2004 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit

6-24-2004 

# Hi ghl a nd s I ns C o v

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D ocke t N o . 03-1760

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UNIT ED STA TES C OURT OF AP PEA LS F OR TH E TH IRD CIR CU IT

No. 03-1760

HIGHLANDS I NSURANCE COMPANY f

/k /aHIGHL ANDS IN SU RA NC E G RO UP , IN C.,

Appellant

v.
HOBBS GROUP, LLC; ROBERT MARKEL; NIS SAN PE RLA; FRONTI ER I NSURANCE COMPANY

and GLOBAL R ISK M AN AG EM EN T S ER VI CE S, IN C.,

Appeal from the United State s District Court for t

he District of

New Jersey (D.C. Civi l Action No. 00-cv-00686) Dist ri ctJudg e: Honor abl e Garret t E. Brow n, Jr.

Argued March 12, 2004

Bef or e: SLOVI TER a nd N YGAARD, Circuit Judges , and S HADUR 1

, Distri ct

Judge (Opinion fi led June 24, 2004 )

Louis R . Mof fa, Jr. (Argued) Ball ardSpahr

Andre ws & Ing ers oll , LLP Plaza 1000, Suite 500 Main Street Voorhees, NJ 08043-4636
Attorneyfor Appella nt

Michael O. Kassak (Argued) Stephen Trzci nski Whit e andWill ia ms LLP 222 Haddon Avenue, Suite 300 Westmont, NJ 08108

A tto rn eys fo r Appellee, Hobbs Gr oup, LLC
Stephen G. Rhoads (Argued) Kriste n E. Polovoy Mo ntgom ery M cC r ac ke n Wa lker & Rhoads , LLP Liberty View, Sui te 600 457 Haddonfield Road Cherry Hill, NJ 08002

A tto rn eys fo r Ap pe ll ee , G l ob al Risk Management Service s, I nc.

OPINI ON OF THE COURT

SH AD UR , Distri ct Judge

.

In February1999 Highlands Insuranc e Co mp any, Inc. (“ Hig hla n ds”) issueda polic y to Oly mpic Limousine, Inc. (“Oly mpic”) that provide d Olym pic w ith 1 Hon orable M ilton I. Shadur, United States District Court Judge for the Northern Dist

rict of Ill inois , si tti ng by designation.2

commercial automobil e insur anc e coverage, subject

to a $2. 5 mill ion ag greg ate annual deductible ( as to whi c h Olym pic was eff ectively self-insured). Befo re the poli cy was cance lled by High la nds just seven m onths later, Highlands fou nd it sel f responsible for handling in exc es s of

$3 mi ll io n i n cl ai ms against Olympic. Unfortunate ly for Highlands, Olympic ne v er paid the $ 2.5 mill ion deducti ble on thos e clai ms. Eve n
more unfortunat el y forHighlands , Olym pic had also fa iledto paythe $62, 500 pr emium requ ired to b utton u p a su rety arrangement

that would hav e protec ted Hig hland s aga inst suc h no npaym ent.

In res p onse to those events, Highlands filed a federal court di versi t y acti on against

a slew of d ef endants, includi ng (1 ) Ho bbs Gr oup, LL C (“Hob bs”), the ins urance broke r that ha d arrangedfo r the un derlying lia bility insurance policy be twee n H ig hla nds and Olym pic and h ad also dealt w it h Highlands in the cours e of the s ur etybond procurement

process an d (2) Gl obal Risk Ma nag eme nt Services , Inc. (“Global” ), t he surety bond br oker that ha d w orke d w ith Hobbs and with propos ed surety Front ier Insuranc e Co. (“Frontier”) . Even tua lly Highlands’ action wa s wh ittled do wn to three counts–cl ai ms of neglige n t misrep r esentat

ion and negligence against Hobbs and a claim of negligence against Glo bal. B oth Hobbs and Global t hen moved for su mm ary judgm ent pu rsuan t to Fed. R. Civ. P. 56 (“Rule 56”) . After full briefi ng, the dis tri ct court concluded that under New Jersey l aw nei the r Hobbs nor Global owed any duty to H ighlan ds, an d it therefore gran ted su mm ary ju dg ment dismissing allthree claims.
Highlands now app eals those rulings, and we have juri sdiction under 28 U.S .C. §1291. We hold that under New Jersey law Hob b s did o we a duty to Highlands that rendered the latter’s neglige nce clai ms viable, so w e reverse
an d re ma nd for a trial on those cl aims. But we find t ha t the di stri ct court was correct in holdi ng tha t no such duty r an from Globa l to Hig hl an ds , and w e therefore affi rm the district court’s dism issal of Glo bal as a defe ndan t.

Facts
Olym pic was a lim ousine an d livery servi ce that ope rated i n and around Manhat tan

. It soug ht ou t Ho bbs in late 1998 to act

as it s insur anc e bro ker in securi ng a new com merc ial auto mo bile insurance poli cy t o take over when Olympic’s old po li cy expire d in ea rly 1999

. Ho bbs in turn g ot in tou ch w ith Highlands, 2 and th e p arties be gan to

2 Because of a fronting agree ment betw een H ighlan ds an d V irginia S urety Com pany, Inc. (“Virginia S urety”), Olympic’ s insur ance coverage was techn ically a con tract be twee n O lympic and Virginia Surety. But because Hig hland s wa s com pletely resp onsib le for allfinanci al and admini strative aspe cts of th e polic y, we ref er to Highlands as Olympic’ s insur ance3

discuss terms for

potenti al cover age. After much negotiation Highlands and O lympic (t hrough Ho bbs) a greed on a p olicy th a t include d the following relev ant provisions:

1. Hig hland s wo uld initially process and pay for clai ms aga ins t Olympic. Each month Highland s wo uld then invo ice O lympic for the clai ms it had paid and O lympic w ould re imburse Highlands, subject

to a $250, 000 loss dedu ctible per v ehicle /$1 mill ion covera ge per vehicl e r ate. But un der n o circumst ances wo uld Oly mpic’s annual reimburs ement obliga tio n to Highlands exceed $2.5 mi lli on.

2. Olympic w ould secu re a su rety bond (with Highlands as the obli gee) in t he amount of Olympic ’s $2 .5 mill ion aggregat e annual deduct ible. 3

With the expi rati on date of Olympic’s existing poli cy ap p roaching

ra pi dl y, Hobbs communicated with Global to see if it would be inte rest ed in procuring the surety bond that Highlands requi red under its pol icy w ith O lymp ic. Global was indeed interested. Working as an agent for Fr ont ier, Global loc ked in Frontier as the expectedsurety fo r Olym pic’s d educ tible and re l ayed tha t com mitm ent ba ck to Hobbs. Alth oug h it had a lready ag reed to be Olympic’ s surety, Fron t ier exp ressly conditi oned the is suance of t he actual surety bon d on two even ts: Several parti es
were required to si gn i nd emnificat ion agreements, and Olympic had to p ay th e firs t y ear’s premium of $62,500.

On February28, 1999 the insurance policy between Oly mpic and Hi ghlands took effect, and Highlands dutifull y began to pa y out

on Olympic’ s clai ms as they accrued. B ut although Highl ands then invoice d Olympic f

or the reimb ursem ents that Oly mpi c owed Highlands under t he te rms of th e p ol icy, Olympic di d not honor its reimburs ement obli gation.

For a varie ty of reason s (incl uding Highlands’ reali zati on that i t had exposed itself to a far

greate r ri sk than it had

or igin ally antic ipate d, as wellas other legal c omp liance issues w ith its policy), Highlands beg an efforts to cancelthe policy w ith O lym pi c a s e ar ly a s Ap ril 1999. It nonet

heless remained respo nsible for cl ai ms againstOlympic unt i l September1999, when the cance llat ion took effe ct.

But neithe r Hobbs nor Global ever in forme d Highlands t hat even though Global had prep are d the sur etybond (on Fron ti er’s behalf) , the bond was never executedand w as ult im atel y “cancell ed carrier.

3 Alth oug h O lympic n ever a ctually signed al l the doc uments that would have legal ly bound it to obtain t he surety bond, at al l ti mes both Hobbs and Global ( not to menti on Highlands) appeared t o be working under t

he basic a ssumpti on that the sur etybond requirement was int egral to the f inal pol icyto which Oly mpic and Highlands agreed.4

f lat” 4 because of Oly mpic’s fai lure to pay the premium on the bond. High lands was

com pletely unaw are un til well af ter it began the ca ncella tion pro cess w ith Olym pic th at it was not protected, as t

he obligee under the s uretybond, from the huge loss t

hat res u lted from O lympic’s

non payme nt. An d it is that f ail ure to inform that H ighlan ds ass erts giv es rise to H ob bs ’ a nd G lo ba l’s lia bi lity.

Rule 56 Standar d and Standard of

Review

We review de novo the decisi on to grantsummary j udgment and use the sa me Ru le 56 sta ndar ds as d id the d istrict c ou rt ( Petruzzi’s I GA Supermkts. , Inc. v. Da rling-D el. Co. , 998 F.2d1224, 1230 (3d Cir. 1993)). Those standards establis h that the Rule 56 mov ant bears t he burden of showing the absenc e of any “genuine i ssue of mate rial fact” ( Celo tex C orp. v . Catre tt , 477 U.S. 317, 322-23 (1986)) : that is, the failure to pro vide “evid ence such that a reasonab le jurycould ret urn a verdi ct for the nonmov i ng party ” ( Anderson v. Libe rty Lobby, I nc. , 477 U.S. 242, 248 (1986)), even while “ acce pting its evidence as true and drawing all justifiab le infere nces from the ev idenc e in its favor” ( Sam eric Co rp. o f D el. v. Ci ty of Philad elphia , 142 F .3d 582, 59 0 (3d C ir. 1998)). New Jersey’ s Rules of Decis ion

A s alw ays in d iver sity cas es, a federalco ur t m us t ap pl y t he substant ive law of the forum st ate–and wher e the state’s hi gh est court has not spoken de finitively on a par ticul ar iss ue, th e federalcourt must

make an i nf ormed predict ion as to how the highest state cou rt

wo uld decide the i ssu e ( Erie R.R. v. To m pkins , 304 U.S . 64, 78 (193 8); Clark

v. Mo dern Group Ltd. , 9 F.3d 321, 326 (3d Cir. 1993)). T o that end the federa l c ourt

m ay cons ider a w ide ran ge of relia bl e sources, incl uding rel ev ant st at e precedents, analogous dec isi ons and reasoned di cta, as well as the poli cies and d o ctri nal trends informing and emerging from those decisio n s ( Scotts African United M ethod ist Prote sta n t Church v. Conference of African Uni on First Colore d Methodist Pr otest ant Church , 98 F.3d 78, 92 (3d Cir. 1996 )). But the court must also be mindful not “to ex pand state law in ways not fores hadowed by st at e prece dent” ( Cityof

Philad elphia v. Be retta U. S. A. Cor p. , 27 7 F.3d 4 15, 421 (3 d Cir. 2002)).

In N ew Jersey

(as i n all ot

her jurisdict ions) any tort of negl igence requires t he p laint

iff t o prove that

the putati ve tortfeasor br eached a duty of care owed to plai ntiff

and that plaint iff suffe red damages proximate ly caused bythat br each ( Weinberg v. Dinger , 5 24 A

. 2 d 366, 373 (N.J. 1987)). In particular, under N e w Je rse y l aw negligen t misrepresentati on requires a showing that defend a nt negligentlyprovided false 4 That locution denotes a cancell ation ab initio, a s though the bond had never been i n force.5

information and t hat plainti ff incurred damages prox imate ly caused by its reli ance on that i nformati on ( Karu v. Feldman , 574 A.2d 42 0, 425 (N.J. 1990)). In that re specta def enda nt ma y be liable (because it owes a duty ) to anyreaso nably for esee able recipi ent who reli es on the information ( id. ).

For Hi gh lands t o prevailon any of its claim s, then, it must fir st show that t he defendant bei ng co nside red o we d it a relevant duty of care. That determinati on is quintes senti ally

a questi on of law for the court ( City Ch ec k Cashing, Inc. v. Mfrs. Hanover Tr. Co. , 764 A.2d 41 1, 416 (N.J. 2001)).

Becaus e th e New J er se y Supreme Court has not

squarel y addr essed whether

a suret y bond br oker owes a dutyto the obligee of that

bond, under Erie princi ples we must predict

whether that co urt w ould recogniz e such a dutyunde r th e circumst ances present ed here. In that respect t he district

court determined as a matter of law that

Highlands’ clai ms of

ne glige nt misrepr esentat ion agai nst Hobbs and of negli gence aga i nst Hobbs and Global could never

succeed because New Jersey does not impose a dut y of care on eithe r par t y wi t h r es pe ct t o H i gh l an ds

. We review that prediction and appl ication of New Jersey

tort law de novo ( Clark , 9 F.3d at 327).
Hig hla nds reli es prima rily on Carter Li nc ol n- M er cu ry, Inc . v. E MAR Group, Inc. , 638 A.2d 1288 (N.J. 1994) to ar gue that both Hobbs and Global owed a duty to Highlands. It is conventional wis dom that

an insurance broker must “ac t with

reaso nable skill and dili gen ce i n performing the serv ices of a bro ker” w ith respect to its insure d ( id. at 1291). Lapses i n that du ty that can g ive rise to lia bilit y include , but are not

limi ted to, eithe r (1) fail ing com ple tely to arr ange for an insurance policy

or (2) de livering a poli cy tha t is void, material ly defici ent or ot he rwise does not pr ovide the coverage the broker agree d to procure ( id. ; Glezerman v. Columbian M ut. Life Ins. Co. , 944 F.2d 146, 150 ( 3d Cir. 199 1 )). Carter Linc oln

- Me rcury , 628 A.2d at 1291-92 emphasizes t hat al thou gh the relation ship between an ins ur ed and its brokeris most often c ontract ual in nature, cl ai ms by an insured againstits broker are not based on a privity relati onship b ut are premisedon the tor

t concept of negli gence in failing to pro cure th e app ropria te coverage. That concept i s fundamentalto

one of Carter Li ncoln-Mercury ’ s centr al hold in gs: th e p rin cip le t ha t th e b ro ke r's d uty owed to insur ed parti es is a lso owed to oth er loss pa yees w ho (a lthoug h no t in privity with the brok er) are w ithin the zone of harm emanat ing from its activi ties ( id. at 1294-9 5, 1297).

Carter Lincoln-M ercury , id. at 1294-95 identi fies t wo key ele ments that shou ld guide court s in del in eati ng the boundaries o f that

zon e of

harm: fores eeab ility and fairness. Fore seeab ility takes into a ccount th e relations hip between the plainti ff a nd the broker , the nature of the risk and the defendant ’s abili ty and

o ppo rtunity to exerc ise care and a ver t6

harm ( id. at 1294). And the fairne ss aspect requires a court to make a value judgment

as to whether est ablis hing a brok er’s du ty in relat ionshi p to a partic ular pla intiff is fair based on policy

consider ations and the pub lic interest ( id. ). After analyzi ng those two aspects un der the circumst ances at issue ther e, Carter Lin coln-M ercury , id. at 1298 ulti matelyheld that the ins urance brokerin that

case did owe a duty t o the loss payee of the insurance poli cy t hat the brokerhad negli gen t ly procur ed fo r its insure d.

Whether the broker’s d ut y i n the insurance context translates t o t he su rety context before us requires that we consi der in the fi rst i nstance w hethe r surety relat ionshi ps are equi valent to ins urance relat ionshi ps under N ew Jerse y law. There

are certain ly many simil arities between the two. Like insura nce re lationsh ips, sure ty relat ions hips have thre e c entral players– th e princi pal obligo r, th e insur ed (or obl igee of the surety bond) and the i nsurer ( or su re ty) ( In re Liquidation of Integrity Ins. Co. , 657 A.2d 902 , 907 ( N.J. S uper . Ct. Ap p. Div. 199 5), aff’d 685 A .2d 1286 (N.J. 1996 )).

In dee d, in many c ontexts New Jersey explic itl y equates surety bonds with insurance police s. For e x a mple, a New Jersey insura nce ra tes statute expr essly define s “polic y of i nsurance” to include surety bonds ( N.J . St. Ann. §17:29A-1(e) (2004) )

. And in the li quidati on of an insurance corporation, t he clai ms of

surety bondh olders are accorded priority togethe r with insurance policyhol ders’ claims ( In re Liquidation of Integrity Ins. Co. , 598 A.2d 94 0, 943 -4 4 ( N. J. Sup er . C t. Ch. Di v

. 1991)). New Jersey

courts have also s tate d

more gener ally that be cause it is l ong settled in N ew Je rse y th at s ur ety is insura nce, suret y bo ndholders ar e equival ent to ins urance policyhol ders ( id. ; Aetna Cas. & Sur. Co. v. Int’l Re-Ins. Corp. , 175 A . 114, 120 (N .J. Ch. 1934 )).

To be sure, in the c ase at bar Hobbs

wa s a n insurance broker for Olympic and procureda p ol ic y fr om Hi ghl an ds . A s bet wee n those two com panie s Olym pic

was the ins ured and Highlands was the insure r

. But the criti cal cover age for purposes of the cu rrentlawsuit is that provided( or, more accurately , not provided) by the surety bond –and that coverag e w as intended to serve Highlands ’ bene fit. From that per s pectiv e O lympic

was to be the pri nci pal obli gor, Fr ontier

was to be t he surety ( the ins urer i n the surety context) a nd Highlands was t o be the obligee of the surety bond (the i nsured in the surety context).

Hobbs and G lobal sta unch ly main tain that ev en ifa surety relatio nship equates to an in su rance re lati onship, the Carter Lincoln-M ercury -define d duty was
never intende d to protect i nsurers such as High lands. But that

mistakes mere for m (the “in s urance company ” label ) for substanc e: In the conte xt at issu e in this
case, Highlands is no t a n insure r qua insurer. Instead w hat is re lev ant is that Highlands is an obligee on a surety bond,

even thou gh it als o happens to be i n the in su ra nc e b us in es s g en er all y.7

A s Highlands would have i t, our inquiry sho uld end with the conclusi on that the C arter Lincoln-M ercury -presc ribed duty extends to a ll surety bond broke rs and iss uers, so that

Hobbs and Globa l

nece ssarily owed a duty to Highlands as the thir d-party obl igee on the sur etybond. But we mu st of co urse p rocee d w ith cauti on when wading into the predict ive Erie wa ters, and the N ew Jersey co urts avoid treat

ing questions of d ut y i n a
conc luso ry fashion. Both of those t hings bei ng true, we proceed bey ond our de term inati ons (1) that New Jerseylaw dr aws strong parall els between insurance po li cies general ly and surety bonds spec ifical ly and ( 2) that H ighlan ds is

e xactly the type o f insu red/ob ligee th at i s entitled to look to the Carter Li ncolnMe rcury an alys is as a basis fo r determi ning th e existe nce o f a du ty ( We inberg , 524 A. 2d at 3 74) . I ns te ad we must pro ceed with the same type of foreseeability-plus- fairness analy sis t hat the New Jersey Supreme Court car ried out in Carte r Linc oln

- Me rcury in eval uating the existe nce or no nexis tence of a d uty to th ird p arti es such as Highl ands. And for that pur pos e, o f course, we consider Hobbs

an d G lo ba l se pa ra tel y.

Hobbs

In te rms of

foreseeabi lit

y, the pro priety of recogni zing a duty of care owed by Hobbs to Highlands is obvious. For one thin g, the techni ca l agent -pri ncipal relation ship betw een H obb s and Oly mp ic in no way vitiate s the i mpact of th e close working relat

ionshi p between Hobbs and Hi ghlands in th e tran sac tion at iss ue, a s evidencedby the nature and volume of the communicati ons between th em ( Weinisch

v. Sawyer , 587 A.2d 615, 618 (N.J. 1991)). Next as to t

he nature of the r isk, by de fini tion the absenc e of prote ction f or Highl and s in the even t of Olympic’s defa ult is pre cisel y the periltha t wo uld

nece ssarily follow from the failure to have ob taine d the sur etybond on which Highlands was to be the obligee . And fin all y, our determinati on that Highl ands

was with in H obb s’ zon e of h arm is signif icantly influe nce d b y the fact t hat Hobbs had both abundant opportuni ties and amp le ability to advis e Highlands t hat it was m istaken in its belief (a n ent irely

reaso nable one) that

it was pr otec ted b y a surety bond with F ronti er, a l ack of protect ion that s tem med fr om O lym pi c's nonpa ymentof the pre mium on the bond ( Carte r Lincoln-M ercury , 638 A.2d at 1294).

Much of H i g h lands ’

corres pondence with Hobbs clearly sh ows that i t was under the i mpression t hat the process of securi ng the sur etybo nd was progress ing with out a hitch. Most no tab ly,

an April 1, 1999 e-ma il from Hig hland s to Hobbs repo rting on the tran saction said in part “we have the bond in plac e,” an explic it communica t ion to Hobbs of Highlands' belief that O lympic’s s urety bond wa s in eff ect. Hobbs had numerous communicati ons with Highlands after that Ap ril 1 e-m ail ab out a vari etyof other matters, but n ot on ce did Ho bbs m ention to Hig hlands that Olympic had not pai d t h e premium needed to cement Fron t ier’s8

surety bond obl igati on. 5

Indeed, th e multi ple reque sts for payment ru nni ng f

ro m H obb s to O lympic show unequ ivocally that thro ugh out the

course of its communicati ons with Highlands Hob bs wa s fu lly aware that Olym pic had n ot paid the premi um on the surety bond and that

Fron tie r would not issue the bo nd untilthat premium was paid. Yet Hobbs did not even make t he cost- free effo rt to not ifyHighlands of Olympic’s delayin pay ing the premi um by copyi ng Highlands on any of t h ose
commu nications.

At every step of t

he way Hobbs had both the op portu nity and th e ability to advise Highlands t

hat it was not prot ected by any s ur e ty bond because Oly mpic had not paid the premium. And it s ongoing tot al sil ence invi ted Highlands to re ly on Hobbs’ conduct that othe rwise sugges ted the surety bond pl acement pr oce ss had been completed as planned. Withoutdoubt Highlands fell squarel y within the fores eeab le zone of ha rm from Ho bbs’ conduct( Pre sident v. Jenki ns , 814 A.2d 1173, 118 5 (N .J . S uper. Ct . App. Div. 2003)).

With fores eeab ility thus firm ly establ ished, we turn to the fairne ss branch of the Carter Lin coln-M ercury analysi s. In that r egard we next l ook to New Jersey pub lic policy to forecast whether the New Jersey Sup reme Co urt w ould find it i n the pu bli c interest t o creat e that duty (639 A.2d at 1294-95) . We con clude that it would.

That court’s tra diti on of holding insurance professi onals t o high s tan dards of care confi rms it s str ong public pol ic y fo cus o n pro tecting parties w ho d eal w ith such professionals ( Aden v. Fortsh , 776 A.2d 792, 805 (N.J. 2001)). True enough, Highlands’ own involve men t in t he insurance indust

ry , rat her than i ts bei ng a general member of the p u blic a s was involvedin Carter Lin coln-M er cury , may cut against

the imposi tion of an actual fi duciary re sponsibilit

y on Hobbs’ part visa-vis Highlands ( see Aden , 776 A.2d at 800-01 ). Bu t tha t does not at al l control the f ai rness conc erns at issue he re, as Hobbs suggests –it mere ly call s for the examinati on of other im port a nt pu blic interest considerations ( Glezerman , 94 4 F.2d at 15 0).

I n the ca se of an un soph isticate d in sur ed, we are primarily concerned that the individ ual w ill suffer harm while adri ft in the ins urance world and at t he mercy of

a professi onal with f

ar greater ex per tis e. Although that spe ctre is ob viou sly not 5 That sil ence on Hobbs’ part under the circ um stance s just m ention ed, an d in the face of t

he other f

actors mentioned hereafter, i s especially

egregious because even a whisper to that e ffect would have elimi nated the problem and t he disast rous conseque nce that

has prom pted th is litigation– Hig hland s cou ld promptly have paid the $62,500 premi um its elf (a s it

had the ri ght to do) , thus shifting the risk to Fro ntier.9

univ ersally p resent

as to an ent

ity such as Highlands, the pu blic po li cy v alue that unifo rmly requires broker s to car ry out the instr uct ions given to t

hem to the bes t of their abili ties applie s with equalforce whether a broker i s deali ng with an indivi dual u nschooled i n insur anc e complexities or is c onducting bu s iness with a savvy entit

y suc h as Highlands ( Aden , 776 A .2d at 805-0 6). A nd fin all y, to shift from the gener al to t

he particular, the imposition of a broker’s d ut y i n the surety context

hones in on the primary purpose that underscores th e entire surety relat ionshi p: protect

ing the obl igee of

the surety bond in the c ase of a defaul t by the princi pal ( United States ex rel. Don Siegel Con str. Co. v. AtulConstr. Co. , 85 F.Supp .2d 414, 41 8 (D. N .J. 2000)).

I n sum , o urana ly si s i n the ter ms taught by Carte r L incoln

- Me rcury –consider ationof the elements of both fores eeab ility and fairness–has led us to con clud e that

th e New J er se y Supreme Cou rt wo uld find, a s to both tort s asserted by Highlands agai nst Hobbs, t hat the latter owed a dutyto Highlands as the obligeeof Olympic’s surety bond. 6 W e go on to address (and to di spatch) Hobbs’ several fallback arguments. First, Ho bbs a sserts that Highlands has not created a genuine i ssue of material factas to t

he other elements of

either o f its tort claims against Hobbs. T o dea l with that con tenti on, we need to identify those other elements.

A s for th e negli g e n t misrepr esentat

ion clai m, the New Jersey casela w that a llows such a clai m to be based on the defendant’s si lenc e or suppress ion of t

ru th ra th erth an o n so me affirmative misrepr esentat ion ( Strawn v. Canuso , 657 A.2d 42 0, 429 (N.J. 1995)) is not limi ted to specialrelationshi p situation s such as those invo lvin g trans acti ons wit hi n explicit fiduciary relati onships, trans acti ons where a quas ifiduci ar y relat

ionshi p develops ei ther through the express conductof the parties

or other circumst an ces particular to t hat indivi dual trans ac tion or transa ctio ns (such

as in suran ce) w hose nature inhere ntly

re quires such a dutyregardl ess of the p arties’ intentions ( Berman v. Gurwicz , 458 A.2 d 13 11, 13 13-1 4 (N .J. Sup er. Ct. Ch. Div . 198 1)). In addition, the required duty of disclosure m ay also arise i n any situationcall ed for bygood fai t h and

common dec en cy ( Maertin v. Armstrong Wo rld Indus. , Inc. , 24 1 F. Supp.2d 434, 461 (D. N.J. 2002), conforming to the holding in Ci ty Check Cashing , 764 A.2d at 417).

Evaluati on of the exis t ence or nonexistence of a duty of discl osure i n the prese nt situatio n calls for the wei ghing of factors essentiall y identi cal to those alrea dy dr awn f

ro m Carter Li nc oln

- 6 We find no reason t o differe ntiate, in Carter Lin coln-M ercury terms, as between negli gence acti ons general ly and neglige nt misr epresent ation a ctions sp ec ifi ca lly ( see H. Rosenblum, Inc . v. Adler , 461 A.2d 138, 145, 153 (N .J. 1983)).10

Me rcury : foreseeability and fairness. We need not thenrepeat

the anal ysi s–what has been said before also s uppor ts the gro unding of H ighlan ds’ ne glig en t

m is repres entation cla im in br ea ch -b yomissi on. A nd m or e b rie fly a s to Highl a nds’ gene ral neg ligenc e claim against Ho bbs, it is h ornb ook law th at a broker’s failure to obtain adeq uate coverage can support a clai m that the brokerh as br ea ch ed its du ty ( Weinisch , 587 A .2d at 618).
Against that backdrop it is p la in that Highlands has adduced enough

ev id ence to rai se genuine i ssues of materi al fact as to both breach and causati on for ea ch tort. Several of Hobbs’

commun icati ons– includ i n g
com mu nicatio ns to Highlands that referred t o the surety bo nd in wa ys that ma de it appearthe bond had al readybeen secure d, communicati ons to Highlands that omi tted any referenc e to theproblem s w ith t he surety bond that Hobbs knew about, and communicati ons to O lympic th at cou ld have been but w ere no t share d w ith Hig hland s–co uld reaso nably su ppo rt a finding tha t Ho bbs b reach ed its du ty to Highlands (see Glez er man , 944 F.2d at 151). An d H ighlan ds’ tota lly pla u sible statement that i f Hobb s had onlysaid t he surety bond w as not in place because of the no npaym ent o f the pre mium , Hi gh lands would its elf have pai d the pr emi um, rais es atleast a genuine i ssue of materi al fact

about causation.

Hobbs tri es to es cape the i mpact of all that e vidence via sev eral arg um ents, all sh ar ing th e co mmon t heme th atsom e factor other t han Hob bs’ failure to inform Highlands of O lympic’s n onp aymen t of its premium (inc lu ding perhaps Highlands’

own asserted n e gligen ce) w as asse rtedly

an intervening or supersedi ng cause of Highlands’ loss. But all those effo rts fail, because ques ti ons of neglige nce (i ncluding comparati ve neglige nce) and causati on are wit hi n the jur

y’ s provinc e in al l but t he most excepti onal si tuati ons ( Fleu hr v. C ity of Cape May , 732 A.2d 1035 , 1041 (N.J. 1999); Ve ga v. P iedilato , 713 A.2d 442, 459 ( N.J. 1998) ). And for Rule 56 purpose s it i s not our f unction to make credib ility determ ination s or oth erw ise to weigh the evi dence ( Pet ru zz i’ s I GA Supermkts. , 998 F.2d at 1230).

In sh ort, there are at l east genui ne iss ues of mate ri al fac t p re cl udi ng s umma r y judgmenton the negl igence andcausati on aspe cts of Highlands’ clai ms against Hobbs

. And finall y, because High lands ha s paid over $3 m il lion in clai ms against Olym pic during t

he cove rage p eriod ( all of which were u nder the po licy’s loss-peroccurrenc e limit and w ould theref ore have been covered bythe Oly mpic dedu cti ble had the surety bond been in plac e), i t has at

a minimum rais ed a genuine i ssue o f material fact as to damages.

Next Ho bbs a sserts that Highlands’ tort clai ms are precluded unde r Salti el v. GSI Consultant s, I nc. , 788 A.2d 268 (N .J. 2002), which di ct ates tha t cond uct w ithin

a relation ship d efin ed s olely by cont ract cannot give rise to a tort cl aim against the allege dly breaching party or i ts a g ent11

unless that partyhas some independe nt duty to the a ggrieved partyoutsi de the scope of the contra ct ( id. at 279-80 ). Hobbs see ks t o support t hat argument

by pointi ng ou t that

although Highl ands never had any form al con tractua l rela t ionsh ip wi th Ho bbs, it did have a con tractu a l relation ship with Olympic. And Hobbs as

an insurance broker was unequi vo c ally Olympic’s agen t ( Weini s ch , 587 A.2d at 618).

But that c ont ention by Hobbs misses the mar k c ompletely i n all events, in l ight of our

determi nation t

hat thedu t y Hobbs owed H ighlands i s wh oll y independent

of any cont

ractua l obli gations it might have had to Highlands as a fun cti o n of Hobbs’ stat us as an agent

of Olympic. In that

respe ct Salti el , 788 A.2d at 280-81 itself explici tlylist s th e Carter Lincoln-M ercury duty as an example of an independent

du ty that would ne gate the Salti el -announced l imit ation.
Nothing daunted, Hobbs also advances t he su gges tio n that onc e H ighlands had s uffic ient no tice that t h e surety bon d wa s not in plac e, i ts deci sion to retain Ol ympic’s prem iums and to continue processing Olympic’s cl ai ms amounted to a ratif ication that ef fectiv ely

wa i ved Highlands’ right to res cind the contrac t based on t

he absence of the bond ( Ajamian v. Schl anger , 89 A.2d 702 (N.J. Super. Ct. App. Div. 1952)) . Hobbs maintai ns that its M arch 3 , 1999 fax to Highlands that di d n ot contai n any inform at ion indicating t hat the bond had been exe cuted a nd c omp let ed gave Hig hlands suffici ent noti ce to trigger the rati fication scenario. 7

Wh ile rati fication may s ometimes be determi ned as a question of la w ( see, e.g. , Garden State Bldgs., L.P. v. First Fid. Bank, N. A. , 702 A.2d 1315, 1324 (N.J. Super. Ct. App. Div. 1995)) , that is not the

case here. High lands ’ Ap ril 1 communicati on reflec ti ng its bel ief that the surety bon d had alread y been p laced puts i nto disput e, for resolution by a jur y, an y conte ntio n tha t the March 3 fa x sequence–which refle cted that Hobbs was sending a spe ci me n sure ty form to Highlands sim pl y t o approve the wording and which plai nl y evidenced Highlands’ clear intent ion to be de signated as the obligee on the final documents–somehow placed Highlands on noticethat t he surety bond was not being arrangedas expect ed. Absent a finding of not ice t o Highlands that there was a potential problem with t he surety agreement, its c ontinue d performance un d er it s insur ance poli cy with Olympic c ou ld not be viewed as a

7 Even though the text dis cussion assumes purel y ar guendo that rati fication in New Jerseyforecl oses a party from bringi ng all tort and cont ract c laims, as
com pared with just pre cludin g the p arty from seeking t

he equit able re medy of resci ssion ( as in Ajamian ), s uch cases as Bilott i v. Accurate Forming Corp. , 188 A.2d 24, 33, 34 (N.J. 1963) and Merchants Indem. Corp. v. Eggl eston , 170 A.2d 50 5, 513 (N.J. 1962) suggest otherwis e.12

rati fication ( Merchant s In dem. , 179 A.2d at 514; Martin Glennon, Inc. v. First Fid. Bank, N. A. , 652 A.2d 199, 205 (N .J. Super. Ct . App. Div. 1995)) . Again the existence of a genu ine is sue of material factdef eats a s um mary jud gm ent in Hob bs’ favor.

F in all y, Hobbs u rges t ha t Highlands’ clai ms are n ot reall y independent

tort clai ms directlyagainst Hobbs, but r a ther s eek indemnifi cati on from Ho bbs f or insu rance claim s th at Highlands had p aid on behalf of Oly mpic. On that premise Hobbs asser ts that Hig hland s can not p revail, b ecau se on ce it cancell ed Olym pic’s in suran ce po lic y i t bec ame partiall y responsible for O ly mpic’ s f ailure to li ve up to it s obli gation to pa y the premium on t he su rety bond , so as to be pr ec lu de d un de r Ne w J ers ey l aw from recoveri ng its lo ss es in in de m ni ty ( Ramos

v. Browning Ferri s Indu s. of S. Je rse y, Inc. , 510 A.2d 1152, 1158-59 (N.J. 1986 )).

That atte mpted r eclass ific ation of Highlands’ tort

acti ons is unp e rsuasi ve. Af tera ll, Highlands fr onted the payment for th e c laims against

Olympic a s it

was required to do by it s ins ur an ce po lic y. Th at being so, the rec overy Highland s seeks from Hobbs consist s of plai n oldfashioneddam ages in to rt, flow ing d irectly from Highlands’ performance without t he bene fit of the protecti on thatshould have be e n provided bythe sur etybond–a deprivat ion that a factfi nder can det ermine shou ld b e att ribut ed to H obbs ’ malfeasance

. We have t h us rej ected eac h of Hobbs’ alte rnati ve grounds for sum ma ry judg men t. We therefore reverse the dis tri ct court’s grantof judgment i n Hobbs’ favor and remand for the resol ution at tri al of Highlands’ claims against Hobbs. Global

I n Global’s case the Carter Li ncol n

Me rcury analysis cu ts in the o ppo site direct ion. Far less discuss ion is needed to explai n why that

is so.
Throughout the entire pr ocess of arrangi ng for Frontier to act as t h e sure ty on Olympic’ s deductible, Global’s line of communicati on ran o nly between Fronti er
a nd H obbs: At no poi nt did Globalever inter actdi re ct lywith Hi ghl and s. By contra st, Ho bbs’ lin e of communicati on stretched from Global to Highlands.

It is plain t

hat com mu nicatio n w ith Highlands wa s wh olly outsi de the scope of Globa l’s professi onal rol e, which was to he lp Ho bbs s ecure Fron tier as the surety

on Oly m pic’s deducti ble (s ee Zieli nski v. Professional Appraisal Assocs. , 740 A.2d 1131, 113 5 ( N. J. Sup er . C t. Ap p. Div. 1999)). Hence it would be a n impe rmissib le stre tch to hol d that Globa l

“ had parti cular knowle dge or reas on t o kno w” that

Highlands was at ri sk of being harmed from its cond uct, a key factor that Ca r terLincoln-M ercury emp loyed in finding the existence of a dutybased on a

zo ne of ha rm th eo ry.

Absent anycommu nication or ot her rel ationsh ip between Highlands an d13

Glo bal, it would do vi olence t o any
reaso nable notion of f or e seeab ility to sadd le Global with liabil itybecause it did not go outsi de the scope of its undertaki ng by informing Highl ands dir ectl y about the prob le ms with securing the s uretybond ( City Check Cashing , 411 A.2d at 416-17; Carter Lincoln-M ercury , 638 A .2d at 1298). And because fores eeabi lity is a

nece ssa ry (thou gh n ot a su fficien t) precondit

ion to the im pos ition of a duty flowing from an insurance or surety br oker to a thir d part y, we need not addres s the other–t he fair ness–prec onditi on ( Carvalho

v. Toll Bro s. & D evelopers , 675 A.2d 209, 213 (N.J. 1 996 )). Hig hla n ds’ negl igence claim against

Global the refor e fai ls as a matte r o f l aw.

Conclusion

We have foll owed the t eac hing of Carter Lincoln-M ercury in identi fyi ng the existence o r non existen ce of a duty running to Highlands as the expe cted obligee of

a surety bo nd– the su bject o f its d efeatedexp ect at io ns. In th ose te rms w e REVERSE the dis tri ct court ’s grant of

summ ary judgment in Hobb s’ fav or and REMAND for the resolution of Highl ands’ cl ai ms at tria l, an d we AFFIRM the dist rict court’s gran t of s um mary jud gm ent in favor of Global, which is di smissed as a defendant i n this acti on.