Opinion
CIVIL NO. 97-3255 (JBS).
April 26, 1999.
Richard V. Jones, Esq., Samuel J. Thomas, Esq., Bressler, Amery Ross, Florham Park, New Jersey, Morristown, New Jersey, Attorneys for Plaintiff.
Matthew B. Wieliczko, Esq., Zeller and Bryant, Cherry Hill, New Jersey, Attorney for Defendant.
OPINION
This case involves a dispute between the plaintiff, Atlantic Casualty Insurance Company of Reading, Pennsylvania ("CNA"), and defendant, the City of Atlantic City ("AC"), regarding an alleged $206,340.00 in premiums owed by AC to CNA. In a January 25, 1999 Opinion, this Court denied the defendant's motion for partial summary judgment, rejecting the argument that the statute of limitations barred plaintiff from recovering $100,955.00 of the totally allegedly due and owing. Currently before the Court are the parties' cross-motions for summary judgment. For the reasons stated herein, both motions will be denied.
I. BACKGROUND
A. The Workers' Compensation Policies
Between 1966 and 1973, CNA issued fourteen workers' compensation insurance policies to AC. (Peterson Aff. ¶ 2; Requests for Admissions ¶¶ 1-6.) These policies provided for retrospective premiums. (Admissions ¶ 7.) The retrospective computations can result in either a premium owed by Atlantic City to CNA or a return premium to be paid to Atlantic City by CNA. According to these policies, the policyholders pay a set premium upon issuance of the policy. Thereafter, the policies call for a retrospective premium analysis which involved the sum of the basic premium, the excess loss premium, and the converted losses, each multiplied by a tax multiplier. (Peterson Aff. ¶ 3; Admissions ¶ 7.) These retrospective calculations can result in either a premium owed by AC to CNA (if AC's losses were higher than expected) or a return premium to be paid by CNA to AC (if AC's losses were lower than expected). (Peterson Aff. ¶ 3.) CNA no longer writes insurance for AC, but it continues to settle active claims from the period of coverage. (Peterson Dep. At 15:6-21.) The premiums are calculated on an annual basis for each policy as long as there are remaining active claims. (Peterson Aff. ¶ 4.)
Requests for Admissions will herein be cited as "Admissions ¶ ____."
More specifically, according to CNA, when each policy was issued, CNA provided AC with an estimated standard premium which was based on estimated payroll, estimated losses, and loss experience. (Supplemental Peterson Aff. ¶ 3(a).) AC paid CNA this estimated standard premium within twelve months of the effective date of each policy. (Id. at ¶ 3(b).) Within eighteen months of that, CNA performed an audit of AC's payroll and loss experience which produced an earned standard premium to replace the estimated standard premium. (Id. at ¶ 3(c).) The first retrospective computation for each policy was calculated for each policy as of eighteen months after the effective date of each policy and sent to AC. (Id. at ¶ 3(e).) This was computed as follows. The first retrospective premium for each policy was the sum of the basic premium (a percentage of the earned standard premium) and converted losses (incurred losses multiplied by a loss conversion factor), multiplied by the applicable tax multiplier, less the earned standard premium, and adjusted by the difference between the estimated standard premium and the earned standard premium. (Id. at ¶ 3(f).) The earned standard premium and the basic premium were only paid in the first retrospective computation for each policy. (Id. at ¶ 3(g).) Thereafter, retrospective premiums were computed by multiplying the sum of claim reserves and incurred losses (amounts paid by CNA on behalf of AC for workers' compensation claims) by the applicable tax multiplier and the loss conversion factor. (Id. at ¶ 3(k).)
According to CNA, for each of the policies, the Compensation Rating and Inspection Bureau (State of New Jersey — Department of Banking and Insurance) ("CRIB") dictated the applicable loss conversion factor and the applicable tax multiplier, and CNA was prohibited from altering those factors. (Id. at ¶¶ 3(i) (j).)
As a result, CNA says, for the policies effective April 15, 1966 to April 15, 1967, the loss conversion factor was 1.14 and the tax multiplier was 1.038. ( Id . at ¶ 5.) For the policies effective from April 15, 1968 to April 15, 1969, the loss conversion factor was 1.14 and the tax multiplier was 1.052. ( Id . at ¶ 6.) For the policies effective April 15, 1969 to April 15, 1970, CNA had already received from AC the maximum retrospective premium allowed by CRIB; because CNA could not charged AC any more for these policies, there were no retrospective premiums owed to CNA in connection to these policies at any time relative to the current dispute. ( Id . at ¶ 7.) For the policies effective from April 15, 1970 to April 15, 1971, the loss conversion factor was 1.135 and the tax multiplier was 1.061. ( Id . at ¶ 8.) For the policies effective from April 15, 1971 to April 15, 1972, the loss conversion factor was 1.135 and the tax multiplier was 1.051. ( Id . at ¶ 10.) For the policies effective April 15, 1972 to April 15, 1973, the loss conversion factor was 1.135 and the tax multiplier was 1.135 and the tax multiplier was 1.054. ( Id . at ¶ 11.) For the policies effective April 15, 1973 to April 15, 1974, the loss conversion factor was 1.135 and the tax multiplier was 1.053. ( Id . at ¶ 12.)
AC admits that it did have these workers' compensation insurance policies with CNA and that they were set up to allow for retrospective calculations on a yearly basis. According to AC, however, the terms of these policies are unknown, and it is impossible to determine what those terms are because neither plaintiff nor defendant has in its possession the insurance agreements and contracts between the parties, and CNA cannot locate the audit for these policies. (CNA's Responses to AC's Interrogatories; Peterson Dep. at 71, 75.) As a result, CNA cannot determine the estimated standard premium that was paid on each of AC's policies. (Peterson Dep. at 74-75.) AC's expert, Michael Zuckerman, who has experience as an insurance broker, risk manager, and academic studying risk management and insurance practices (Zuckerman Aff. Ex. A), opines that no definitive verification of retrospective terms can be made without the policies that contained the appropriate retrospective premium endorsements attached, for the audited standard premium for each policy becomes the basis for all future retrospectively rated premium adjustments. (Zuckerman Report at 1-2.)
It is true that the original policies cannot be found. CNA has, however, attached to their moving papers copies of the Retrospective Premium Endorsement Forms originally filed for these policies setting forth the tax multiplier and the loss conversion factors. (Supplemental Peterson Aff. Exs. A-C.) The only unknown factors are whether the incurred losses stated for each year by the insurance company are accurate and what standard premiums were actually paid by CNA to AC. According to CNA, the question about the standard premium is irrelevant. Though the exact amounts of the estimated standard premium and the earned standard premium paid by AC to CNA are unknown, they are irrelevant to a determination of retrospective adjustments after the first retrospective adjustment, for the adjustment is calculated only based on incurred losses multiplied by the tax multiplier and the loss conversion factor.
For example, CNA argues that for the policies effective April 15, 1966 to April 15, 1967, in 1990, there were incurred losses in the amount of $1,300.00. Multiplied by the tax multiplier of 1.038 and the loss conversion factor of 1.14, that equals $1,539.00 in retrospective premiums owed by AC to CNA. By contrast, in 1991, on those same policies, the incurred losses resulted in $2,320.00 paid to CNA. Multiplied by the tax multiplier and the loss conversion factor, that resulted in $2,746.00 payable by CNA to AC. (See Supplemental Peterson Aff. ¶ 14 Ex. D.)
B. The Disputed Retrospective Premiums
On January 24, 1990, Daniel J. Peterson, an Account Manager for CNA, sent a letter to Georgeanna Buckalew, the Risk Manager for Atlantic City, which included Invoice H. 04366 reflecting a return premium to Atlantic City of $103,766.00. (Id. at ¶ 7 and Ex. A.) Buckalew sent a letter on January 30, 1990, noting "I really have no questions concerning this particular retroadjustment at this time. Please send the return premium of $103,766.00 promptly." (Id. at ¶ 8 and Ex. B.) That check was issued on February 16, 1990. (Id. at ¶ 9.)
On November 7, 1990, Peterson sent a letter to Buckalew along with Invoice H 07008. The Invoice reflected premiums owed by Atlantic City equaling $100,955.00 for retrospective computations as of October 1, 1990 and noted that payment of the invoice was due on December 7, 1990. (Id. at ¶¶ 10-11 and Ex. D.) At the request of Buckalew, Peterson sent documentation of seven claims, accounting for the amount billed on November 7, 1990. (Id. at ¶ 12 and Ex. E.) On January 16, 1991, Buckalew sent a letter to CNA which stated her own review of these documents and which countered CNA's request for $100,955.00 with her own calculation of the amount due. The letter then stated as follows: "Our 1991 Budget cycle is concluded. Any retro payment to CNA would have to be planned for 1992. I am interested in the cost to close out this contract, in addition to the retro-calculation for 10/1/90." (Id.)
On December 11, 1991, Peterson sent a facsimile to Buckalew concerning the charges on Invoice H 07008 and attached an explanation of the retro-calculations that Buckalew had requested in her January 16, 1991 letter. In this facsimile, Peterson stated that "[t]his fax is just a reminder that we expect payment for this in January of 1992." (Id. at ¶ 14 and Ex. F.) According to Peterson, "[t]he due date for payment of Invoice H07008 was extended to January of 1992 based on Ms. Buckalew's prior statement that it could not be factored into the 1991 Budget Cycle." (Id. at ¶ 14.)
On December 19, 1991, Peterson sent a letter to Buckalew further explaining the retro-calculation valued as of October 1, 1990 and Invoice H 07008. (Id. at ¶¶ 15, 16, 19, and Ex. G.) This letter confirmed a telephone conversation between Peterson and Buckalew held on December 11, 1991 in which Buckalew had advised that the amount billed under Invoice No. H 07008 would not be provided for in the 1992 budget. The Peterson letter noted that Invoice H 07008 did not reflect increases of reserves for active claims as Buckalew had believed, but, rather, that the majority of the amount due was caused by the error in the retrospective computation valued as of October 1, 1989 (money that was included in the $103,766.00 check sent to Atlantic City in February 16, 1990).
Peterson gave the explanation for this error, as Buckalew had requested. Peterson's letter further explained that the invoice did not reflect increases of reserves for active claims as Ms. Buckalew had believed, but that the majority of the invoiced premiums "is the recouping of the money returned, in error, in 1989 on the Foley claim." (Id.) Peterson's letter explained CNA's position that CNA's Accounting Department had made an error in updating the value of the Foley claim for October 1, 1989, because "[t]he total value of the [Foley] claim should have been $150,448 and the Account Department reflected the claim value as $50,448, or a difference of $100,000. The overall return premium as of the 10/1/89 evaluation was $103,776. The 10/1/90 adjustments which are at issue produce an additional premium of $100,955." (Id., Ex. G.) The letter further stated that "we have no further recourse but to place this account into legal collections as this receivable is over a year old." (Id. at ¶¶ 15, 16 and Ex. G.) CNA issued a new invoice, Invoice HO 01002, which requested immediate payment of $100,955.00 for the retrospective computation valued as of October 1, 1990. (Id. at ¶ 17.)
On December 31, 1991, Buckalew sent a letter to Peterson at CNA in which she indicated that she was having "a difficult time getting [her] specific points reviewed and addressed. How can you expect any payment of this magnitude to be authorized if our questions/challenges remain unanswered? You can put our account into collection but the City of Atlantic City stands firm concerning our requirement of a full and complete justification of your 10/1/90 billing." (Peterson Aff. Ex. H.)
CNA continued to pay insurance claims over the next few years. (Pl.'s Reply Br. at 10.) However, CNA did not send out invoices for retrospective adjustments again until almost six years after its last correspondence. In May of 1997, AC received a bill for approximately five and one half years of alleged premiums due. (Buckalew Dep. at 103-105.) Those bills totaled $105,383. It is undisputed that Kathleen Swetlik of CNA sent Buckalew of AC a letter dated April 30, 1997, with Invoice No. HO 04002 and the retrospective computations for evaluation dates of October 1, 1992, October 1, 1993, October 1, 1994, October 1, 1995, and October 1, 1996, seeking $102,615.00 in retrospective premiums by May 20, 1997. (Swetlik Aff. Ex. A.) It is also undisputed that Ms. Swetlik advised Ms. Buckalew that AC owed a past due balance of $100,955 as of October 1, 1990, and $2,768.00 as of October 1, 1991. (Id. at Ex. A.) Buckalew contacted CNA to discuss these bills. By letter dated May 16, 1997, Ms. Swetlik sent status reports on open claims to Ms. Buckalew. (Id. Ex. B.) Additionally, Ms. Swetlik sent a facsimile dated May 23, 1997 to Buckalew with a list of the open claims with the CNA file numbers and the telephone numbers of the corresponding claim representatives. (Id. Ex. C.) It is undisputed that AC did not pay the claims.
On June 24, 1997, plaintiff CNA filed suit in this Court alleging that defendant Atlantic City owed plaintiff $206,338.00 in retrospective premiums, $100,955.00 of which stem from the October 1, 1990 billing, and $105,383 of which stem from retrospective premiums calculated after that date.
Plaintiff also seeks an additional $2.00, claiming that on December 16, 1997, Peterson sent Buckalew a letter, Invoice NO. HO 55273, and retrospective computations evaluated as of October 1, 1997, indicating that AC owed CNA an additional $2.00. (Peterson Aff. Ex. I.) According to a January 5, 1998 letter, that $2.00 was due on January 16, 1998. (Id. Ex. J.)
Now before the Court are the parties cross-motions for summary judgment. For the reasons discussed in the next section, both motions will be denied.
II. DISCUSSION
A. Summary Judgment Standard
Summary judgment is appropriate when the materials of record "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c);see Hersh v. Allen Prods. Co., 789 F.2d 230, 232 (3d Cir. 1986). A dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is "material" only if it might affect the outcome of the suit under the applicable rule of law.Id. Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment. Id.
In deciding whether there is a disputed issue of material fact, the court must view the evidence in favor of the non-moving party by extending any reasonable favorable inference to that party. See Aman v. Cort Furniture Rental Corp., 85 F.3d 1074, 1080-81 (3d Cir. 1996). The threshold inquiry is whether there are "any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Liberty Lobby, 477 U.S. at 250; Brewer v. Quaker State Oil Refining Corp., 72 F.3d 326, 329-330 (3d Cir. 1995) (citing Anderson, 477 U.S. at 248).
The moving party always bears the initial burden of showing that no genuine issue of material fact exists, regardless of which party ultimately would have the burden of persuasion at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Jalil v. Avdel Corp., 873 F.2d 701, 706 (3d Cir. 1989), cert. denied, 493 U.S. 1023 (1990). However, where the nonmoving party bears the burden of persuasion at trial, "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." Id. at 325; Brewer v. Quaker State Oil Refining Corp., 72 F.3d at 329-330 (citing Celotex, 477 U.S. at 322-23). Once the moving party has carried its burden of establishing the absence of a genuine issue of material fact, "its opponent must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Thus, if the non-movant's evidence is merely "colorable" or is "not significantly probative," the court may grant summary judgment. Anderson, 477 U.S. at 249-50.
B. The $100,955.00 Allegedly Owed
Plaintiff CNA has moved for summary judgment, arguing that the evidence clearly establishes that AC owes CNA $100,955.00 based on retrospective computations evaluated as of October 1, 1990. Defendant AC has cross-moved for summary judgment, arguing that because neither party can produce the original insurance policies, the terms of this contract are too indefinite and there can be no suit on the contract.
AC also argues that the statute of limitations prevents CNA from recouping this money. This Court rejected that argument in the January 25, 1999 Opinion, but the present briefing was complete before January 25, 1999, so the parties were unaware of that fact.
AC is correct that in order to be enforceable, a contract must be sufficiently definite in its terms that the performance to be rendered by each party can be ascertained with reasonable certainty. Friedman v. Tappan Devl. Corp., 22 N.J. 523, 531 (1956). AC is incorrect, however, that CNA's inability to produce the original insurance contracts prohibits CNA from seeking to enforce the terms of those contracts. That there is a contract here is not disputed. Both parties agree that AC had insurance policies with CNA and that those insurance policies had these basic terms:
AC pays a premium.
CNA pays out on insurance claims on the policies. CNA calculates retroadjustments which could result in money owed to CNA or owed to AC each year.
Those basic terms are not disputed.
More specific details as to how these basic duties are to be carried out is disputed. AC disputes CNA's assertion that the formula for all relevant retroadjustments was based only on the incurred losses, the tax multiplier, and the loss conversion factor. Moreover, AC disputes the particular amount of the incurred losses claimed, and AC's expert Michael Zuckerman claims that the loss conversion factor and tax multiplier could have been negotiated between the parties instead of set by CRIB. (Zuckerman Report at 6.)
However, the fact that these details cannot be proven in this Court by looking to the words of the original contract does not mean that they do not exist. Rather, those terms are simply ambiguous, and interpretation of ambiguous contract provisions should be decided by a jury. See Teamsters Indus. Employees Welfare Fund v. Rolls-Royce Motor Cars, Inc., 989 F.2d 132, 135 (3d Cir. 1993). The jury may consider extrinsic evidence, including the conduct of the parties (course of performance) in establishing the meaning of those terms. Id. "Evidence of a course of conduct is particularly compelling when it occurs over a substantial period of time." Id. at 137 (citing Old Colony Trust Co. v. City of Omaha, 230 U.S. 100, 118 (1913)).
Here, CNA has presented evidence from which a reasonable factfinder could find that the terms of the contract, as established by the endorsement forms from the insurance policies in question and by the parties' course of performance, are as CNA states. CNA has presented evidence of how, based upon the parties' course of performance, CNA was to establish the particular retrospective adjustment for any given year (claim reserves and incurred losses multiplied by the tax multiplier and the loss conversion factor). Moreover, CNA has presented evidence through the original endorsement forms of what the relevant tax multipliers and loss conversion factors were for the policies in question. CNA has also presented evidence, such as letters from Buckalew to CNA, that shows that AC in the past accepted retrospective premiums payable to AC allegedly calculated according to the formula which Peterson says CNA used. Furthermore, CNA has presented evidence by letters and affidavit purporting to show that most of the $100,955.00 due simply is CNA recouping $100,000 erroneously given to AC by CNA in 1989. Based on this extrinsic evidence, a reasonable jury could resolve the contractual terms' ambiguity in CNA's favor and find for CNA. For that reason, defendant's cross-motion for summary judgment that CNA is not entitled to the $100,955 must be denied.
That does not mean, however, that CNA has met its burden of proving that it is indisputedly entitled to $100,955.00. Extending all reasonable inferences to the non-moving party, in this case AC, a reasonable jury could believe that the standard premium, which has not and cannot be established by either party, was a factor. A reasonable jury could also agree with Georgeanna Buckalew of AC, who attempted her own calculation of the amount due and found that it should have been approximately $23,000 instead of $100,955.00. Moreover, CNA has not met its burden of proof because its evidence as to the $100,955 merely establishes that they told AC that $100,955 was the amount owed and that AC did not pay that amount; the evidence does not establish conclusively that $100,955.00 was the correct amount due as of October 1990. Therefore, summary judgment will not be granted for CNA.
If CNA is unable to meet its burden at trial of proving the terms of the contract, such that the terms are indefinite and cannot be enforced, te Court notes that CNA could still recover under Count IV of the Complaint, which is CNA's claim for unjust enrichment. An unjust enrichment claim cannot stand unless the contract itself is invalid. Should the jury determine that there is no enforceable contract here, CNA could still recover money based on the amount to which it proves AC was unjustly enriched.
C. The $105,385.00 Allegedly Owed
CNA also seeks summary judgment on its claim that AC has failed to pay an additional $105,385.00 in retrospectively calculated premiums. AC likewise seeks summary judgment that CNA has not and cannot recover that amount.
CNA argues that it should win its claim because AC has not provided evidence that AC does not owe the $105,385.00. However, AC does not have the burden of proving that it does not owe that amount; CNA, as plaintiff on a contract claim, has the burden of proof. Simply pointing to AC's lack of evidence will not satisfy that burden of proof. Rather, CNA must present evidence that the amount for which CNA billed AC was the proper amount.
First, AC again argues that this Court must deny summary judgment in favor of CNA because CNA has not produced the original written insurance policies. For the reasons stated supra in subpart II.B, because CNA has presented evidence from which a reasonable factfinder could find that the contract terms are as stated by CNA, this is not a valid basis for denying summary judgment for CNA and granting summary judgment to AC.
Second, AC argues that even if the contract did exist, CNA abandoned that contract by failing to send bills for retrospective premiums for five and one half years. It is undisputed that prior to January 16, 1992, CNA had forwarded invoices to AC for alleged premiums due but that CNA stopped this practice in January of 1992, only to resume again five and one half years later. Defendant AC notes that a court may infer from all of the parties' acts and circumstances that they have intended to abandon the agreement. Morris v. Fauver, 153 N.J. 80, 96 (1998). AC quotes the New Jersey Supreme Court: "As a general rule, a contract `will be treated as abandoned where one party acts in a manner inconsistent with the existence of the contract and the other party acquiesces in that behavior.'" Id. (citing Dorchester Manor v. Borough of New Milford, 287 N.J. Super. 163, 170-71 (Law Div. 1994), aff'd, 287 N.J. Super. 114 (App.Div. 1996)). Based on this, AC argues that because CNA sent invoices from 1967 to 1992 and stopped doing so for five and one half years, it acted inconsistently with the existence of the contract, and AC acquiesced by not making any payments to CNA.
AC is incorrect. Even if AC proves that sending premium invoices was a term of the contract, which will be discussed next, CNA's failure to send those notices does not constitute an abandonment of the contract. As the Court in Morris v. Fauver further expressed, the "intention to abandon a contract by actions or acquiescence, however, must be `clearly expressed.'" Morris v. Fauver, 153 N.J. at 96. Where abandonment "is to be implied from the conduct of the parties, the actions must be positive and unequivocal." Id. (internal citation omitted). Moreover, rescission by abandonment requires that the whole contract be terminated, such that neither party can bind the other, for to allow such a partial abandonment would bring unjust enrichment to one party. Id. at 96-97. Here, though CNA did not send bills for payment for five and one half years, it is undisputed that CNA continued to pay out on open workers' compensation claims over those years, fulfilling the bulk of the responsibilities which both parties agree that CNA had under the terms of the insurance policies. Therefore, while CNA did not send notices, its behavior does not unequivocally indicate that it intended to abandon the insurance policies. Indeed, to the contrary, there is ample evidence that CNA continued to perform its obligations of paying covered claims, for the benefit of AC. AC is not entitled to summary judgment on this ground.
Were AC allowed to accept the benefit of that coverage while simultaneously avoiding its duty to pay because CNA "abandoned" the contracts by failing to send bills and AC "acquiescing" by agreeing not to pay, that would likely work the sort of unjust enrichment which the Court in Morris sought to avoid.
AC's final argument for why the Court should grant summary judgment for AC and not for CNA is that the duty to send invoices was a term of the insurance policies, and by not sending those invoices for five and one half years, CNA breached the contract and forfeited its right to payment of the $105,385. In support of this argument, AC cites Carfagnini v. Service Life Ins. Co. of Omaha, 113 N.J. Super. 469 (App.Div. 1971). In Carfagnini, the insured failed to pay premiums due as a result of his insurer failing to forward the insured timely notices of premiums due, and the insurance company canceled the policy. The insured sued to recover benefits due under the policy, and the insurance company moved for summary judgment, which the Law Division granted. Id. at 472. The Appellate Division reversed, rejecting the insurance company's contention that it had no duty to forward premium notices to the insured. Id. The Appellate Division found that "when an insurer establishes a practice of giving notice of premiums due so as to lead the insured to believe that such notice will be given regularly, the insurer cannot declare a forfeiture for nonpayment of premium if such nonpayment is attributable to the insurer's failure to provide the notice." Id. at 473. Were the law otherwise, the insurer could simply "declare a forfeiture when it was in the interest of the company to invoke the express policy provisions, yet permit the insurer to waive such provisions and collect the premiums when it was in its interest to do so." Id.
AC also cites Monarch Life Ins. Co. v. Trinity Industries, Inc . , 495 S.W.2d 41 (Ct. Civ. App. Tx. 1973). However, Monarch is inapplicable here for two main reasons. First, the Court's decision in that case was rooted in Texas law, not New Jersey law. Moreover, the Monarch decision has been criticized by other Texas courts in Johnston v. Houston General Ins. Group, 636 S.W.2d 278 (Tex.Civ.App. Ft. Worth 1982).
AC argues that this case establishes that in New Jersey, a regular practice of sending notices becomes a term of the contract as a matter of law, and failure to send notices in accordance with that practice relieves the insured of the obligation to pay. The Carfagnini case, however, rests on a different factual premise than that present here. There, the insurance company sought to declare a forfeiture, thereby taking advantage of its own failure to send notice that payment was due. Here, however, CNA seeks not to declare a forfeiture, but rather to enforce its right to payment under the contract. The Appellate Division's fear in Carfagnini — that an insurance company which generally sent notices but had no duty to do so could simply fail to send notices and thereby cancel the policy if it felt like it — is not present here. Though CNA did not send notice for five and one half years, it is not trying to cancel the policy and avoid coverage of claims as a result; rather it is seeking a retrospective adjustment in premium to account for the alleged fact that the insurance policy's incurred losses over the years exceeded the coverage allowed by AC's original premium payments. Presumably, inCarfagnini, the court would not simply allow the insured to recover the benefits of the policy without paying for those benefits, but rather would allow the insured additional time in which to make the payments which were not timely made because of the insurance company's error.
Therefore, neither Carfagnini nor any other New Jersey case establishes that, as a matter of law, failure to send notice in accordance with a longstanding practice of doing so constitutes a breach of contract which relieves the insured's obligation to pay premiums due. However, AC may be able to establish to a jury that, under the facts of this case, the duty to give timely notice of premiums due became one of CNA's contractual obligations through the course of performance, such that the failure to send notice for five and one half years breached the contract. AC has cited to a number of pieces of evidence from which a reasonable factfinder might reach that conclusion. For example, AC's expert, Michael Zuckerman, opines that based upon generally accepted insurance principles and practices, an insurance company should meet with the insured once a year to review all ultimate claims (Zuckerman Report at 3), and that failure to meet with the client and failure to send retrospective adjustments for five years violates generally accepted insurance principles and practices because it is so prejudicial to the insured. (Id. at 5.) Additionally, AC points out that, in his deposition, Mr. Peterson of CNA was asked the following questions and gave the following answers:
There are other authorities out there which agree with Carfagnini . In Kaeppel v. Mutual Life Ins. Co. of New York , 78 F.2d 899 (3d Cir. 1935), the Third Circuit went through a list of various sources, all of which agreed that if the amount of the premium owed by an insured cannot be known to the insured without notice, an insurer which fails to provide notice cannot cancel the contract as a result of nonpayment. Id . However, no court has stated the proposition which plaintiff argues.
Whether AC has suffered prejudice is quite another matter; it appears that CNA's failure to calculate annual premiums and send notices during the 5 ½ year span, while paying claims of AC's employees as if fully covered, conferred not detriment upon AC, but rather a windfall.
Q: You'll agree with me that for a number of the years, that C.N.A. did not issue timely billings to the City of Atlantic City for retrospective policy premiums?
A: Yes.
Q: And would you agree with me that under the terms of the policy, that that was an obligation of C.N.A., to provide its insureds with timely billings?
A: Yes, it was.
. . .
Q: And you consider that a breach of one of the terms of the policy, is that correct?
A: Oh, yes. Because they're supposed to be done annually.
(Peterson Dep. at 137:3-21.)
CNA denies that it was under a duty to send such notices and that the failure to send these notices constituted a breach of contract, and taking the evidence in a light most favorable to CNA as nonmovant, there is a genuine issue of material fact. Because this is a disputed fact, summary judgment is not appropriate for AC.
The Court notes that if AC convinces a jury that CNA breached its duty and thereby relieved AC's contractual duty to pay, Count IV of CNA's claim would still exist and CNA could still recover the value of premiums on the basis of unjust enrichment, which is a quasi-contractual claim.
Nor is summary judgment appropriate for CNA, however. While CNA has presented evidence of what it believes to be the terms of the contract, those terms are disputed by AC and AC's expert. Moreover, since a reasonable jury could find, based on the evidence presented, that a duty to send timely notices was a term of the contract between the parties and that the notices were not sent in a timely fashion, CNA has not met its burden of proving that it is unquestionably entitled to recover $105,385. Therefore, summary judgment will be denied for CNA as well.
III. CONCLUSION
For the foregoing reasons, neither party is entitled to summary judgment, for genuine issues remain disputed in this case, including the terms of the contract, the correct amount of the incurred losses, the amount of the standard premium paid, whether CNA had a duty to send timely notices, and whether AC would be unjustly enriched by accepting the benefit of workers' compensation insurance coverage without paying amounts above the initial premiums AC paid years ago. These are all disputed issues of fact, and they are for the jury's consideration. Summary judgment is inappropriate and will be denied. The accompanying Order is entered.
O R D E R
This matter having come before the Court upon plaintiff's motion for summary judgment and defendant's cross-motion for summary judgment; and the Court having considered the parties' submissions; and for the reasons expressed in an Opinion of today's date;
IT IS this day of April 1999 hereby
ORDERED that plaintiff's motion for summary judgment be, and hereby is, DENIED; and it is further
ORDERED that defendant's motion for summary judgment be, and hereby is, DENIED.