Title: Benjamin Aden v. Robert F. Fortsh

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). ZAZZALI, J., writing for a majority of the Court. The issue before the Court is whether a policyholder's failure to read his policy may be asserted as comparative negligence in a professional malpractice action against an insurance broker. In September 1994, Benjamin and Beatrice Aden purchased a $48,000 condominium in Sussex, New Jersey. Prior to closing, Benjamin Aden (Aden) contacted Robert Fortsh to request insurance coverage for the new condominium. Fortsh had been Aden's insurance broker since 1979. The parties disagree as to the substance of their conversations regarding the purchase of the policy. Aden testified that he asked for a policy that would cover any losses he may have in his condominium and told Fortsh that he wanted the equivalent of a homeowners' policy for a condominium. Aden said that Fortsh asked him two questions: 1) the price Aden paid for the condominium, to which he answered $48,000; and 2) the worth of Aden's personal contents in the condominium, to which Aden answered $16,000. Fortsh testified that Aden asked for the minimum policy requirements and that a policy with a premium of $120 had been rejected by Aden as too expensive. Fortsh stated that he told Aden to check with his condominium association to discover what coverage he had under the association's policy. Fortsh further testified that he sought a less expensive policy from a different insurer, Hartford Insurance Company, through a different broker, Johl & Company. Fortsh offered Aden the Hartford policy for a premium of $98. He again advised Aden to consult the condominium association policy to make sure that anything not covered under the Hartford policy would be covered under the association policy. The Hartford policy issued to the Adens provided $1000 in coverage in the event of damage to their dwelling. In June 1996, the Aden's condominium was damaged by fire. The damage to the exterior of the building was covered under the condominium association insurance policy. Aden paid $20,000 in repairs for damage to the interior of his unit because the Hartford policy only provided for $1000 in dwelling coverage. Aden testified that he learned of the limited amount of coverage when he read the policy for the first time after the fire. In October 1996, the Adens sued Fortsh and Johl & Company for negligently failing to procure adequate insurance on the condominium. The Adens settled with Johl & Company. The matter was tried against Fortsh in 1998. At the conclusion of trial, the judge charged the jury on the law. Among other things, the judge defined the broker's duty and instructed that Fortsh's negligence must have been a substantial factor in bringing about the harm or loss. Fortsh's attorney recommended the judge also instruct the jury on a charge that was essentially a comparative negligence instruction regarding Aden's failure to read the policy, which the judge declined to do. The jury ultimately returned a unanimous verdict in favor of the Adens. The parties stipulated damages in the amount of $18,566. After calculating prejudgment interest, the court entered judgment in the amount of $20,877. On appeal, the Appellate Division reversed, holding that the trial court erred in refusing to instruct the jury in respect of Aden's failure to read the policy. The Supreme Court granted certification. HELD: The comparative negligence defense is unavailable to a professional insurance broker who asserts that the client failed to read a policy and failed to detect the broker's own negligence. It is the broker, not the insured, who is the expert and the client is entitled to rely on that professional's expertise in faithfully performing the very job he or she was hired to do. 1. The New Jersey Legislature abolished contributory negligence in favor of the doctrine of comparative fault by adopting the Comparative Negligence Act (Act). Under the Act, jurors in negligence actions must determine the percentage of each party's fault or negligence. However, the Legislature has allowed courts to retain the authority to establish a policy-based preclusion of the factfinder's consideration of the fault of the plaintiff. Generally, comparative or contributory negligence may not be charged when a professional breaches his or her duty to a client. This policy reflects this State's heightened expectations of professional services. Of course, the client's conduct is not irrelevant. If the conduct of the client, rather than that of the professional, was the sole proximate cause of the alleged harm, a jury may conclude that the professional is not negligent. (Pp. 10-14) 2. If a client impedes the professional by, for example, withholding or failing to provide certain information, the client's conduct may constitute comparative negligence unless the professional's scope of employment included an obligation to prevent such conduct on the part of the client. A policy-based preclusion of the comparative-negligence defense also may be unavailable depending on the level of knowledge of the client in the field of expertise of the particular profession. Nevertheless, professionals may not diminish their liability under the Act when the alleged negligence of the client relates to the task for which the professional was hired. (Pp. 14-16) 3. The fiduciary relationship between the broker and the client gives rise to a duty owed by the broker to the client to exercise good faith and reasonable skill in advising insureds. There is case law establishing the sound policy that an insured is entitled to assume that a broker has performed his or her fiduciary duty. That duty is not lessened when a policyholder fails to detect the broker's breach of that duty. (Pp. 16-21) 4. In view of New Jersey's tradition of holding insurance professionals and other fiduciaries to higher standards, Aden's failure to read the insurance policy cannot be asserted as comparative negligence in an action against the broker for negligent failure to procure insurance. A comparative negligence charge would place undue emphasis on the behavior of the client rather than on the negligence of the broker. Here, it is undisputed that Fortsh failed to properly procure adequate insurance. (Pp. 21-23) 5. The Court's disposition does not prevent brokers from contending during trial that an insured's failure to read a policy severed the causal link between the broker's fault and the insured's harm. That is what Fortsh attempted to prove at trial; an argument the jury rejected. Furthermore, the Legislature has intended the Act to apply to the conduct of victims of professional malpractice, but only to the extent that such conduct substantially contributed to the professional's nonperformance. (Pp. 23-24) 6. The dissent argues that case law precluding comparative negligence in this type of professional malpractice action is no longer valid. The Court disagrees. There is no indication that the Legislature intended to overrule the long line of cases that have sanctioned the preclusion of the comparative negligence defense in professional malpractice matters. (Pp. 24-30) Judgment of the Appellate Division is REVERSED. JUSTICE VERNIERO, dissenting, in which JUSTICES COLEMAN and LAVECCHIA join, is of the view that the majority's holding relieves an insured from having to take the minimal step of reviewing a policy's one or two-page declarations sheet to avoid the kinds of injuries that occurred here. That approach dilutes the significance of the numerous cases in which courts have stressed the importance of having insurance policies written in clear, straightforward terms to aid policyholders in reading and understanding them. Justice Verniero would hold that in malpractice actions involving insurance agents, brokers, or similar parties, the trier of fact is generally required to determine the degree of an insured's negligence or fault in failing to read a policy's declarations page. CHIEF JUSTICE PORITZ and JUSTICES STEIN and LONG join in JUSTICE ZAZZALI'S opinion. JUSTICE VERNIERO filed a separate dissenting opinion, in which JUSTICES COLEMAN and LAVECCHIA join. BENJAMIN ADEN and BEATRICE ADEN, Plaintiffs-Appellants, v. ROBERT F. FORTSH, Defendant-Respondent, and JOHL & COMPANY, INC., Defendant. Argued November 8, 2000 -- Decided July 18, 2001 On certification to the Superior Court, Appellate Division, whose opinion is reported at 327 N.J. Super 360 (2000). Louis Smith argued the cause for appellants (LeBoeuf, Lamb, Greene & MacRae, attorneys). Jared Stolz argued the cause for respondent (Methfessel & Werbel, attorneys; Jeffrey M. Patti, on the letter in lieu of brief). The opinion of the Court was delivered by ZAZZALI, J. The question presented in this appeal is whether a policyholder's failure to read his policy may be asserted as comparative negligence in a professional malpractice action against an insurance broker. In a published opinion, the Appellate Division reversed a jury verdict in favor of the insureds and held that the trial court should have instructed the jury on comparative negligence for the failure to read the policy. Aden v. Fortsh, 327 N.J. Super. 360 (App. Div. 2000). We reverse. In New Jersey, the comparative fault defense traditionally will not apply in a plaintiff's suit alleging a professional's malpractice, at least in those cases in which the defendant argues that the plaintiff was at fault in failing to understand or to perform the task for which the professional was hired. Brian E. Mahoney, New Jersey Comparative Fault and Liability Apportionment 6:2-10 at 119 (2001). We now hold that the comparative negligence defense is unavailable to a professional insurance broker who asserts that the client failed to read the policy and failed to detect the broker's own negligence. It is the broker, not the insured, who is the expert and the client is entitled to rely on that professional's expertise in faithfully performing the very job he or she was hired to do. The Rider decision is based on the sound policy that an insured in this State is entitled to assume that a broker has performed his or her fiduciary duty. That duty is not diminished when a policyholder fails to detect the broker's breach of that duty. Ibid.; see also Winans-Carter Corp. v. Jay & Benisch, 107 N.J. Super. 268, 272 (App. Div. 1969) (holding that plaintiff's failure to read fire insurance endorsement did not contribute to defendant-broker's nonperformance). Authoritative commentators on insurance law, leading jurisprudence encyclopedias, and other jurisdictions are in accord with that view. 12 Holmes, Appleman on Insurance 2d, 87.3 (noting that allegations of failure to read policy not really appropriate to insurance agency and brokerage liability where the question is fundamentally whether, considering all the facts, did the insured have the right to rely on the agent or broker? ); 3 Couch on Insurance 46:69 (3d ed.) ( The insured's failure to read the policy has traditionally been held not to be a defense to an action against the agent for failure to procure insurance, on the reasoning that the principal is entitled to assume that the agent performed his or her duty . . . . ); 43 Am. Jur 2d Insurance 141 ( [I]f an insurance agent or broker has failed to procure a policy which in terms and coverage is of the type specified by the insured, and the insured consequently suffers an uninsured loss, the agent or broker cannot successfully contend that he is relieved of liability by reason of any contributory negligence on the part of the insured in not having read and familiarized himself with the contents of the policy. ). See also Weinlood v. Fisher & Assocs., 975 P.2d 1226 (Kan. App. 1999) (observing that insured not negligent in failing to examine application or policy and justified in assuming that it had been written as contemplated); Grigsby v. Mountain Valley Ins., 795 S.W.2d 372, 373-74 (Ky. 1990) (noting that insured cannot be contributorily negligent for failure to read or understand fire insurance coverage); Stock v. Adco Gen. Corp., 632 P.2d 1182 (N.M. App.), cert. denied, 632 P.2d 1181 (N.M. 1981) (observing that trial court properly refused to adopt requested findings that insured's failure to read policy constituted contributory negligence); Israelson v. Williams, 151 N.Y.S. 679, appeal dismissed, 109 N.E. 1079 (N.Y. 1915) (holding insured not negligent in failing to examine policy in negligence action against broker); Robin Cheryl Miller, Annotation, Liability of Insurance Agent or Broker on Ground of Inadequacy of Liability-Insurance Coverage Procured, 60 A.L.R. 5th 165, 189-90 (1998) (discussing view that insured's failure to read policy generally not a defense). BENJAMIN ADEN and BEATRICE ADEN, Plaintiffs-Appellants, v. ROBERT F. FORTSH, Defendant-Respondent, and JOHL & COMPANY, INC., Defendant. _____________________ VERNIERO, J., dissenting. Implicit in that approach is an abiding faith in jurors. Along those lines, this Court observed recently that jurors are persons of good faith, that they strive to fulfill their role without passion or prejudice toward either side, and that they work hard to abide by all instructions to the best of their ability. Wanetick v. Gateway Mitsubishi, 163 N.J. 484, 494 (2000). I see no compelling reason to justify shielding jurors from the possible comparative negligence of an insured under the circumstances presented here. NO. A-116 BENJAMIN ADEN and BEATRICE ADEN, Plaintiffs-Appellants, v. ROBERT F. FORTSH, Defendant-Respondent, and JOHL & COMPANY, INC., Defendant. DECIDED July 18, 2001 Chief Justice Poritz