRM the Appellate Division judgment in favor of C&R, REVERSE the judgment in favor of Zurich, and REMAND to the trial court for further proceedings consistent with this opinion. JUSTICE VERNIERO filed a separate opinion concurring in part and dissenting in part, in which JUSTICE LaVECCHIA joins, stating that he joins the Court s disposition in respect of the agent and agrees that the policy is ambiguous, but that Dr. Jenkins nevertheless received precisely the coverage that he reasonably expected, as evidenced by the totality of the circumstances. CHIEF JUSTICE PORITZ and JUSTICES ZAZZALI and ALBIN join in JUSTICE WALLACE s opinion. JUSTICE VERNIERO filed a separate opinion concurring in part and dissenting in part, in which JUSTICE LaVECCHIA joins. JUSTICE LONG did not participate. Plaintiffs, v. DR. REGINALD JENKINS, Defendant-Appellant, and ST. BARNABAS MEDICAL CENTER, DR. LAMBERTO FLORES, DR. FRANCINE HUGHES, DR. JOHN DOE, DR. ROBERT ROE, (fictitious name), SALLY SMITH (fictitious name), XYZ Brokerage Agency, (fictitious name) and PRINCETON INSURANCE COMPANY, Defendants, and C&R INSURANCE AGENCY and ZURICH INSURANCE COMPANY, Defendants-Respondents. Argued January 6, 2004 Decided August 4, 2004 On appeal from the Superior Court, Appellate Division, whose opinion is reported at 357 N.J. Super. 288 (2003). Hugh P. Francis argued the cause for appellant (Francis & Berry, attorneys; Peter A. Olsen, on the brief). Eric L. Harrison argued the cause for respondent C&R Insurance Agency (Methfessel & Werbel, attorneys). Kevin T. Coughlin argued the cause for respondent Zurich American Insurance Company (McElroy, Deutsch & Mulvaney, attorneys; Robert W. Muilenberg and David D. Hess, on the brief). Nooshin Namazi submitted a brief on behalf of amicus curiae, Professional Insurance agents of New Jersey (Nicoletti, Hornig, Campise, Sweeney & Paige, attorneys; David H. Paige, a member of the New York bar, on the brief). JUSTICE WALLACE delivered the opinion of the Court. In this insurance case, we consider two separate issues: (1) whether a claims made professional liability insurance policy issued by a successor insurer provides coverage for an asserted claim against its insured, and (2) whether the insurance agent breached its duty of care in procuring the policy for the insured. The trial court granted summary judgment in favor of both the insurer and the agent. The Appellate Division affirmed. President v. Jenkins, 357 N.J. Super. 288 (2003). Because of a dissent in the Appellate Division, id. at 318-325, the case is before us as a matter of right, R. 2:2-1(a)(2). Prior to argument, we accorded amicus curiae status to the Professional Insurance Agents of New Jersey (Agents). We now conclude that the insurance documents received by the insured were ambiguous and that the evidence presented an issue of material fact concerning the insured s reasonable expectations. However, we also conclude that the insurance agent breached no duty of care to the insured. Consequently, we reverse in part and affirm in part. [(Emphasis added).] The policy defined policy period as the period of coverage that begins at 12:01 a.m. on the inception date shown in the Declarations and ends at 12:01 a.m. on the expiration date or effective date of cancellation of this policy. The policy period does not include any extended reporting period. There was a reference in the coverage section limiting coverage to medical incidents that occurred after the retroactive date. However, the retroactive date was neither defined nor set forth in the policy. With the policy, Dr. Jenkins received a declarations page for the group policy with GSPA as the named insured. It contained, in bold face, the reference to claims made coverage and listed a policy period from January 1, 1998, to January 1, 1999, with a retroactive date of January 1, 1997. Dr. Jenkins renewed the Zurich policy at the end of 1998 for the calendar year 1999. A summary of the various dates on the insurance documents is as follows: Certificate of Insurance: Date: 01/08/98 Insurer: Zurich Insured: Dr. Jenkins Policy Effective Date: 02/01/98 Policy Expiration Date: 01/01/99 Endorsement #1: Insured: GSPA Additional Insured Physician: Dr. Jenkins Effective Date of Policy: 01/01/98 Expiration Date of Policy: 01/01/99 Effective Date of Endorsement: 02/01/98 Retroactive Date: 02/01/98 Endorsements #2 - #4; Policy Schedule: Insured: GSPA Effective Date of Policy: 01/01/98 Expiration Date of Policy: 01/01/99 Effective Date of Endorsement: 02/01/98 AFCO: Commercial Premium Finance Agreement: Date: 01/12/98 Insurer: Zurich Insured: Dr. Jenkins Effective Date of Policy: 02/01/98 1998 Declarations Page for Group Policy: Insured: GSPA Policy Period: 01/01/98 to 01/01/99 Retroactive Date: 01/01/97 1999 Declarations Page for Group Policy: Insured: GSPA Policy Period: 01/01/99 to 01/01/00 Retroactive Date: 01/01/97 On September 20, 1999, plaintiffs, Deborah and Perry President, filed a medical malpractice complaint against Dr. Jenkins based on injuries resulting from alleged negligence that occurred on January 3 and 4, 1998. Dr. Jenkins forwarded the complaint to Zurich to provide representation. Zurich declined coverage because the incident occurred prior to the policy s February 1, 1998, retroactive date. Thereafter, plaintiffs amended their complaint several times to name as defendants: (1) St. Barnabas Medical Center, (2) two resident physicians, Doctors Lamberto Flores and Francine Hughes, (3) Princeton, (4) Zurich, and (5) C&R. Dr. Jenkins obtained counsel and answered the complaint, denying he was negligent in the treatment of Deborah President. The claims were dismissed against all defendants except Dr. Jenkins. Dr. Jenkins amended his answer to include cross claims against Zurich and C&R. Zurich and C&R each moved for summary judgment and submitted documentation to demonstrate that Zurich provided no coverage prior to February 1, 1998, and that Dr. Jenkins informed C&R that his coverage with Princeton did not expire until February 1, 1998. In a cross-motion for summary judgment against Zurich and C&R, Dr. Jenkins certified that when he initially contacted C&R, he explained that he needed coverage starting in February 1998. He claimed that O Brien never questioned that date and failed to advise him of the availability of coverage to fill any gap that might have existed between the end of the Princeton coverage and commencement of the Zurich coverage. Dr. Jenkins asserted that when he received the binder from Zurich, he believed that the policy became effective January 1, 1998 - the date listed as the effective date of the policy. He claimed not to understand what was meant by the binder period ran from February 1, 1998 to April 1, 1998, and not to comprehend the significance of a retroactive date. He also asserted that he stressed to O Brien that he was concerned about gaps in his insurance coverage and expected to receive coverage that was adequate to meet his needs. Further, he maintained that O Brien never discussed or explained the significance of the GSPA. The trial court denied Dr. Jenkins s cross-motion for summary judgment and dismissed all claims against Zurich and C&R. Thereafter, Dr. Jenkins settled with plaintiffs. The Appellate Division affirmed the trial court s judgment with one member of the panel dissenting. President, supra, 357 N.J. Super. at 318. The majority concluded that Dr. Jenkins s malpractice insurance policy with Zurich did not cover plaintiffs claim and that C&R did not breach a professional duty of care in failing to bridge Dr. Jenkins s insurance coverage gap. Id. at 295. The majority rejected Dr. Jenkins s claim that the Zurich policy was ambiguous and inconsistent with his reasonable expectations. Id. at 303-304. The court found the policy clearly limited coverage to incidents that occurred on or after the February 1, 1998, retroactive date, which was exactly what Dr. Jenkins had requested. Id. at 304-06. With respect to C&R, the majority found there was no evidence from which a jury could reasonably conclude that Dr. Jenkins s insurance coverage gap was attributable to C&R s failure to exercise the requisite skill and diligence in procuring coverage. Id. at 309-10. Rather, the majority faulted Dr. Jenkins for failing to inform C&R that his Princeton insurance policy was cancelled or in danger of being cancelled. Id. at 310. The majority concluded that absent expert proofs establishing an industry norm or customary practice, C&R did not owe Dr. Jenkins a duty to affirmatively ascertain the existence of any gaps in [his] coverage and to advise him accordingly. Ibid. The dissent concluded it was error to grant summary judgment in favor of Zurich, C&R, and Princeton. See footnote 2 Id. at 325. Regarding Zurich, the dissent was concerned with the trial court s heavy reliance upon the lack of ambiguity in the insurance documents respecting the effect of [the] use of the term retroactive date. Id. at 324. The dissent noted that none of the insurance documents defined retroactive date, or distinguished that term from the policy s effective date, rendering it ambiguous. Ibid. The dissent also found that O Brien s explanation of the meaning of retroactive date, did not preclude [a] possible misapprehension. Id. at 322. With respect to C&R, the dissent found that an expert report was not required for a trier of fact to understand that, absent an explanation that incidents occurring prior to the retroactive date are not covered, a lay person could reasonably believe that claims for such incidents made after the effective date of a claims made policy would be covered. Id. at 321-22. [Kievit v. Loyal Protective Life Ins. Co., 34 N.J. 475, 482 (1961) (citation omitted).] The doctrine has been applied to all forms of insurance contracts. See, e.g., Zacarias, supra, 168 N.J. at 601-03 (discussing reasonable expectations under boat owner s insurance policy); Doto, supra, 140 N.J. at 556-59 (addressing insured s reasonable expectations under commercial-umbrella liability policy related to underinsured motorist coverage); Sparks, supra, 100 N.J. at 338-39 (applying doctrine in context of professional liability). SUPREME COURT OF NEW JERSEY A- 85 September Term 2002 Plaintiffs, v. DR. REGINALD JENKINS, Defendant-Appellant, and ST. BARNABAS MEDICAL CENTER, DR. LAMBERTO FLORES, DR. FRANCINE HUGHES, DR. JOHN DOE, DR. ROBERT ROE, (fictitious name), SALLY SMITH (fictitious name), XYZ Brokerage Agency, (fictitious name) and PRINCETON INSURANCE COMPANY, Defendants, and C&R INSURANCE AGENCY and ZURICH INSURANCE COMPANY, Defendants-Respondents. JUSTICE VERNIERO, concurring in part and dissenting in part. I concur in all but one critical aspect of the Court s thoughtful and comprehensive opinion. I agree that the insurance agent in this case breached no duty of care to the insured. I endorse the Court s meticulous analysis in that respect, especially its conclusion that the evidence was so one-sided [in support of the agent] that the trial court properly granted summary judgment in favor of [that party]. Ante at ___ (Slip op. at 25) (citing Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)). Unlike my colleagues, I would apply a similar rationale and hold that no reasonable jury could conclude that Dr. Jenkins s expectations were anything but as argued by the insurer. Thus, even assuming that the policy here is ambiguous (a close question but one that I answer in favor of the insured for the reasons expressed by my colleagues), I nonetheless would find that the evidence clearly indicates that Dr. Jenkins reasonably expected no coverage in these circumstances. In that regard, I essentially share the observation of Judge Parrillo who, writing for the Appellate Division s majority, stated: In this case, the insured specifically understood the terms of the policy and got exactly what he bargained for. In fact, the retroactive date of February 1, 1998 was set because of representations made by Jenkins both orally and in writing. In August 1997, Jenkins told the C & R representative that he was presently insured with Princeton [Insurance Company] and that his coverage with Princeton would expire on February 1, 1998. Shortly after their conversation, on August 18, 1997, Jenkins faxed a completed Non-Binding Information Quote Form, which represented that his present insurer was Princeton under an occurrence plus policy. On this form Jenkins also requested an effective date of 2/98 . Along with this form, Jenkins forwarded, among other things, a claims and coverage history form from Princeton dated April 19, 1996, documenting policy periods beginning and ending February 1st of every year from 1987 through 1997. After meeting next with the C & R agent on January 8, 1998, the following day Jenkins prepared, signed and dated an Individual Physicians Application for insurance, which represented that his current policy would expire on February 1, 1998. In response to a specific inquiry on the application, Jenkins represented that his professional liability insurance had never been denied, canceled or non-renewed. The application also contained the following language above Jenkins signature: I understand that the coverage offered is provided by a claims- made policy and that incidents that occurred prior to the prior acts or retroactive date are not covered and claims reported after the expiration date are not covered unless I purchase or otherwise obtain an extended reporting endorsement provided by Zurich [Insurance Company]. (emphasis added.) And on January 12, 1998, in his application for financing of the premium, Jenkins again represented a policy effective date of February 1, 1998. In sum, we think it plain that . . . February 1, 1998 . . . was specifically understood, indeed requested, by the insured as the date on or after which his acts of negligence would be covered if reported during the policy period. The record is devoid of any evidence that the insured expected, bargained, or for that matter, paid for anything more in the way of coverage. [President v. Jenkins, 357 N.J. Super. 288, 306-07 (2003) (footnote omitted).] When construing ambiguity in this setting, we defer not to any or all expectations articulated by an insured during the course of litigation, but rather to the objectively reasonable expectations at the time the policy was issued. See DiOrio v. New Jersey Mfrs. Ins. Co., 79 N.J. 257, 269 (1979). From that perspective, whether an insured s expectation is objectively reasonable should depend on the totality of the circumstances in a given case. I am persuaded that Dr. Jenkins s own words and deeds surrounding the issuance of the policy lead to only one conclusion as a matter of law, namely, that the insured did not expect what he now seeks as coverage from his insurer. As indulgent as we might like to be in insurance-coverage cases, this case will not be helped by requiring a jury to resolve a question that, in my view, lends itself to only one reasonable answer. In sum, in respect of the agent, I join in the Court s disposition. Regarding the insurer, I accept that the policy is ambiguous, a finding that requires us to modify the Appellate Division s judgment. I agree, however, with the Appellate Division s ultimate holding in favor of the insurer because I believe that Dr. Jenkins received precisely the coverage that he reasonably expected as evidenced by the totality of the circumstances. Hence, I would modify and affirm the judgment below. To the extent that my colleagues reach a contrary conclusion, I respectfully dissent. Justice LaVecchia joins in this opinion. NO. A-85 SEPTEMBER TERM 2002 ON APPEAL FROM Appellate Division, Superior Court DEBORAH PRESIDENT and PERRY PRESIDENT, Plaintiffs, v. DR. REGINAL JENKINS, Defendant-Appellant, and ST. BARNABAS MEDICAL CENTER, et al., Defendants, and C&R INSURANCE AGENCY and ZURICH INSURANCE COMPANY, Defendants-Respondents. DECIDED August 4, 2004 Chief Justice Poritz PRESIDING OPINION BY Justice Wallace CONCURRING/DISSENTING OPINION BY Justice Verniero DISSENTING OPINION BY