373 F.3d 347 | 3rd Cir. | 2004
SHADUR, District Judge.
In February 1999 Highlands [1] Honorable Milton I. Shadur, Insurance Company, Inc. (“Highlands”) United States District Court Judge for the issued a policy to Olympic Limousine, Inc. Northern District of Illinois, sitting by (“Olympic”) that provided Olympic with designation. comm er cia l auto mo bile in surance Global owed any duty to Highlands, and it coverage, subject to a $2.5 million therefore granted summary judgment aggregate annual deductible (as to which dismissing all three claims. Olympic was effectively self-insured). Before the policy was cancelled by Highlands now appeals those Highlands just seven months later, rulings, and we have jurisdiction under 28 Highlands found itself responsible for U.S.C. §1291. We hold that under New handling in excess of $3 million in claims Jersey law Hobbs did owe a duty to against Olympic. Unfortunately for Highlands that rendered the latter’s Highlands, Olympic never paid the $2.5 negligence claims viable, so we reverse million deductible on those claims. Even and remand for a trial on those claims. more unfortunately for Highlands, But we find that the district court was Olympic had also failed to pay the $62,500 correct in holding that no such duty ran premium required to button up a surety from Global to Highlands, and we arrangement that would have protected therefore affirm the district court’s Highlands against such nonpayment. dismissal of Global as a defendant.
In response to those events, Facts Highlands filed a federal court diversity action against a slew of defendants, Olympic was a limousine and livery including (1) Hobbs Group, LLC service that operated in and around (“Hobbs”), the insurance broker that had Manhattan. It sought out Hobbs in late arranged for the underlying liability 1998 to act as its insurance broker in insurance policy between Highlands and securing a new commercial automobile Olympic and had also dealt with Highlands insurance policy to take over when in the course of the surety bond Olympic’s old policy expired in early procurement process and (2) Global Risk 1999. Hobbs in turn got in touch with Highlands, [2] and the parties began to Management Services, Inc. (“Global”), the surety bond broker that had worked with Hobbs and with proposed surety Frontier Insurance Co. (“Frontier”). Eventually [2] Because of a fronting agreement Highlands’ action was whittled down to between Highlands and Virginia Surety three counts–claims of negligent Company, Inc. (“Virginia Surety”), misrepresentation and negligence against Olympic’s insurance coverage was Hobbs and a claim of negligence against technically a contract between Olympic Global. Both Hobbs and Global then and Virginia Surety. But because moved for summary judgment pursuant to Highlands was completely responsible Fed. R. Civ. P. 56 (“Rule 56”). After full for all financial and administrative briefing, the district court concluded that aspects of the policy, we refer to under New Jersey law neither Hobbs nor Highlands as Olympic’s insurance discuss terms for potential coverage. After indeed interested. Working as an agent for much negotiation Highlands and Olympic Frontier, Global locked in Frontier as the (through Hobbs) agreed on a policy that expected surety for Olympic’s deductible included the following relevant provisions: and relayed that commitment back to
Hobbs. Although it had already agreed to 1. Highlands would initially be Olympic’s surety, Frontier expressly process and pay for claims against conditioned the issuance of the actual Olympic. Each month Highlands would surety bond on two events: Several parties then invoice Olympic for the claims it had were required to sign indemnification paid and Olympic would reimburse agreements, and Olympic had to pay the Highlands, subject to a $250,000 loss first year’s premium of $62,500. deductible per vehicle/$1 million coverage per vehicle rate. But un der no On February 28, 1999 the insurance circumstances would Olympic’s annual policy between Olympic and Highlands reimbursement obligation to Highlands took effect, and Highlands dutifully began exceed $2.5 million. to pay out on Olympic’s claims as they
accrued. But although Highlands then 2. Olympic would secure a surety invoiced Olympic for the reimbursements bond (with Highlands as the obligee) in the that Olympic owed Highlands under the amount of Olympic’s $2.5 million terms of the policy, Olympic did not honor aggregate annual deductible. [3]
its reimbursement obligation. With the expiration date of For a variety of reasons (including Olympic’s existing policy approaching Highlands’ realization that it had exposed rapidly, Hobbs communicated with Global itself to a far greater risk than it had to see if it would be interested in procuring originally anticipated, as well as other the surety bond that Highlands required legal compliance issues with its policy), under its policy with Olympic. Global was Highlands began efforts to cancel the
policy with Olympic as early as April 1999. It nonetheless remained responsible
carrier. for claims against Olympic until September 1999, when the cancellation [3] Although Olympic never actually took effect. signed all the documents that would have legally bound it to obtain the surety bond,
But neither Hobbs nor Global ever at all times both Hobbs and Global (not informed Highlands that even though to mention Highlands) appeared to be Global had prepared the surety bond (on working under the basic assumption that Frontier’s behalf), the bond was never the surety bond requirement was integral executed and was ultimately “cancelled to the final policy to which Olympic and Highlands agreed. flat” [4] because of Olympic’s failure to pay New Jersey’s Rules of Decision the premium on the bond. Highlands was completely unaware until well after it As always in diversity cases, a began the cancellation process with federal court must apply the substantive Olympic that it was not protected, as the law of the forum state–and where the obligee under the surety bond, from the state’s highest court has not spoken huge loss that resulted from Olympic’s definitively on a particular issue, the nonpayment. And it is that failure to federal court must make an informed inform that Highlands asserts gives rise to prediction as to how the highest state court Hobbs’ and Global’s liability. would decide the issue (Erie R.R. v.
Tompkins, 304 U.S. 64, 78 (1938); Clark Rule 56 Standard and Standard of v. Modern Group Ltd., 9 F.3d 321, 326 (3d Review Cir. 1993)). To that end the federal court may consider a wide range of reliable We review de novo the decision to sources, includin g re le vant state grant summary judgment and use the same precedents, analogous decisions and Rule 56 standards as did the district court reasoned dicta, as well as the policies and (Petruzzi’s IGA Supermkts., Inc. v. doctrinal trends informing and emerging Darling-Del. Co., 998 F.2d 1224, 1230 (3d from those decisions (Scotts African Cir. 1993)). Those standards establish that United Methodist Protestant Church v. the Rule 56 movant bears the burden of Conference of African Union First showing the absence of any “genuine issue Colored Methodist Protestant Church, 98 of material fact” (Celotex Corp. v. Catrett, F.3d 78, 92 (3d Cir. 1996)). But the court 477 U.S. 317, 322-23 (1986)): that is, the must also be mindful not “to expand state failure to provide “evidence such that a law in ways not foreshadowed by state reasonable jury could return a verdict for precedent” (City of Philadelphia v. Beretta the nonmoving party” (Anderson v. U.S.A. Corp., 277 F.3d 415, 421 (3d Cir. Liberty Lobby, Inc., 477 U.S. 242, 248 2002)). (1986)), even while “accepting its evidence as true and drawing all justifiable In New Jersey (as in all other inferences from the evidence in its favor” jurisdictions) any tort of negligence (Sameric Corp. of Del. v. City of requires the plaintiff to prove that the Philadelphia, 142 F.3d 582, 590 (3d Cir. putative tortfeasor breached a duty of care 1998)). owed to plaintiff and that plaintiff suffered
damages proximately caused by that breach (Weinberg v. Dinger, 524 A.2d 366, 373 (N.J. 1987)). In particular, under N e w J e r s e y l a w n e g l i g e n t [4] That locution denotes a misrepresentation requires a showing that cancellation ab initio, as though the bond defendant negligently provided false had never been in force. information and that plaintiff incurred Highlands. It is conventional wisdom that damages proximately caused by its an insurance broker must “act with reliance on that information (Karu v. reaso nable skill and diligence in Feldman, 574 A.2d 420, 425 (N.J. 1990)). performing the services of a broker” with In that respect a defendant may be liable respect to its insured (id. at 1291). Lapses (because it owes a duty) to any reasonably in that duty that can give rise to liability foreseeable recipient who relies on the include, but are not limited to, either (1) information (id.). failing completely to arrange for an
insurance policy or (2) delivering a policy For Highlands to prevail on any of that is void, materially deficient or its claims, then, it must first show that the otherwise does not provide the coverage defendant being considered owed it a the broker agreed to procure (id.; relevant duty of care. That determination Glezerman v. Columbian Mut. Life Ins. is quintessentially a question of law for the Co., 944 F.2d 146, 150 (3d Cir. 1991)). court (City Check Cashing, Inc. v. Mfrs. Carter Lincoln-Mercury, 628 A.2d at Hanover Tr. Co., 764 A.2d 411, 416 (N.J. 1291-92 emphasizes that although the 2001)). relationship between an insured and its
broker is most often contractual in nature, Because the New Jersey Supreme claims by an insured against its broker are Court has not squarely addressed whether not based on a privity relationship but are a surety bond broker owes a duty to the premised on the tort concept of negligence obligee of that bond, under Erie principles in failing to procure the appropriate we must predict whether that court would coverage. That concept is fundamental to recognize such a duty under the one of Carter Lincoln-Mercury’s central circumstances presented here. In that holdings: the principle that the broker's respect the district court determined as a duty owed to insured parties is also owed matter of law that Highlands’ claims of to other loss payees who (although not in negligent misrepresentation against Hobbs privity with the broker) are within the zone and of negligence against Hobbs and of harm emanating from its activities (id. Global could never succeed because New at 1294-95, 1297). Jersey does not impose a duty of care on either party with respect to Highlands. We Carter Lincoln-M ercury, id. at review that prediction and application of 1294-95 identifies two key elements that New Jersey tort law de novo (Clark, 9 F.3d should guide courts in delineating the at 327). boundaries of that zone of harm:
foreseeability and fairness. Foreseeability Highlands relies primarily on Carter takes into account the relationship between Lincoln-Mercury, Inc. v. EMAR Group, the plaintiff and the broker, the nature of Inc., 638 A.2d 1288 (N.J. 1994) to argue the risk and the defendant’s ability and that both Hobbs and Global owed a duty to opportunity to exercise care and avert harm (id. at 1294). And the fairness aspect 940, 943-44 (N.J. Super. Ct. Ch. Div. requires a court to make a value judgment 1991)). New Jersey courts have also stated as to whether establishing a broker’s duty more generally that because it is long in relationship to a particular plaintiff is settled in New Jersey that surety is fair based on policy considerations and the insurance, surety bondholders are public interest (id.). After analyzing those equivalent to insurance policyholders (id.; two aspects under the circumstances at Aetna Cas. & Sur. Co. v. Int’l Re-Ins. issue there, Carter Lincoln-Mercury, id. at Corp., 175 A. 114, 120 (N.J. Ch. 1934)). 1298 ultimately held that the insurance broker in that case did owe a duty to the To be sure, in the case at bar Hobbs loss payee of the insurance policy that the was an insurance broker for Olympic and broker had negligently procured for its procured a policy from Highlands. As insured. between those two companies Olympic
was the insured and Highlands was the Whether the broker’s duty in the insurer. But the critical coverage for insurance context translates to the surety purposes of the current lawsuit is that context before us requires that we consider provided (or, more accurately, not in the first instance whether surety provided) by the surety bond–and that relationships are equivalent to insurance coverage was intended to serve Highlands’ relationships under New Jersey law. There benefit. From that perspective Olympic are certainly many similarities between the was to be the principal obligor, Frontier two. Like insurance relationships, surety was to be the surety (the insurer in the relationships have three central players–the surety context) and Highlands was to be principal obligor, the insured (or obligee of the obligee of the surety bond (the insured the surety bond) and the insurer (or surety) in the surety context). (In re Liquidation of Integrity Ins. Co., 657 A.2d 902, 907 (N.J. Super. Ct. App. Div. Hobbs and Global staunchly 1995), aff’d 685 A.2d 1286 (N.J. 1996)). maintain that even if a surety relationship
equates to an insurance relationship, the Indeed, in many contexts New Carter Lincoln-M ercury-defined duty was Jersey explicitly equates surety bonds with never intended to protect insurers such as insurance polices. For example, a New Highlands. But that mistakes mere form Jersey insurance rates statute expressly (the “insurance company” label) for defines “policy of insurance” to include substance: In the context at issue in this surety bonds (N.J. St. Ann. §17:29A-1(e) case, Highlands is not an insurer qua (2004)). And in the liquidation of an insurer. Instead what is relevant is that insurance corporation, the claims of surety Highlands is an obligee on a surety bond, bondholders are accorded priority together even though it also happens to be in the with insurance policyholders’ claims (In re insurance business generally. Liquidation of Integrity Ins. Co., 598 A.2d
As Highlands would have it, our Highlands in the transaction at issue, as inquiry should end with the conclusion that evidenced by the nature and volume of the the Carter Lincoln-M ercury-prescribed communications between them (Weinisch duty extends to all surety bond brokers and v. Sawyer, 587 A.2d 615, 618 (N.J. 1991)). issuers, so that Hobbs and Global Next as to the nature of the risk, by necessarily owed a duty to Highlands as definition the absence of protection for the third-party obligee on the surety bond. Highlands in the event of Olympic’s But we must of course proceed with default is precisely the peril that would caution when wading into the predictive necessarily follow from the failure to have Erie waters, and the New Jersey courts obtained the surety bond on which avoid treating questions of duty in a Highlands was to be the obligee. And conclusory fashion. Both of those things finally, our determination that Highlands being true, we proceed beyond our was within Hobbs’ zone of harm is determinations (1) that New Jersey law significantly influenced by the fact that draws strong parallels between insurance Hobbs had both abundant opportunities policies generally and surety bonds and ample ability to advise Highlands that specifically and (2) that Highlands is it was mistaken in its belief (an entirely exactly the type of insured/obligee that is reasonable one) that it was protected by a entitled to look to the Carter Lincoln- surety bond with Frontier, a lack of Mercury analysis as a basis for protection that stemmed from Olympic's determining the existence of a duty nonpayment of the premium on the bond (Weinberg, 524 A.2d at 374). Instead we (Carter Lincoln-M ercury, 638 A.2d at must proceed with the same type of 1294). foreseeability-plus-fairness analysis that the New Jersey Supreme Court carried out M u c h o f H i g h l a n d s ’ in Carter Lincoln-Mercury in evaluating correspondence with Hobbs clearly shows the existence or nonexistence of a duty to that it was under the impression that the third parties such as Highlands. And for process of securing the surety bond was that purpose, of course, we consider Hobbs progressing without a hitch. Most notably, and Global separately. an April 1, 1999 e-mail from Highlands to
Hobbs reporting on the transaction said in Hobbs part “we have the bond in place,” an explicit communication to Hobbs of In terms of foreseeability, the Highlands' belief that Olympic’s surety propriety of recognizing a duty of care bond was in effect. Hobbs had numerous owed by Hobbs to Highlands is obvious. communications with Highlands after that For one thing, the technical agent-principal April 1 e-mail about a variety of other relationship between Hobbs and Olympic matters, but not once did Hobbs mention to in no way vitiates the impact of the close Highlands that Olympic had not paid the working relationship between Hobbs and premium needed to cement Frontier’s surety bond obligation. [5] conduct (President v. Jenkins, 814 A.2d
1173, 1185 (N.J. Super. Ct. App. Div. Indeed, the multiple requests for 2003)). payment running from Hobbs to Olympic show unequivocally that throughout the With foreseeability thus firmly course of its communications with established, we turn to the fairness branch Highlands Hobbs was fully aware that of the Carter Lincoln-Mercury analysis. In Olympic had not paid the premium on the that regard we next look to New Jersey surety bond and that Frontier would not public policy to forecast whether the New issue the bond until that premium was Jersey Supreme Court would find it in the paid. Yet Hobbs did not even make the public interest to create that duty (639 cost-free effort to notify Highlands of A.2d at 1294-95). We conclude that it Olympic’s delay in paying the premium by would. copying Highlands on any of those communications. That court’s tradition of holding
insurance professionals to high standards At every step of the way Hobbs had of care confirms its strong public policy both the opportunity and the ability to focus on protecting parties who deal with advise Highlands that it was not protected such professionals (Aden v. Fortsh, 776 by any surety bond because Olympic had A.2d 792, 805 (N.J. 2001)). True enough, not paid the premium. And its ongoing Highlands’ own involvement in the total silence invited Highlands to rely on insurance industry, rather than its being a Hobbs’ conduct that otherwise suggested general member of the public as was the surety bond placement process had involved in Carter Lincoln-Mercury, may been completed as planned. Without doubt cut against the imposition of an actual Highlands fell squarely within the fiduciary responsibility on Hobbs’ part vis- foreseeable zone of harm from Hobbs’ a-vis Highlands (see Aden, 776 A.2d at
800-01). But that does not at all control the fairness concerns at issue here, as Hobbs suggests–it merely calls for the [5] That silence on Hobbs’ part under examination of other important public the circumstances just mentioned, and in interest considerations (Glezerman, 944 the face of the other factors mentioned F.2d at 150). hereafter, is especially egregious because even a whisper to that effect would have
In the case of an unsophisticated eliminated the problem and the insured, we are primarily concerned that disastrous consequence that has the individual will suffer harm while adrift prompted this litigation–Highlands could in the insurance world and at the mercy of promptly have paid the $62,500 premium a professional with far greater expertise. itself (as it had the right to do), thus Although that spectre is obviously not shifting the risk to Frontier. universally present as to an entity such as First, Hobbs asserts that Highlands Highlands, the public policy value that has not created a genuine issue of material uniformly requires brokers to carry out the fact as to the other elements of either of its instructions given to them to the best of tort claims against Hobbs. To deal with their abilities applies with equal force that contention, we need to identify those whether a broker is dealing with an other elements. individual unschooled in insurance complexities or is conducting business A s f o r t h e n e g l i g e n t with a savvy entity such as Highlands misrepresentation claim, the New Jersey (Aden, 776 A.2d at 805-06). And finally, caselaw that allows such a claim to be to shift from the general to the particular, based on the defendant’s silence or the imposition of a broker’s duty in the suppression of truth rather than on some surety context hones in on the primary affirmative misrepresentation (Strawn v. purpose that underscores the entire surety Canuso, 657 A.2d 420, 429 (N.J. 1995)) is relationship: protecting the obligee of the not limited to special relationship surety bond in the case of a default by the situations such as those involving principal (United States ex rel. Don Siegel transactions within explicit fiduciary Constr. Co. v. Atul Constr. Co., 85 relationships, transactions where a quasi- F.Supp.2d 414, 418 (D. N.J. 2000)). fiduciary relationship develops either
through the express conduct of the parties In sum, our analysis in the terms or other circumstances particular to that t a u g h t b y C a r t e r L i n c o l n - individual transaction or transactions (such Mercury–consideration of the elements of as insurance) whose nature inherently both foreseeability and fairness–has led us requires such a duty regardless of the to conclude that the New Jersey Supreme parties’ intentions (Berman v. Gurwicz, Court would find, as to both torts asserted 458 A.2d 1311, 1313-14 (N.J. Super. Ct. by Highlands against Hobbs, that the latter Ch. Div. 1981)). In addition, the required owed a duty to Highlands as the obligee of duty of disclosure may also arise in any Olympic’s surety bond. [6] We go on to situation called for by good faith and address (and to dispatch) Hobbs’ several common decency (Maertin v. Armstrong fallback arguments. World Indus., Inc., 241 F.Supp.2d 434,
461 (D. N.J. 2002), conforming to the holding in City Check Cashing, 764 A.2d at 417). [6] We find no reason to differentiate, in Carter Lincoln-Mercury terms, as Evaluation of the existence or between negligence actions generally and
nonexistence of a duty of disclosure in the negligent misrepresentation actions present situation calls for the weighing of specifically (see H. Rosenblum, Inc. v. factors essentially identical to those Adler, 461 A.2d 138, 145, 153 (N.J.
already drawn from Carter Lincoln- 1983)). Mercury: foreseeability and fairness. We sharing the common theme that some need not then repeat the analysis–what has factor other than Hobbs’ failure to inform been said before also supports the Highlands of Olympic’s nonpayment of its grounding of H ighlands’ negligent premium (including perhaps Highlands’ misrepresentation claim in breach-by- own asserted negligence) was assertedly omission. And more briefly as to an intervening or superseding cause of Highlands’ general negligence claim Highlands’ loss. But all those efforts fail, against Hobbs, it is hornbook law that a because questions of negligence (including broker’s failure to obtain adequate comparative negligence) and causation are coverage can support a claim that the within the jury’s province in all but the broker has breached its duty (Weinisch, most exceptional situations (Fleuhr v. City 587 A.2d at 618). of Cape May, 732 A.2d 1035, 1041 (N.J.
1999); Vega v. Piedilato, 713 A.2d 442, Against that backdrop it is plain 459 (N.J. 1998)). And for Rule 56 that Highlands has adduced enough purposes it is not our function to make evidence to raise genuine issues of credibility determinations or otherwise to material fact as to both breach and weigh the evidence (Petruzzi’s IGA causation for each tort. Several of Hobbs’ Supermkts., 998 F.2d at 1230). c o m m u n i c a t i o n s – i n c l u d i n g communications to Highlands that referred In short, there are at least genuine to the surety bond in ways that made it issues of material fact precluding summary appear the bond had already been secured, judgment on the negligence and causation communications to Highlands that omitted aspects of Highlands’ claims against any reference to the problems with the Hobbs. And finally, because Highlands has surety bond that Hobbs knew about, and paid over $3 million in claims against communications to Olympic that could Olympic during the coverage period (all of have been but were not shared with which were under the policy’s loss-per- Highlands–could reasonably support a occurrence limit and would therefore have finding that Hobbs breached its duty to been covered by the Olympic deductible Highlands (see Glezerman, 944 F.2d at had the surety bond been in place), it has at 151). And Highlands’ totally plausible a minimum raised a genuine issue of statement that if Hobbs had only said the material fact as to damages. surety bond was not in place because of the nonpaym ent of the premium, Next Hobbs asserts that Highlands’ Highlands would itself have paid the tort claims are precluded under Saltiel v. premium, raises at least a genuine issue of GSI Consultants, Inc., 788 A.2d 268 (N.J. material fact about causation. 2002), which dictates that conduct within
a relationship defined solely by contract Hobbs tries to escape the impact of cannot give rise to a tort claim against the all that evidence via several arguments, all allegedly breaching party or its agent unless that party has some independent Highlands sufficient notice to trigger the
ratification scenario. [7] duty to the aggrieved party outside the scope of the contract (id. at 279-80). Hobbs seeks to support that argument by While ratification may sometimes pointing out that although Highlands never be determined as a question of law (see, had any formal contractual relationship e.g., Garden State Bldgs., L.P. v. First Fid. with Hobbs, it did have a contractual Bank, N.A., 702 A.2d 1315, 1324 (N.J. relationship with Olympic. And Hobbs as Super. Ct. App. Div. 1995)), that is not the an insurance broker was unequivocally case here. Highlands ’ Ap ril 1 Olympic’s agent (Weinisch, 587 A.2d at communication reflecting its belief that the 618). surety bond had already been placed puts
into dispute, for resolution by a jury, any But that contention by Hobbs contention that the March 3 fax misses the mark completely in all events, sequence–which reflected that Hobbs was in light of our determination that the duty sending a specimen surety form to Hobbs owed Highlands is wholly Highlands simply to approve the wording independent of any contractual obligations and which plainly evidenced Highlands’ it might have had to Highlands as a clear intention to be designated as the function of Hobbs’ status as an agent of obligee on the final documents–somehow Olympic. In that respect Saltiel, 788 A.2d placed Highlands on notice that the surety at 280-81 itself explicitly lists the Carter bond was not being arranged as expected. Lincoln-M ercury duty as an example of an Absent a finding of notice to Highlands independent duty that would negate the that there was a potential problem with the Saltiel-announced limitation. surety a g r e e m e n t , i t s c o n t i n u ed
performance under its insurance policy Nothing daunted, Hobbs also with Olympic could not be viewed as a advances the suggestion that once Highlands had sufficient notice that the surety bond was not in place, its decision [7] Even though the text discussion to retain Olympic’s premiums and to assumes purely arguendo that ratification continue processing Olympic’s claims in New Jersey forecloses a party from amounted to a ratification that effectively bringing all tort and contract claims, as waived Highlands’ right to rescind the compared with just precluding the party contract based on the absence of the bond from seeking the equitable remedy of (Ajamian v. Schlanger, 89 A.2d 702 (N.J. rescission (as in Ajamian), such cases as Super. Ct. App. Div. 1952)). Hobbs Bilotti v. Accurate Forming Corp., 188 maintains that its March 3, 1999 fax to A.2d 24, 33, 34 (N.J. 1963) and Highlands that did not contain any Merchants Indem. Corp. v. Eggleston, information indicating that the bond had 170 A.2d 505, 513 (N.J. 1962) suggest been executed and completed gave otherwise. ratification (Merchants Indem., 179 A.2d We have thus rejected each of at 514; Martin Glennon, Inc. v. First Fid. Hobbs’ alternative grounds for summary Bank, N.A., 652 A.2d 199, 205 (N.J. judgment. We therefore reverse the district Super. Ct. App. Div. 1995)). Again the court’s grant of judgment in Hobbs’ favor existence of a genuine issue of material and remand for the resolution at trial of fact defeats a summary judgment in Highlands’ claims against Hobbs. Hobbs’ favor. Global
Finally, Hobbs u rges that In Global’s case the Carter Lincoln- Highlands’ claims are not really Mercury analysis cuts in the opposite independent tort claims directly against direction. Far less discussion is needed to Hobbs, but rather seek indemnification explain why that is so. from Hobbs for insurance claims that Highlands had paid on behalf of Olympic. Throughout the entire process of On that premise Hobbs asserts that arranging for Frontier to act as the surety Highlands cannot prevail, because once it on Olympic’s deductible, Global’s line of cancelled Olympic’s insurance policy it communication ran only between Frontier became partially responsible for Olympic’s and Hobbs: At no point did Global ever failure to live up to its obligation to pay interact directly with Highlands. By the premium on the surety bond, so as to contrast, Hobbs’ line of communication be precluded under New Jersey law from stretched from Global to Highlands. recovering its losses in indemnity (Ramos v. Browning Ferris Indus. of S. Jersey, It is plain that communication with Inc., 510 A.2d 1152, 1158-59 (N.J. 1986)). Highlands was wholly outside the scope of
Global’s professional role, which was to That attempted reclassification of help Hobbs secure Frontier as the surety Highlands’ tort actions is unpersuasive. on Olympic’s deductible (see Zielinski v. After all, Highlands fronted the payment Professional Appraisal Assocs., 740 A.2d for the claims against Olympic as it was 1131, 1135 (N.J. Super. Ct. App. Div. required to do by its insurance policy. 1999)). Hence it would be an That being so, the recovery Highlands impermissible stretch to hold that Global seeks from Hobbs consists of plain old- “had particular knowledge or reason to fashioned damages in tort, flowing directly know” that Highlands was at risk of being from Highlands’ performance without the harmed from its conduct, a key factor that benefit of the protection that should have Carter Lincoln-M ercury employed in been provided by the surety bond–a finding the existence of a duty based on a deprivation that a factfinder can determine zone of harm theory. shou ld be attributed to Hobbs’ malfeasance. Absent any communication or other
relationship between Highlands and Global, it would do violence to any reasonable notion of foreseeability to saddle Global with liability because it did not go outside the scope of its undertaking by informing Highlands directly about the problems with securing the surety bond (City Check Cashing, 411 A.2d at 416-17; Carter Lincoln-M ercury, 638 A.2d at 1298). And because foreseeability is a necessary (though not a sufficient) precondition to the imposition of a duty flowing from an insurance or surety broker to a third party, we need not address the other–the fairness–precondition (Carvalho v. Toll Bros. & Developers, 675 A.2d 209, 213 (N.J. 1996)). Highlands’ negligence claim against Global therefore fails as a matter of law.
Conclusion We have followed the teaching of Carter Lincoln-M ercury in identifying the existence or nonexistence of a duty running to Highlands as the expected obligee of a surety bond–the subject of its defeated expectations. In those terms we REVERSE the district court’s grant of summary judgment in Hobbs’ favor and REMAND for the resolution of Highlands’ claims at trial, and we AFFIRM the district court’s grant of summary judgment in favor of Global, which is dismissed as a defendant in this action.
