Wanda GLEZERMAN, Trustee, Appellant,
v.
COLUMBIAN MUTUAL LIFE INSURANCE COMPANY; CMS Companies;
Robert E. Spivak, individually, jointly, severally
and/or in the alternative.
No. 90-5818.
United States Court of Appeals,
Third Circuit.
Argued March 4, 1991.
Decided Sept. 10, 1991.
Charles I. Tighe, III (argued), Chatburn & Tighe, Mt. Laurel, N.J., for appellant.
Richard M. Eittreim (argued), McCarter & English, Newark, N.J., for Columbian Mut. Life Ins. Co.
Norman K. Zeiner (argued), Law Offices of Thomas Dempster, III, Mt. Laurel, N.J., for CMS Companies.
Frank A. Luchak (argued), Duane, Morris & Heckscher, Marlton, N.J., for Robert E. Spivak, et al.
Before BECKER, NYGAARD and HIGGINBOTHAM, Circuit Judges.OPINION OF THE COURT
A. LEON HIGGINBOTHAM, Jr., Circuit Judge.
Appellee, Robert Spivak ("Spivak"), is an insurance broker who handled the insurance needs of Benjamin and Wanda Glezerman for the period of approximately twenty years prior to Benjamin Glezerman's death. Benjamin Glezerman died on September 14, 1988. Prior to that date, Wanda Glezerman handled most of the communications regarding the policy at issue in this case.
The present litigation was brought by Wanda Glezerman, as trustee for her husband's estate, for damages based on appellee Columbian Mutual Life Insurance Company's ("Columbian") failure to pay death benefits on a Columbian policy sold to Benjamin Glezerman by Spivak. Wanda Glezerman is suing Spivak, CMS Companies ("CMS") (the firm that serviced the policy), and Columbian. The district court granted appellees' motion for summary judgment on the ground that the appellees owed no duty to Glezerman in the circumstances of this case. We affirm in part, vacate in part, and remand for further proceedings in accordance with this opinion.
BACKGROUND
Spivak had a close affiliation with CMS. The Glezermans received letters signed by Spivak on CMS letterhead, and Wanda Glezerman testified that she thought Spivak was a partner in CMS. See Appendix ("App.") at 7. Spivak acknowledged that he placed all his business with CMS, and that CMS provided all the servicing of Spivak's accounts. See id. at 8-9. Spivak's offices were in the same building as CMS, and he shared CMS staff. See id. at 9.
The life insurance policy at issue became effective on September 14, 1979. Each annual premium was set out in the policy. The premium increased from $9,313.20 in the first year to $37,026.60 in the twentieth year, see App. at 34, and was payable in two semiannual installments, one due in September and one due in March. For the year in question, the annual premium was $18,064.80. The policy provided for a thirty-one day grace period in which the insured could pay the premium after the due date and still retain coverage. See App. at 29; see also N.J.S.A. § 17B:25-3 (mandating a minimum of thirty days as a grace period prior to cancellation of a life insurance policy). Finally, the policy provided terms for reinstatement in the event of cancellation for non-payment of premiums. In order to qualify for reinstatement, the insured was required to provide proof of insurability, and then pay all overdue premiums at 5% interest. See App. at 39.
For purposes of summary judgment, the following facts concerning the relationship between the Glezermans and Spivak are taken as true. Columbian sent premium statements to CMS, not the Glezermans. See App. at 20. There was no set procedure for the Glezermans to follow when making premium payments. Premiums were occasionally paid to Spivak's office, and occasionally to Columbian. On some occasions, CMS paid the premium, billing the Glezermans later. See App. at 15. One of the premiums paid by CMS was $15,000. Further, the amount in the premium statement was not always the amount actually due, because Spivak advised the Glezermans to occasionally borrow against their policies to make premium payments. See App. at 14. Spivak also told the Glezermans from which of their financial accounts to pay the premium. See Supplemental Appendix ("Supp.App.") at 23-24.
Finally, because each premium payment represented a large sum of money, the Glezermans had established a special procedure wherein CMS would notify them as the grace period drew to a close so that they could pay at the very last minute. The servicing department of CMS monitored the Glezermans' premium payments. Spivak acknowledges this procedure was agreed to and followed by appellees. See App. at 20, 23. As Wanda Glezerman described it:
From the beginning of time, I always got the notice from [Spivak] first and then he would catch up with the grace period and they will tell me when to send the check and how much to send, whether there was a difference or there wasn't [in the amount owed from the amount on the statement] and from what account to pay it.
Supp.App. 71-72.
In the spring of 1986, the Glezermans received notification from Columbian, via CMS, indicating that the premium on Benjamin Glezerman's life insurance policy was due. See Supp.App. at 22. That notification specified both the due date for the premium payment, and the end of the grace period. See Supp.App. at 118.1 Soon thereafter, Spivak telephoned Wanda Glezerman and discussed the payment with her. Spivak told Glezerman not to worry about the payment because she still had time to pay. See App. at 45. The next communication the Glezermans received notified them that the policy had lapsed. See App. at 84.
CMS and Spivak had received notice that the Glezermans' policy had lapsed from Columbian shortly after the end of the grace period. That notice included a late payment offer to bring the policy back into force. See App. at 46. Apparently no action was taken pursuant to this notice, and there is no evidence in the record as to whether the Glezermans were informed of Columbian's late payment offer.
On May 6, Wanda Glezerman sent two checks that had been previously prepared in anticipation of April 14, the end of the grace period. See Supp.App. at 132. Per the instructions of a CMS employee, these checks were back dated to the last day of the grace period, although they were actually written on May 6. Wanda Glezerman was told that the policy would be reinstated. See App. at 48. Instead of automatically reinstating the policy, however, Columbian required the Glezermans to file a request for reinstatement, and a medical form to be completed with reference to Benjamin Glezerman.
Also in the beginning of May, Spivak contacted the general agent at Columbian and tried to get the policy reinstated. See App. at 51. CMS employees originally gave Spivak a reason to believe that Columbian was prepared to reinstate the policy without further medical evidence, see id. at 52, but by the end of May or the beginning of June, Spivak knew that Columbian did not want to reinstate the policy because of medical reasons. See id. at 53. On June 9, 1986, Spivak wrote to the Glezermans and told them that Columbian had reinstated the policy. See id. at 54. Spivak now admits that the policy was never reinstated after the lapse in March. The premium checks that Wanda Glezerman sent to Columbian on May 6, were returned by Columbian to CMS in July of 1986, and from CMS to the Glezermans in October of 1986. See App. 60-62.
The only replacement policies that the Glezermans were able to purchase were those that conditioned payment of death benefits on the insured surviving a certain period of time. Benjamin Glezerman died on September 14, 1988, prior to the end of the stated period necessary to make the replacement policies effective. His estate received only the premiums that had been paid on the replacement policies.
DISCUSSION
A. Duty Owed by Broker to Client
Wanda Glezerman argues that during their long term relationship Spivak assumed responsibilities, in addition to those normally associated with the client-broker relationship, from which a legal duty arose. Under New Jersey law,
one who holds himself out to the public as an insurance broker is required to have the degree of skill and knowledge requisite to the calling. When engaged by a member of the public to obtain the insurance, the law holds him to the skill, care and diligence in the execution of his commission.... If he neglects to procure the insurance or if the policy is materially deficient ... because of his failure to exercise the requisite skill or diligence, he becomes liable.
Rider v. Lynch,
Insurance brokers are held to a high standard by New Jersey courts:
It is not necessary for the client in order to establish a breach of duty to prove that he laid out for the broker the elements of a contract of insurance. It is sufficient to show that he authorized procurement of the insurance needed to cover the risks indicated and that the broker agreed to do so but failed or neglected to perform his duty. Moreover, if the broker agrees to try to obtain or to try to obtain the coverage he knows or should know the principal seeks, and he finds that he cannot procure it, he is bound to notify the principal of that fact with reasonable dispatch.
Rider,
Spivak argues that he did not breach the duty imposed by New Jersey because the Glezermans received a premium notice which indicated the day the premium was due. Spivak contends that the New Jersey Superior Court holding in Insinga v. Hegedus,
In addition, mere non-renewal is insufficient to preclude an insured's claim. In the seminal case discussing brokers' and agents' duty to clients, Rider, the New Jersey Supreme Court stated:
In passing it should be said that the failure of [the insureds] to read the policy will not estop either of them from prosecuting a cause of action in negligence.... Nor will such a failure support a defense of contributory negligence. In view of the relationship of principal and agent ... [the insureds] were entitled to rely upon and believe that the broker had fulfilled his undertaking....
Spivak argues that the basis of the duty owed by a broker to a client is the specialized knowledge required to handle complex insurance agreements.2 Spivak is only partially correct. While it is true that specialized knowledge is part of the rationale for imposing a duty on insurance brokers, New Jersey caselaw does not support the conclusion that professional training is the primary basis for such a duty.
An insurance agent may assume duties in addition to those normally associated with the agent-insured relationship, and New Jersey courts regularly review the record for evidence of greater responsibilities. See, e.g., Sobotor,
As these judicial investigations into the parties' relationship indicate, the client must establish "something more" than a broker-client relationship in order to impose a heightened standard of care on a broker. See Avery,
Wanda Glezerman has established a disputed issue of material fact concerning the scope of the duty owed her by Spivak. Under the standard for summary judgment, we accept as true her assertion that she relied on Spivak to tell her when, how much, and from which account to make a premium payment. Spivak also admits that he had set up a procedure at CMS, wherein CMS would monitor the account, thereby permitting the Glezermans to make their payment as late as possible. Finally, the month before the premium was due, Spivak told Wanda Glezerman that she had time to pay Columbian and that she should not worry about it. These allegations, if true, establish the "something more" required by New Jersey law that creates additional responsibilities on the part of the broker. See, e.g., Insinga,
Once a duty has been established under the facts of the case, the question presented on summary judgment is "whether reasonable minds could differ on the facts presented to the motion judge as to whether the duty owed was breached. If reasonable minds could differ on the answer, a plenary trial is necessary and summary judgment cannot be entered." Avery,
We do not here decide the question of whether Spivak owed a duty to the Glezermans. The only instances where brokers have been liable as a matter of law have been where they have been ignorant of available coverage, or have failed to obtain requested coverage, or have failed to advise the client of unavailability of requested coverage. See Avery,
In Rider, the New Jersey Supreme Court cited with approval Barton v. Marlow,
Similarly, in Auger v. Gionti Agency,
B. Negligent Misrepresentation
On June 9, 1986, Spivak wrote to the Glezermans and told them that the Columbian policy was in full force and effect. See App. at 54.4 As noted above, Spivak now admits that the policy has not been in effect since the lapse. Wanda Glezerman argues, relying on Auger v. Gionti, that because Spivak is an insurance broker who had a long standing relationship with the Glezermans, his representation that coverage was in effect when in fact it was not should be considered negligence "as a matter of law and the only thing for the jury to determine is the amount of damages." Appellant's Opening Brief at 8. Wanda Glezerman's reliance on Auger, is misplaced. In that case the loss occurred while the plaintiff was under the misimpression that the policy was still in effect, and thus relied to her detriment. In the matter at hand, Benjamin Glezerman died months after the misrepresentation was discovered. At the time of Benjamin Glezerman's death, Wanda Glezerman knew that the Columbian policy was not in force, and therefore, after she had knowledge that the policy was not in force, she could not have detrimentally relied on Spivak's representation.
Where the insured reasonably believes he is covered by virtue of representations by an insurance agent or broker, "the failure of the broker to produce the coverage or else warn the client at once that coverage could not be obtained constitutes a failure to exercise the requisite skill or diligence required of a broker to the same extent as would have obtained had there been a failure to issue a policy which the broker promised to procure." Dimarino,
Wanda Glezerman's argument may also be construed as one of "waiver." The doctrine of waiver is available to insureds. A waiver
is predicated upon acts or conduct of the insurer with knowledge of the breach tending to show a recognition of the policy, or an intent to relinquish the right to declare a forfeiture for the known breach.... [I]t is always open to the assured to show a waiver of policy provisions when the conduct of the insurer gives reasonable ground to the assured, as a layman ... to believe that such a forfeiture will not be incurred and the assured relies thereon to his prejudice.
Bruni v. Prudential Insurance Co.,
The waiver of immunity on the policy must be intentional. An agent who furnishes a proof of claim which is immediately signed by the plaintiff, "with no attendant trouble, delay or expense on her part, or prejudice to her, represent circumstances which must, as a matter of law, be deemed insufficient to constitute a waiver by the company." Feder v. Bankers National Life Insurance Co.,
C. Vicarious Liability of CMS
Glezerman asks this court hold hold CMS liable on an agency theory. Appellant makes a number of factual assertions intended to establish a principal-agent relationship between CMS, as principal, on the one hand, and Spivak, as agent, on the other. Factual issues concerning the liability of CMS under an agency theory were not discussed or resolved by the district court because that court granted Spivak's motion for summary judgment on the basis that he owed no duty to the Glezermans under the circumstances of this case. We will remand this issue to the district court for that court to determine in the first instance whether the appellant has created a triable issue of fact as to this issue.
D. Liability of Columbian
An insurer has a reasonable amount of time in which to demand proof of insurability and then decide whether to reinstate. If the insurer affords the insured a reasonable opportunity in which to comply, the insured's response is a condition precedent for reinstatement. If these conditions are met, mere payment of the premium is insufficient for reinstatement; the insured must submit evidence of insurability. See, e.g., Volis v. Puritan Life Insurance Co.,
Under Pennsylvania law, for example, the reinstatement provision contemplates the making of a new contract between the parties. The insurance company is not required to reinstate absent evidence of insurability. Hogan v. John Hancock Mutual Life Insurance Co.,
There is no evidence in the record that Columbian acted in a dilatory or even lackadaisical manner. We therefore hold that Columbian acted within a reasonable period of time in responding to the Glezermans' application.
Where the insurer receives the premium and then reinstates the policy, it becomes bound to its representation of coverage despite the fact that the representation was unauthorized conduct on the part of the agent. See Jerry V. Carbone, Inc. v. North River Insurance Co.,
This argument fails for the same reason that the negligent misrepresentation claim against Spivak failed. Namely, the Glezermans cannot demonstrate detrimental reliance on any alleged representation. Wanda Glezerman has not alleged that she would have been able to get alternative coverage before her husband died, but for the representations of Columbian. The other insurance companies she approached told her exactly what Columbian did: at that time, Benjamin Glezerman was not insurable.
Wanda Glezerman's final argument is that Columbian's failure to reinstate the policy based on its determination of insurability was erroneous. The Glezermans contend that the member of the insurer's underwriting department who performed the assessment was not qualified to do so. The Glezermans further contend that the insurance company is required to have a medical doctor at least review the records, if not perform a medical examination, prior to denying reinstatement.
The underwriter was not a medical doctor, but was able to determine from the medical records that Benjamin Glezerman had suffered from one myocardial infarction since the policy was issued, and had also developed a new left bundle branch block pattern on his electrocardiogram. Columbian argues that there is no requirement that a physician make the insurability determination.
Neither party cites precedent which delineates the requirements that an insurer must comply with in order to properly determine whether a particular applicant is entitled to reinstatement. The applicable New Jersey statute does not specify a procedure for the company to follow in addressing the insurability question: "the policy will be reinstated at any time within 3 years ... upon written application therefor, the production of evidence of insurability satisfactory to the insurer...." N.J.Stat.Ann. § 17B:25-9. The policy increases the statutory reinstatement period from three to five years, but conditions reinstatement "upon evidence of insurability satisfactory to the Company...." App. at 29. Given that the Glezermans could find no other insurer to provide full coverage in the two years from the cancellation of the policy until the death of Benjamin Glezerman, we cannot say that Columbian acted unreasonably. Cf. Fisher v. American National Insurance Co.,
Further, New Jersey has adopted the view that the reinstatement clause of an insurance policy contemplates a new contract of insurance. See New York Life Insurance Co. v. Weiss, 133 N.J.Eq. 375,
CONCLUSION
We will affirm the district court's grant of summary judgment as it relates to Columbian, and vacate that portion of the district court's order granting Spivak's and CMS' motions for summary judgment. Concerning Spivak, New Jersey law recognizes a broader duty owed an insured by a broker than was recognized by the district court. We hold that the district court erred when it concluded that "based on public policy considerations, we find that even if Mr. Spivak had developed a custom or practice of reminding plaintiff that the grace period was about to expire, he had no legal duty to provide such notice." Indeed, it is just such a custom or practice that would give rise to a legal duty to provide notice of the end of the grace period. Turning to CMS, the district court should determine in the first instance whether Wanda Glezerman has created a triable issue of fact concerning CMS' liability. Wanda Glezerman's claims against Columbian should not survive summary judgment, and we will affirm the district court's judgment in that regard. We will remand this case to the district court for further proceedings in accordance with this opinion.
Notes
This document is not in the record
For example, in Walker v. Atlantic Chrysler Plymouth, Inc.,
[O]ur holding in Sobotor [v. Prudential Property & Cas. Ins. Co.,
Id.
In that case, summary judgment in favor of the insurer was not warranted because there was no evidence that the insurer acted promptly and reasonably, and also because of some deposition testimony of the broker to the effect that the refusal to reinstate was not prompt. See id.
Wanda Glezerman does not argue that either Spivak or CMS were agents of Columbian. Indeed the facts do not support such a contention. Accordingly, their alleged negligence may not be attributed to Columbian. See Avery,
Both agents and brokers are obliged to inform insured of available coverage. Agents, like brokers, are obligated to exercise good faith and reasonable skill in advising insureds.
Because of their different roles, however, the remedy differs for breach of their duty to disclose.... So separate are the broker and insurer that when the insured recovers against the broker, the broker may not obtain indemnification from the insurer.
Weinisch v. Sawyer,