CANUSA CORPORATION v. THE OWENS GROUP, LTD., INC.
Filing
51
OPINION & ORDER; granting and denying in part 40 Canusa's motion for summary judgment; Canusa's motion for summary judgment seeking dismissal with respect to Owenss second affirmative defense ( no legal duty), sixth affirmative defense (assumption of risk), and tenth affirmative defense (comparative negligence), is GRANTED; Owens's motion for summary judgment (DE 41) is GRANTED in part and DENIED in part; etc. Signed by Judge Kevin McNulty on 12/19/2019. (sms)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CANUSA COPORATION,
Civ. No. 16-0908 1 (KM) (JBC)
as a subrogee of
OPINION & ORDER
ANW/CRESTWOOD, INC.
Plaintiff,
V.
THE OWENS GROUP LTD., INC.,
Defendant.
KEVIN MCNULTY, U.S.D.J.:
Pending before the Court are the parties’ competing motions for
summary judgment. Plaintiff Canusa Corporation (“Canusa”), as subrogee of
ANW/Crestwood, Inc. (“ANW”), moves for partial summary judgment on four of
the affirmative defenses asserted by defendant Owens Group LTD., Inc.
(“Owens”). (DE 40). Defendant Owens moves for summary judgment seeking to
dismiss all of the claims in this five-count complaint. (DE 41).
For the reasons explained herein, I will grant in part and deny in part
Canusa’s motion for summary judgment. I will also grant in part and deny in
part Owens’s motion for summary judgment.
1
I.
Summary’
a. The parties
ANW, a New Jersey corporation, was “engaged in the procurement,
distribution and sale of craft papers, cardstock and other related products”
from the 1980’s until 2012 (PSOF
1—2; see also DSOF
¶
¶
3). In 2012, an
involuntary petition under Chapter 7 of the U.S. Bankruptcy Code was filed
against ANW. (PRSOF
until 2012. (PSOF
¶
¶
2). Todd Caliguire was president of ANW from 2001
3).
Canusa, the plaintiff here, is a subrogee of ANW by virtue of a 2001
lending agreement in which Canusa became a secured lender to ANW. (PSOF
¶
51). Pursuant to a bankruptcy court order, Canusa was afforded the right to
commence and prosecute certain causes of action belonging to ANW, including
those claims asserted here. (Id.; DSOF
¶
2).
Owens is a licensed insurance broker in New Jersey. (DSOF
¶
4). From
ANW’s inception until September 2011, ANW was a client of Owens. (DSOF
PSOF
¶
¶
5;
4). Brian Bonelli was an account executive with Owens and was
Citations to the record will be abbreviated as follows. Citations to page numbers
refer to the page numbers assigned through the Electronic Court Filing system, unless
otherwise indicated:
=
Docket entry number in this case.
“Compl.”
=
“PSOF”
The statement of uncontested facts filed by Canusa [DE 40—2].
=
The complaint filed by Canusa [DE 1].
“PRSOF” = Canusa’s responsive statement of facts to the statement of facts filed
by Owens [DE 46-1].
“DSOF”
=
The statement of uncontested facts filed by Owens [DE 41—1].
“DRSOF” = Owens’s responsive statement of facts to the statement of facts filed
by Canusa [DE 45-1].
Canusa’s counterstatement of uncontested facts, submitted with its opposition to
Owens’s motion for summary judgment, is substantively identical to the statement of
uncontested facts it submitted with its own motion for summary judgment. (DE 46-2).
For simplicity, I will cite only to Canusa’s PSOF. Likewise, Owens’s response to
Canusa’s counterstatement of facts (DE 48-1) is substantively identical to its
responsive statement of facts, DRSOF. I will therefore cite only to DRSOF.
2
responsible for the ANW account beginning in 2008 through 2011. (PSOF
DSOF
¶
1
7;
6).
b. ANW’s warehouse and insurance needs
In July 2002, ANW leased a warehouse located at 510 Ryerson Road,
Lincoln Park, New Jersey. (PSOF
¶ 14).
ANW used this warehouse as a
multifunction space—storing its inventory and property and operating its
business from there. (Id.). The warehouse was located near a river in a FEMA
designated “A09” flood zone, i.e., a high-hazard area that had the potential to
flood. (Id.
¶
20).
ANW, through Caliguire, worked with Owens to purchase insurance for
ANW and its warehouse. (Id.
15—16). Owens procured a variety of insurance
¶1
policies—automobile, property, general liability, employment practices liability,
flood and other coverages. (Id.
¶
17). For example, beginning in 2004, The
Hartford provided ANW’s primary annual packaged policy, which comprised
business personal property, business income insurance, automobile insurance,
and general liability insurance. (Id. ¶3118—19). However, The Hartford package
expressly excluded coverage for floods. (Id.
¶
19). Owens therefore obtained a
$500,000 National Flood Insurance Program (“NFIP”) policy through Travelers
for ANW. (Id.
¶
23; DSOF
¶
8).
Upon taking over the account in 2008, Bonelli understood that the ANW
warehouse was in a flood zone and understood that ANW’s inventory and
personal property in the warehouse was valued at approximately $6 million.
(PSOF
¶
21). Thus, Bonelli considered ANW to be underinsured with respect to
flood coverage. (Id.
¶
22).
c. Renewal of ANW’s policies
On April 8, 2011, Bonelli and his supervisor, Jean Dennehy, went to the
ANW warehouse to meet with Caliguire to discuss ANW’s insurance needs and
renewal of its policies. (PSOF
¶
27; DSOF
¶
9). Bonelli and Dennehy observed
that the warehouse was located near a river and thus was susceptible to
flooding. (PSOF
31
29).
3
That April 8, 2011 meeting primarily focused on renewal of The Hartford
package of policies; however, the issue of increasing ANW’s flood insurance was
also discussed. (Id.; DSOF
9). While the parties do not recall who first
suggested the possibility of acquiring excess flood insurance, they do not
dispute that Bonelli and Dennehy agreed during the meeting to attempt to
provide ANW with quotes for excess flood insurance. (PSOF
¶ 29).
After the meeting, on April 11, 2011, Bonelli emailed The Hartford and a
representative at Westrope, Vincent Flemming, regarding excess flood
insurance for ANW. (Id. ¶j 33—34). Westrope was a wholesale insurance broker
that Owens used for excess and surplus lines of insurance. (Id.
¶
35).2
Bonelli
indicated that he was interested in sourcing $6 million in flood coverage for
ANW and asked Flemming to provide a quote. (Id.
¶ 36).
On April 19, 2011, Flemming responded to Bonelli with a “quote
indication” of $26,000 for $2 million in coverage. (Id.
¶ 37). This was not a
formal quote, but Bonelli understood that one would be made available on
request. (Id.
¶ 38). Bonelli never informed Caliguire in writing of this quote
indication. (Id. ¶ 39).
Caliguire and Bonelli next spoke at least twice via telephone on May 3,
2011. (Id.
¶ 40). The parties dispute the contents of those conversations.
Caliguire contends that he and Bonelli discussed The Harford policy
renewal, reduction of ANW’s business personal property insurance in California
from $250,000 to $100,000,
and reduction of ANW’s business income
insurance from $6 million to $2 million or less. (id.
¶ 40, 42). The quote
indication from Westrope was never discussed, says Caliguire, and therefore
Owens and Westrope had a contractual relationship whereby Owens’s brokers
would receive a commission for any excess or surplus insurance policies placed with
Westrope. (PSOF ¶ 35).
2
The parties dispute the number of phone calls that took place between Bonelli
and Caliguire. Canusa stated that they had two telephone conversations on May 3,
2011. (PSOF ¶40). Owens contends they spoke three times and points to phone
records that show that someone at Owens called the main number for ANW three
times that day. (DE 45-4 at 17).
3
4
never rejected. (Id.
¶
41). Instead, according to Canusa, Bonelli informed
Caliguire that excess flood insurance was not available. (Id.
¶
40). This last
point—that the ultimate message conveyed to Caliguire was that excess flood
insurance was not available—Owens curiously concedes for purposes of these
motions while also contesting the contents of the conversations. (See DSOF
¶
10).
According to Owens, Bonelli informed Caliguire of the Westrope quote
indication during their May 3, 2011 telephone conversations. Caliguire rejected
the quote, says Owens, because Caliguire claimed that $26,000 was too costly.
(DRSOF
¶1J
39—41). Owens points to ANW activity reports as confirmation of its
position. These activity reports contain notes inputted by Bonelli. On May 3,
2011, for example Bonelli made this entry: “Todd advised to lower BPP for CA
to lOOK instead of 250K, andhe is still considering lowering the 81 as he feels it
is to high. I have requested revised quotes for 2MM adn 4MM per his request.”
(DE 45-4 at 76; sic in original). An entry from a minute later reads “PCKG:
request revised with lOOK BPP in CA, also requesting lower BI to 2MM and
4MM.” (Id.). In separate entries from May 3, 2011, under “PLOD: Excess flood
indication” the following activities were reported: “Spoke with insured and he
advised that he feels 2MM is to high. If you were to quote 500K and 1MM
would we still be hitting the minimum premium of 25k?”, “advised insured he
advised 2MM might be to high, wants quotes for500K and 1MM. requested
from underwriter”, and “received confirmatinof ro carrier that we woul dstill be
hitting minimum premium of 2 5K” under lower limits. (DE 45-4 at 78; sic in
original). No other entries related to flood insurance indicate what follow-up
information, if any, was conveyed to ANW.
d. Hurricane Irene
On August 28, 2011, Hurricane Irene made landfall in New Jersey.
(PSOP
¶
46; DSOP
¶
11). As a result, the ANW warehouse was flooded and a
significant portion of ANW’s inventory and property was destroyed. (PSOF
DSOF
¶
¶
47;
11). There was approximately $6 million in inventory in the warehouse
5
at the time. ANW was paid $500,000 under its NFIP flood insurance policy, but
its total losses far exceeded that amount. (Id.).
e. The Complaint
On December 8, 2016, Canusa filed its complaint in this action. (DE 1).
The complaint asserts five causes of action:
Count 1: Negligent Procurement of Insurance/Malpractice (Compl.
24—31);
Count 2: Negligent Misrepresentation (Compl.
¶1!
Count 3: Breach of Fiduciary Duty (Compl.
¶jJ
42-52);
Count 4: Breach of Contract (Compl.
¶
¶f
32—41);
53—61);
Count 5: Breach of Implied Covenant of Good Faith and Fair Dealing
(Compl. ¶ 62—73).
On January 25, 2017, Owens filed its answer to the complaint and
asserted 21 affirmative defenses. (DE 6). During the course of discovery, Owens
withdrew eight (see stricken items in chart, below), but continued to assert 13
affirmative defenses (PSOF
1.
2.
3-—
4-—
5.
6.
7.
8.
9.
10.
1 1.
12.
13.
14.
15.
16.
17.
18.
19.
¶
57):
Affirmative Defense
Failure to State a Claim
No Legal Duty
ATaiver, Laches, Res Judicata, Collateral Estoppel,
Judicial Estoppel, and Equitable Estoppel
Statute of Limitations
Mutual Mistake
Assumption of Risk
All Applicable Defenses under the Contract
Failure to Mitigate
Damages were Caused by Plaintiff or a Third Party
Comparative Negligence
Owens complied with all laws
No Proximate Cause
Frivolous Pleading
Absence of Privity
Unclean Hands
Fraud
Entire Controversy Doctrine
Failure to Join Necessary Parties
Failure to Supply an Affidavit of Merit
6
20.
21.
Abscncc
Catchall
pf
a Contract
f. Competing motions for summary judgment
On March 29, 2019, the parties filed the competing motions for summary
judgment at issue here.
i. Canusa’s motion (DE 40)
Canusa moved for partial summary judgment seeking to dismiss four
affirmative defenses raised by Owens in its Answer: (1) the Second Affirmative
Defense: No Legal Duty; (2) the Sixth Affirmative Defense: Assumption of Risk;
(3) the Eighth Affirmative Defense: Failure to Mitigate; and (4) the Tenth
Affirmative Defense: Comparative Negligence.
Owens’s second affirmative defense is “that it had no legal duty to
procure excess flood insurance for ANW.
.
.
.“
(PSOF
¶
59; DRSOF
¶
59).
Canusa moves to dismiss this defense while simultaneously moving for
an order that Owens had a duty as a matter of law to act in good faith
and with reasonable skill when it undertook to provide ANW excess flood
insurance quotes. (DE 40-1 at 5).
Owens’s sixth affirmative defense is that “Todd Caliguire, who is a
sophisticated businessman, assumed the risk that his business would be
flooded when he moved into a flood zone and close to a body of water. In
addition, Mr. Caliguire (ANW) assumed the risk that he would not have enough
flood insurance when he decided not to purchase excess flood insurance
offered to him by Owens Group prior to Hurricane Irene.” (PSOF
¶
60; DRSOF
¶
60). Canusa asserted in its briefing that Owens’s assumption of the risk
defense should be dismissed because New Jersey has essentially eliminated
this defense except in limited circumstances not applicable here. (DE 40-1 at
16—17). Owens agrees and withdrew this defense. (DE 45 at 10). Accordingly,
Canusa’s motion to dismiss Owens’s sixth affirmative defense is GRANTED.
Owens’s eighth affirmative defense is “that ANW failed to procure excess
flood insurance and therefore failed to mitigate its damages from Hurricane
Irene. In addition, it is unclear at this time whether ANW could have taken any
7
additional steps to minimize its damages after Hurricane Irene, including but
not limited [to] exploring the immediate sale of its business or salvage of any
damaged equipment or property.” (PSOF
¶
61; DRSOF
¶
61). Canusa moves to
dismiss this defense because Owens failed to uncover any evidence in discovery
to support its contention that ANW failed to mitigate damages. (DE 40-1 at 18).
Owens’s tenth affirmative defense is one of comparative negligence:
ANW was comparatively negligent in that it placed its craft paper
business in a flood zone and failed to procure sufficient flood
insurance, including excess flood insurance, available to ANW.
Canusa was comparatively negligent in that its President, Mr.
Fleming, who owned 1/3 of ANW and was aware that the company
sold craft paper and related paper products and was in a flood
zone, never inquired whether ANW had sufficient flood insurance
in place. Canusa was also comparatively negligent in that it lent
millions of dollars to ANW with generous increases in ANW’s line of
credit, despite ANW having financial difficulties.
(PSOF
¶
62; DRSOF
¶
62). Canusa contends that this affirmative defense
is unavailable as a matter of law where the claim is one of professional
malpractice. (DE 40-1 at 20).
ii. Owens’s motion (BE 41)
Owens has filed a motion for summary judgment (DE 41) dismissing
Counts I through V. Regarding Count I (malpractice), Owens asserts that
plaintiff has failed to carry its burden of establishing a duty owed by Owens to
ANW to offer it excess flood insurance. (DE 41-4 at 7—11). Counts II (negligent
misrepresentation) and III (breach of fiduciary duty), Owens asserts, are
subsumed under Count I and should be dismissed. (Id. at 12—15).
Finally, with respect to Counts IV (breach of contract) and V (breach of
implied covenant of good faith and fair dealing), Owens moved for summary
judgment. Canusa did not oppose this portion of Owens’s motion and agreed to
the dismissal with prejudice of these claims. (PSOF
8
¶
55; PRSOF
¶
13).
Accordingly, Owens’s motion for summary judgment with respect to Counts IV
and V is GRANTED.
II.
Discussion
As a result of sound concessions by the parties, this summary judgment
discussion is now narrowed to Counts I, II, and III of the Complaint, and the
Second, Eighth, and Tenth Affirmative Defenses.
a. Legal standard
Federal Rule of Civil Procedure 56(a) provides that summary judgment
should be granted “if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
247—48, 106 5. Ct. 2505, 2509—10 (1986); Kreschollek v. S. Stevedoring Co.,
223 F.3d 202, 204 (3d Cir. 2000).
“When the moving party has the burden of proof at trial, that party must
show affirmatively the absence of a genuine issue of material fact.” In re
Bressman, 327 F.3d 229, 238 (3d Cir. 2003) (quoting United States v. Four
Parcels of Real Property, 941 F.2d 1428, 1438 (11th Cir. 1991)). That is, the
moving party must demonstrate that “on all the essential elements of its case
on which it bears the burden of proof at trial, no reasonable jury could find for
the non-moving party.” Id.
On the other hand, “with respect to an issue on which the nonmoving
party bears the burden of proof
...
the burden on the moving party may be
discharged by ‘showing’—that is, pointing out to the district court—that there
is an absence of evidence to support the nonmoving party’s case.” Celotex Corp.
u. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548, 2554 (1986). If the nonmoving
party has failed “to make a showing sufficient to establish the existence of an
element essential to that party’s case, and on which that party will bear the
burden of proof at trial,
...
there can be ‘no genuine issue of material fact,’
since a complete failure of proof concerning an essential element of the
nonmoving party’s case necessarily renders all other facts immaterial.” Katz v.
9
Aetna Cas. & Stir. Co., 972 F.2d 53, 55 (3d Cir. 1992) (quoting Celotex, 477
U.S. at 322—23, 106 S. Ct. at 2552).
To demonstrate the existence of a genuine issue, a party “must do more
than simply show that there is some metaphysical doubt as to material facts.”
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106
S. Ct. 1348, 1356 (1986). Likewise, “unsupported allegations
...
and pleadings
are insufficient to repel summary judgment.” Schoch v. First Fid.
Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990). Rather, a party must present
evidence sufficient to create a triable issue. Anderson, 477 U.S. at 248—49, 106
S. Ct. at 2510; Gleason v. Nonoest Mortg., Inc., 243 F.3d 130, 138 (3d Cir.
2001) (“A nonmoving party has created a genuine issue of material fact if it has
provided sufficient evidence to allow ajuiy to find in its favor at trial.”). By
evidence, the Rule means “materials in the record, including depositions,
documents, electronically stored information, affidavits or declarations,
stipulations (including those made for purposes of the motion only),
admissions, interrogatory answers, or other materials.” Fed. R. Civ. P.
56(c)(1)(A). In construing such evidence, however, the court must draw
inferences in the light most favorable to the nonmoving party. See Boyle v.
County of Allegheny Pennsylvania, 139 F.3d 386, 393 (3d Cir. 1998).
In deciding a motion for summary judgment, the court’s role is not to
evaluate the evidence and decide the truth of the matter, but to determine
whether there is a genuine issue for trial. Anderson, 477 U.S. at 248—49, 106 S.
Ct. at 2510. Credibility determinations are the province of the fact finder. Big
Apple BMW, Inc. v. BMW0f N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992).
b. Professional Malpractice (Count I)
With respect to Count I (Professional Malpractice), both sides’ summary
judgment motions seek a ruling as to the existence and scope of any duty that
Owens owed to ANW.
Canusa asserts that, as a result of Bonelli’s April 2011 undertaking to
look into excess flood insurance, Owens took on a professional duty to
10
competently pursue excess flood insurance quotes for ANW. (DE 40-1 at 12).
Canusa therefore moves for partial summary judgment on Count I, seeking an
order that as a matter of law Owens owed a duty of professional care to ANW in
connection with obtaining suitable flood insurance.
Owens’s motion rests on a legal view contrary to that of Canusa as to the
nature and scope of its duty. Owens seeks a ruling that it did not have a legal
duty to offer excess flood insurance to ANW, even if it was available, because it
had no duty to advise ANW regarding its possible insurance needs. (DE 41-4 at
7—8). Therefore, Owens argues, summary judgment must be granted dismissing
Count I as a matter of law. (DE 41-4 at 7).
For the reasons outlined herein, I will grant that portion of Canusa’s
partial motion for summary judgment on the limited issue of duty and deny
Owens’s motion for summary judgment, both with respect to Count I.
i. Discussion
Under New Jersey law, “[t]he existence of a duty to exercise reasonable
care to avoid a risk of harm to another is a question of law.”4 Fackelman v. Lac
d’Amiante du Quebec, 942 A.2d 127, 134 (N.J. Super. Ct. App. Div. 2008). The
determination of whether or not there is a duty, however, is dependent on the
specific facts of each case. Wang u. Allstate Ins. Co., 592 A.2d 527, 534 (N.J.
1991). The duties owed by an insurance broker, like Owens, to its clients were
elucidated in Aden z.’. Fortsh, 776 A.2d 792 (N.J. 2001):
The import of the fiduciary relationship between the professional
and the client is no more evident than in the area of insurance
coverage. Insurance intermediaries in this State must act in a
No substantial choice of law issue is presented. “[Ijn a diversity action, a district
court must apply the choice of law rules of the forum state to determine what law will
govern the substantive issues of a case.” Waniner a Stanton, 475 F.3d 497, 499—500
(3d Cir. 2007) (citing Klaxon Co. u. StentorElec. Mfg. Co., 313 U.S. 487, 496 (1941)).
The parties do not dispute that in this diversity action, based on an accident in New
Jersey, New Jersey law applies. See, e.g., McCarrell a Hoffinann-La Roche, Inc., 227
N.J. 569, 590 (2017) (“LI]n a personal-injury action, the substantive law of the place of
injury is presumed to be the governing law under section 146” of the Restatement
(Second). “Absent another state having a more significant relationship, the substantive
law of the injury-site state applies.”).
11
fiduciary capacity to the client “[b]ecause of the increasing
complexity of the insurance industry and the specialized
knowledge required to understand all of its intricacies.” Walker v.
Ati. Chrysler Plymouth, Inc., 216 N.J. Super. 255, 260 (App. Div.
1987) (quoting Sobotor v. Prudential Prop. & Cas. Ins. Co., 200 N.J.
Super. 333, 341 (App. Div. 1984)); see also N.J.A.C. 11:17A—4.1O
(“An insurance producer acts in a fiduciary capacity in the conduct
of his or her insurance business.”). The fiduciary relationship gives
rise to a duty owed by the broker to the client “to exercise good
faith and reasonable skill in advising insureds.” Weinisch a
Sawyer, 123 N.J. 333, 340 (1991).
Accordingly, an insurance broker who agrees to procure a specific
insurance policy for another but fails to do so may be liable for
damages resulting from such negligence. Rider v. Lynch, 42 N.J.
465, 476, 201 A.2d 561 (1964). Liability resulting from the
negligent procurement of insurance is premised on the theory that
a broker “ordinarily invites [clientsj to rely upon his expertise in
procuring insurance that best suits their requirements.” Id. at 477,
201 A.2d 561. The concept is essentially one of professional
malpractice.
Aden, 776 A.2d at 800—80 1.
In Rider v. Lynch, a prospective insured requested automobile liability
coverage and then relied on the insurance broker’s recommendation that a
certain type of policy would cover a particular risk. 201 A.2d 563—64. However,
unbeknownst to the insured, the policy’s limitations excluded that particular
risk. Id. at 563—66. When that particular risk materialized in the form of a
collision, coverage was denied. Id. at 566. Ultimately, the New Jersey Supreme
Court “reversed the dismissal of the plaintiffs claim against the broker,
concluding that a factual question existed with regard to whether the broker
breached his duty of care. The Court noted that because of the nature of the
principal-agent relationship, the broker was charged with the knowledge that
the policy did not fit his client’s need and, even if the broker was not aware of
the limited policy coverage, he was under a duty to examine and reject the
policy himself before delivering it to the [client].” Aden, 776 A.2d at 801. The
Court held that an insured is “entitled to rely upon and believe that the broker
12
had fulfilled his [or her] undertaking to provide the coverage
and that the policy sent
...
...
agreed upon,
represented accomplishment of that undertaking.”
Rider, 201 A.2d at 570. The Court elaborated:
One who holds himself [or herself] 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 insurance, the law holds him [or her] to the
exercise of good faith and reasonable skill, care and diligence in
the execution of the commission. He [or she] is expected to possess
reasonable knowledge of the types of policies, their different terms,
and the coverage available in the area in which his [or her]
principal seeks to be protected. If he [or she] neglects to procure
the insurance or if the policy is void or materially deficient or does
not provide the coverage he [or she] undertook to supply, because
of his [or her] failure to exercise the requisite skill or diligence, he
[or she] becomes liable to his [or her] principal for the loss
sustained thereby.
Id. at 567 (citations omitted).
Thus, as clarified more recently by the New Jersey Supreme Court in
President v. Jenkins, 853 A.2d 247, 257 (N.J. 2004), an insurance broker owes
a prospective insured a threefold duty: (1) to procure the insurance; (2) to
secure a policy that is neither void nor materially deficient; and (3) to provide
the coverage he or she undertook to supply.
ii. Analysis
The parties’ competing motions for summar judgment primarily
implicate the third way in which an insurance broker owes a duty to its client:
to exercise reasonable professional care in providing the coverage he or she
undertook to supply.
Plaintiff moves for a ruling that as a matter of law Owens took on a duty
of care when ANW asked it to look into a quote for flood insurance and Owens
agreed to do so. (DE 40-1 at 12—15). Relatedly, plaintiff moves for an order
dismissing Owens’s second affirmative defense, i.e., that Owens owed no legal
duty to ANW. (Id.).
13
Owens opposes Canusa’s motion and moves for summary judgment
seeking an order that it “did not have a duty to procure excess flood insurance,
and it was consistent with New Jersey law for Owens to inform ANW that
excess flood insurance was unavailable or that it could not procure it.” (DE 45
at 10; see also DE 45 at 4)). Here, Owens relies heavily on C.S. Osborne and
Wang, which held that “Absent a special relationship, ‘there is no common law
duty of a carrier or its agents to advise an insured concerning the possible need
for higher policy limits upon renewal of a policy.”’ C. S. Osborne & Co. v. Charter
Oak Fire Ins. Co., No. A-2182-15T4, 2017 WL 1548796, at *5 (N.J. Super. Ct.
App. Div. May 1, 2017) (citing Wang, 592 A.2d at 532).
Owens’s argument is correct as far as it goes; New Jersey law does not
require an agent to officiously seek out coverage based on the agent’s unilateral
perception that the client needs it. But this case does not arise from an
insurer’s failure to recognize its client’s need for more insurance or higher
policy limits. Indeed, the undisputed facts establish the opposite: both parties
were aware that ANW wanted and needed additional flood insurance, and they
discussed Owens’s providing ANW with quotes for insurance commensurate
with the value of its inventory. (PSOF
¶
22; DSOF
¶
9).
The question narrows to the scope of Owens’s duty once ANW asked it to
obtain quotes for flood coverage and Owens agreed to do so. The underlying
facts relevant to the existence of a duty are largely undisputed. On April 8,
2011, Owens’s insurance broker, Bonelli, went to ANW’s warehouse to discuss
insurance coverage issues with ANW’s President, Caliguire. (PSOF
¶
¶
27; DRSOF
27). At this meeting, Bonelli mentioned the possibility of getting excess flood
insurance. (PSOF
¶
29; DRSOF
¶
29). Bonelli agreed to look for and supply
ANW with potential insurance quotes. (PSOF
¶
30; DRSOF
¶
30). Bonelli then
reached out to various third parties to see if they would provide excess flood
insurance to ANW. (PSOF
¶1J
33—34; DRSOF
¶
33—34). Westrope responded,
offering $2 million in coverage at a cost of $26,000, which Bonelli understood
to mean that coverage was available. (PSOF
14
¶f
37—38; DRSOF
¶f
37—38).
Under these circumstances, I hold that Bonelli had a duty to exercise
good faith and reasonable skill in seeking out quotes, and then to follow
through by relaying that information to ANW for its approval or rejection. See
Rider, 201 A.2d at 567; Jenkins, 853 A.2d at 257. Whether Bonelli did exercise
such skill and care is an issue for another day. Both sides concede that
material facts are disputed concerning the actions Bonelli took upon learning
of the Westrope quote. For instance, Canusa contends that Bonelli never
relayed the Westrope quote to Caliguire, and indeed represented that coverage
was not available. (PSOF ¶‘j 39—4 1). Owens alleges the opposite: that Bonelli
relayed the substance of the quote to Caliguire, who rejected it as too
expensive. (DRSOF
¶
41).
Accordingly, Canusa’s motion for summary judgment is GRANTED on
the limited issue of whether Owens owed ANW a duty to exercise reasonable
care to provide the coverage quotes it undertook to supply. Owens’s second
affirmative defense that it had no duty to ANW is therefore dismissed.
Owens’s motion for summary judgment seeking to dismiss Count I is
DENIED.
c. Negligent Misrepresentation (Count II)
Turning to Count II, Owens moves for summary judgment on Canusa’s
negligent misrepresentation claim, asserting that this claim is subsumed by
Count I, plaintiffs malpractice claim. (DE 41-4 at 12). In the alternative, Owens
moves to dismiss Count II because Canusa, says Owens, has failed to allege an
actionable negligent misrepresentation. (Id.). Canusa opposes this motion,
stating that the Counts I and II are distinct and require satisfaction of different
elements. (DE 46 at 22—24).
A claim for negligent misrepresentation requires proof of the following
elements: “(1) an incorrect statement (2) negligently made, (3) upon which a
Not even Owens’s expert, Thomas Ahart, denies that when an insurance broker
undertakes to procure coverage, that broker has a duty to procure it or tell the client it
cannot be procured. (SeeDE 41-12 at 51 (“If you’ve agreed to procure the coverage,
you have a duty to either procure it or to tell them you can’t.”)).
5
15
plaintiff justifiably relied, (4) and which resulted in economic loss or injury as a
consequence of that reliance.” Sarlo z’. Wells Fargo Bank, N.A., 175 F. Supp. 3d
412, 425 (D.N.J. 2015); see also Premier HealthAssocs., LLCv. Med. Tech.
Sols., No. CV 17-331 (JLL), 2018 WL 4043289, at *7 (D.N.J. Aug. 24, 2018).
While “a Fiduciary duty between the parties is not an element of a claim
for negligent misrepresentation,” a plaintiff seeking to recover for negligent
misrepresentation must nonetheless establish that the defendant owed it a
duty of care. Kronfeld v. First Jersey Nat’l Bank, 638 F. Supp. 1454, 1465
(D.N.J. 1986); cf New Jersey Econ. Dev. Auth. u. Pavonia Rest., Inc., 319 N.J.
Super. 435, 446, 725 A.2d 1133 (App. Div. 1998) (“a party has no duty to
disclose information to another party in a business transaction unless a
Fiduciary relationship exists between them, unless the transaction itself is
fiduciary in nature, or unless one party ‘expressly reposes a trust and
confidence in the other.’ “). “The question of whether a duty exists is a matter of
law properly decided by the court, not the jury, and is largely a question of
fairness or policy.” Wang, 592 A.2d 527 (1991).
Professional malpractice is, of course, a variety of the tort of negligence.
It need not, however, involve misrepresentations of any kind; it may rest on
substandard performance. So Counts I and II are not equivalent as a legal
matter.
It must be said, however, that the facts underlying these two counts
overlap. Owens, negligently or not, is alleged to have made the false
representation to ANW that excess flood insurance was not available. (Compare
Compi.
¶
27 (alleging under Count I that Owens told ANW excess flood
insurance was unavailable) with Compl.
¶
38 (alleging under Count II that the
Owens group was negligent in representing that excess flood insurance was
unavailable)). Further, neither party denies that ANW was underinsured and
that, as a result, did not have its losses fully covered. Count II also ostensibly
implicates the same broker-client relationship at issue under Count I, giving
16
rise to a duty of care, whether in performance or in the making of disclosures
to the client.
Still, a plaintiff is permitted to plead as many claims as it has in the
alternative, see Fed. I?. Civ. P. 8(d), and it cannot be said that there is no
genuine material issue of fact as to Count II. It may be that these two claims
may be consolidated, or one may be dropped, for purposes of streamlining the
case for trial. For now, however, I will not dismiss Count II as superfluous.
Accordingly, Owens’s motion for summary judgment dismissing Count II
is DENIED without prejudice.
d. Breach of fiduciary duty (Count III)
Owens additionally moves for an order dismissing Count III as
duplicative of Count I. (DE 41-4 at 14—15). However, Canusa’s claim for breach
of a fiduciary duty cannot be subsumed under Count I as a matter of law.
It is undisputed that Owens has a fiduciary duty to ANW. See Aden, 776
A.2d at 800 (“The import of the fiduciary relationship between the professional
and the client is no more evident than in the area of insurance coverage.
Insurance intermediaries in this State must act in a fiduciary capacity to the
client “[b]ecause of the increasing complexity of the insurance industry and the
specialized knowledge required to understand all of its intricacies.” (citing
Walker v. AtL Chrysler Plymouth, Inc., 523 A.2d 665 (N.J. Super. Ct. App. Div.
1987)).
Although the allegations supporting a claim for breach of fiduciary duty
and professional malpractice may overlap, “[p]rofessional malpractice actions
are grounded in the tort of negligence.” Alcman Sen’s. Corp. u. Samuel H.
Bullock, P.C., 925 F. Supp. 252, 258 (D.N.J. 1996), affd sub nom. Alcman
Servs. Corp. v. Bullock, 124 F.3d 185 (3d Cir. 1997)). In contrast, a claim that
an individual breached a fiduciary duty is an intentional tort, separate from
allegations concerning an individual’s negligent deviation from the professional
standard of care. Fink v. Kirchner, No. CIV.A. 12-4125 NLH, 2013 WL 1952303,
at *3 (D.N.J. May 8, 2013).
17
Accordingly, because the claims rest upon differing standards, Count III
is not duplicative or superfluous, and Owens’s motion for summary judgment
dismissing Count III is DENIED.
e. Affirmative defenses
Finally, Canusa moves for partial summary judgment on two affirmative
defenses asserted by Owens: the eighth, failure to mitigate damages, and the
tenth, comparative negligence. I discuss them in turn.
i. Failure to mitigate damages
“The difference between contributory negligence and a failure to mitigate
damages is simply timing, with the latter involving plaintiff’s negligence after
the tort or breach.” S.K.A. Steel Trading, Inc. v. Penn Terminals, Inc., No. CIV. A.
96-CV-4687, 1998 WL 964195, at *1 (E.D. Pa. Dec. 3, 1998), affd sub nom.
S.K.A. Steel Trading Co. v. Lombard Metals Corp., 208 F.3d 206 (3d Cir. 2000).
“Where the defendant has already committed an actionable wrong, whether tort
or breach of contract, then this doctrine [avoidable consequences] limits the
plaintiff’s recovery by disallowing only those items of damages which could
reasonably have been averted.” Ostrowski u. Azzara, 545 A.2d 148, 154 (1988)
(citing Southport Transit Co. v. Avonale Marine Ways, Inc., 234 F.2d 947, 952
(5th Cir. 1956)). The doctrine “limits consideration of a plaintiffs fault to the
time period that begins after a defendant’s wrongful conduct.” Del Thfo a flvp.
of Old Bridge, 685 A.2d 1267, 1282 (1996).
Owens, in support of this defense, asserts that ANW could have sought
excess flood insurance on its own, after Owens conveyed that such insurance
was unavailable but before Hurricane Irene hit. (DE 45 at 11). Once the
hurricane damage had occurred, Owens says, Canusa should have salvaged
certain equipment and inventory and used its value, or perhaps the value of
the business itself, to offset its claimed damages. (Id. at 12). For example,
Owens provides a number of invoices submitted by Canusa, where Canusa
helped ANW purchase and install this equipment. Owens asserts that after
ANW went bankrupt, Canusa then took back some of this equipment; Canusa
18
was allegedly able to use some of the phones in one of its businesses. (DE 45-4
at 37). But Owens does not suggest what value, if any, this equipment had at
the time.
Canusa, seeking to dismiss this mitigation defense, states that (1)
“discovery is now long over and the undisputed evidence shows that none of
the damaged property was salvageable” and (2) that “Owens[’s] claim that
[ANW] should have sold its business after the flood has numerous flaws.” (DE
40-1 at 19). Canusa suggests that the $25,000 equipment-related damages
claim is related to technological property entirely destroyed by the flood, which
ANW later replaced. (DE 49 at 10—li). Canusa is not specific about what
exactly this equipment consisted of, or whether it had a residual value that was
retained by Canusa. Those facts should be in Canusa’s control, if they are
anywhere.
Canusa does not seriously dispute that ANW failed to seek flood
insurance on its own after Owens failed to provide it. Still, this part of the
mitigation defense is entwined with genuine issues of material fact as to
whether Owens discharged its duty, ANW’s justifiable reliance on Owens’s
advice, and the extent to which ANW made a conscious decision to forgo
additional flood insurance coverage. Those issues preclude summary judgment
on this issue. See Section III.a, supra. For this reason alone, I would not strike
the mitigation defense.
As to post-hurricane mitigation of damages, neither side really
discharges its obligation to cite evidence, but the extent of damages—if liability
is found—is quintessentially one for trial. The proofs will look much the same,
regardless of whether mitigation is ultimately submitted to the jury as an issue.
Surely Canusa does not suggest, for example, that ANW could simultaneously
retain a piece of undamaged equipment and claim reimbursement for its loss.
That proposition may or may not depend on a “mitigation” defense at all.
Similarly, to the extent the $25,000 equipment claim rests on replacement of
truly flood-damaged equipment, this may be just a case of straight loss
calculation. But to the extent the contours of mitigation remain unclear,
19
Canusa’s vagueness about the evidence (which is within its control) supporting
the equipment claim is partially to blame.
ANW went bankrupt. As to whether Canusa or ANW had some ill-defined
obligation to liquidate ANW’s business in some other way in order to minimize
damages, Owens fails to respond. Perhaps it is not asserting such a mitigation
theory. Of course, if ANW received a good faith offer for the business and
rejected this offer, that might be evidence of a failure to mitigate. See, e.g., C &
K Coal Co. v. United Mine Workers of Am., 704 F.2d 690, 701, n.4 (3d Cir.
1983). By contrast, if ANW made a post-hurricane attempt to sell its business
or inventory, even if unsuccessful, that might be evidence that ANW complied
with its duty to mitigate. See Omni Electromotive, Inc. v. R.A. Johnson, Inc., No.
A-0187-05T5, 2006 WL 2590120, at *6 (N.J. Super. Ct. App. Div. Aug. 8,
2006).
On the motion papers as presented, however, this is no more than
hypothetical. References to mitigation in Canusa’s briefing do not comply with
Rule 56 and need not be accepted. Fed. R. Civ. P. 56(c) (“A party asserting that
a fact cannot be or is genuinely disputed must support the assertion by: (A)
citing to particular parts of materials in the record, including depositions,
documents, electronically stored information, affidavits or declarations,
stipulations (including those made for purposes of the motion only),
admissions, interrogatory answers, or other materials; or (B) showing that the
materials cited do not establish the absence or presence of a genuine dispute,
or that an adverse party cannot produce admissible evidence to support the
fact.”).
At any rate, I cannot state with confidence that the issue of mitigation is
wholly out of the case. The legitimate amount of damages, if any, will be the
subject of proofs at trial. Accordingly, Canusa’s motion for summary judgment,
to the extent it seeks to dismiss Owens’s eighth affirmative defense, failure to
mitigate damages, is DENIED.
20
ii. Comparative negligence
Canusa moves for summary judgment dismissing Owens’s tenth
affirmative defense—La, that Canusa’s claims are barred or reduced by ANW’s
comparative negligence. (DE 40-1 at 19—2 1). Canusa asserts that New Jersey
law does not allow professionals, such as Owens, to defend on this basis. (Id.). I
agree and will dismiss this defense.
The general New Jersey rule is that in negligence actions “resulting in
injury to the person or to real or personal property, the trier of fact shall make
the following as findings of fact:
(1) The amount of damages which would be recoverable by the injured
party regardless of any consideration of negligence or fault, that is,
the full value of the injured party’s damages.
(2) The extent, in the form of a percentage, of each party’s negligence or
fault. The percentage of negligence or fault of each party shall be
based on 100% and the total of all percentages of negligence or fault
of all the parties to a suit shall be 100%.”
N.J. Stat. Ann.
§ 2A: 15-5.2. The Act applies to strict liability and negligence
actions, including “civil actions for damages based upon theories of negligence,
products liability, [and] professional malpractice whether couched in terms of
contract or tort and like theories.” Id.
Nevertheless, with respect to a claim of negligence relating to a
professional’s performance of his or her duties, the settled law in New Jersey is
to the contrary:
The view that comparative or contributory negligence generally
may not be charged when a professional breaches his or her duty
to a client reflects our heightened expectations of professional
services in this State. See, e.g., Conklin, supra, 145 N.J. at 412,
678 A.2d 1060 (holding injured party’s negligence not relevant in
attorney malpractice action); Tobic v. Cooper Med. Ctr., 136 N.J
335, 341, 643 A.2d 1(1994) (“[W]hen a tortfeasor’s duty includes
exercise of reasonable care to prevent a party from engaging in
self-damaging conduct, contributory negligence is barred as a
defense.”); Cowan ii. DoeHng, 111 N.J 451, 464—65, 545 A.2d 159
(1988) (holding that health-care professionals could not assert
21
contributory negligence defense against suicidal patient); Mitchell
v. Procini, 331 N.J Super. 445, 457, 752 A.2d 349 (App.Div.2000)
(aUsually, comparative fault is not an issue in medical malpractice
actions....”); Hofstrom a Share, 295 N.J Super. 186, 193, 684 A.2d
981, (App.Div.1996) (observing “particularly acute danger” in
permitting junr to focus on plaintiffs alleged comparative
negligence in professional negligence action), ceflif denied, 148
N.J 462, 690 A.2d 610 (1997); Bryant a Calantone, 286 N.J Super.
362, 371—72, 669 A.2d 286 (App.Div.1996) (same); Conforti &
Eisele v. John C. Morris Assocs., 199 N.J Super. 498, 501, 489 A.2d
1233 (App.Div. 1985) (noting that plaintiffs conduct did not
constitute negligence in suit against design professionals);
Pressler, Current N.J Court Rules, comment 8.6 on R. 4:5—4
(commenting that comparative negligence defense “not so
chargeable where the attorney’s obligation was to protect the client
from the self-inflicted harm that ensued”).
That is not to say that the conduct of the client in a professional
malpractice action is irrelevant in other respects. Illustratively,
Conklin noted that in an attorney malpractice action, “if a client or
patient deliberately violates the professional’s instructions with
respect to self-care or heedlessly enters a transaction regardless of
any instructions on the part of the professional, the trier of fact
may find that there is no causal connection between the fault and
the harm, Lamb v. Barbour, 188 N.J.Super. 6, 12—13, 455 A.2d
certif denied, 93 N.J. 297, 460 A.2d 693
1122 (App.Div.1982)
if the conduct of the client, rather than that of the
(1983),.
professional, was the sole proximate cause of the alleged tort, a
jury may conclude that the professional is not liable.
...,
.
.
As one commentator has accurately summarized our law, “[i]n
general, the comparative fault defense will not apply in a plaintiffs
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.” Mahoney, supra, § 6:2—10 at 119.
Aden, 776 A.2d at 799—800.
An important caveat, however, is that a defendant is not prevented from
putting forth evidence that plaintiffs actions severed the causal connection
between the broker’s fault and the insured’s harm. Id. at 802 (“Our disposition
22
does not prevent brokers from contending during trial that an insured’s failure
to read the policy severed the causal connection between the broker’s fault and
the insured’s harm.”). Such evidence, as I read Aden, is distinct from a defense
of comparative negligence. Thus the striking of such a defense would not deny
Owens the right to defend itself on the issues of breach and causation. Owens
remains free to introduce evidence that, for example, it did not misinform ANW
about the availability of insurance, or that ANW in fact rejected the Westrope
quote for reasons of its own.
New Jersey holds insurance professionals and other fiduciaries to
standards higher than those that apply to a non-professional accused of
negligence. Accordingly, it is well-settled that Owens cannot assert a
comparative negligence defense here. Canusa’s motion for summary judgment,
to the extent it seeks to dismiss Owens’s tenth affirmative defense, comparative
negligence, is therefore DENIED.
ORDER
For the reasons set forth above,
IT IS this 19th day of December, 2019,
ORDERED as follows:
Canusa’s motion for summanT judgment (DE 40) is GRANTED in part
and DENIED in part as follows:
a) Canusa’s motion for summary judgment seeking dismissal with
respect to Owens’s second affirmative defense (no legal duty), sixth
affirmative defense (assumption of risk), and tenth affirmative
defense (comparative negligence), is GRANTED.
b) Canusa’s partial motion for summary judgment on the issue that
Owens had a duty to use reasonable professional efforts when
undertaking to supply ANW with insurance quotes, as discussed in
more detail above, is GRANTED.
c) Canusa’s motion with respect to Owens’s eighth affirmative defense
(failure to mitigate), is DENIED.
23
Owens’s motion for summary judgment (DE 41) is GRANTED in part and
DENIED in part as follows:
d) Owens’s motion for summary judgment on Counts I, II, and III is
DENIED.
e) Owens’s motion for summary judgment dismissing Counts IV and
V is GRANTED.
Kevin McNulty
United States District Judge
24
(j
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