Opinion
Civ. No. 00-2628 (WGB)
March 20, 2002
August R. Soltis, Esq., IULO SOLTIS, ESQS., Passaic, New Jersey, Attorneys for Plaintiffs.
Marc D. Haefner, Esq., CONNELL FOLEY LLP, Roseland, New Jersey, Attorneys for Defendant Continental Casualty Company.
Gregg S. Sodini, Esq., BUCHANAN INGERSOLL, P.C., Princeton, N.J., Attorneys for Defendant Washington Mutual Home Loans, f/k/a PNC Mortgage Corp. Of America.
M E M O R A N D U M O P I N I O N
Plaintiffs Diana Lisa Horvath, executrix of the Estate of Richard Z. Horvath, and her minor child Veronica Lynn Horvath (collectively "the Horvaths" or "Plaintiffs"), have brought this action to recover insurance benefits from Defendants Washington Mutual Home Loans, Inc., f/k/a PNC Mortgage Corp. ("Washington Mutual" or "PNC") and Continental Casualty Company ("CNA"). The Court has jurisdiction pursuant to 28 U.S.C. § 1332.
Defendant PNC now moves for Summary Judgment against Plaintiffs. Additionally, Defendants PNC and CNA, who have each brought cross-claims against the other for indemnification, also move for Summary Judgment on their respective cross-claims. For the following reasons, Defendant PNC's motion for Summary Judgment is granted in part and denied in part as to Plaintiffs, and denied as to co-defendant CNA. CNA's cross-motion for Summary Judgment is granted.
I. BACKGROUND
Plaintiffs are the widow and minor daughter of Richard Horvath, who died on September 14, 1999. This litigation stems from an Accidental Death Dismemberment Insurance Policy ("the Policy") issued by CNA to the decedent. After decedent passed away, Plaintiffs sought to claim the $151,000 in benefits provided for by the Policy. Defendant CNA denied Plaintiffs' claim, on the grounds that the policy was no longer in effect.
It is undisputed that the Policy was validly issued prior to decedent's passing away. It is also undisputed that the Policy was validly cancelled by CNA. Given those facts, the central question in dispute is whether PNC had been authorized by Mr. Horvath to have CNA cancel the policy.
On or about December 14, 1994, Plaintiffs purchased a home in Clifton, New Jersey, and obtained a mortgage with Defendant PNC. PNC had an agreement with CNA whereby PNC included, along with the monthly mortgage statements it sent to its mortgagors, CNA solicitations for optional insurance coverage. The premiums for any such policies would be paid to PNC along with the customer's monthly mortgage payment, and remitted by PNC to CNA. In the Fall of 1995, Plaintiffs received from PNC a solicitation for Accidental Death Dismemberment Insurance (issued by CNA) along with their monthly mortgage statement. It is undisputed that in October, 1995 Richard Horvath responded to the solicitation, and obtained the Policy, which provided for $151,000 in insurance from CNA. Plaintiffs, who had already been remitting mortgage payments to PNC, began remitting monthly mortgage payments of $1,465.54 per month to PNC, which included $1,087.62 in principal and interest, $335.39 in escrow, $17.79 for Disaster Mortgage Protection, and $24.75 in Accidental Death and Dismemberment Insurance premiums that PNC would remit to CNA for the insurance policy.
Defendant PNC alleges that in July, 1996, Richard Horvath contacted them by phone and requested that the Policy be cancelled. PNC has introduced computer records that purportedly demonstrate such a call took place, and that purportedly demonstrate a letter was mailed informing Mr. Horvath that in order for any cancellation to occur, he would need to make his request in writing. This letter was allegedly mailed to Horvath because of PNC's policies and procedures, which undisputedly required PNC to receive a written request before cancelling an optional insurance policy.
PNC's computer records purportedly demonstrate that on July 31, 1996, the Horvaths' Disaster Mortgage Protection Policy and Accidental Death and Dismemberment Policy were cancelled. PNC's computer records also purportedly demonstrate that on that same date, the Horvaths added Forced Hazard Insurance to cover their property. It is undisputed that shortly thereafter, PNC forwarded its monthly list of "Optional Insurance Adds and Deletes" to CNA, and indicated that Richard Horvath's Policy should be cancelled. CNA received the list, and pursuant to its receipt, CNA terminated the Policy effective September 31, 1996.
After Richard Horvath died in 1999, Plaintiffs put in a claim to CNA for Accidental Death benefits. CNA denied the claim, and pointed to the September 31, 1996 cancellation, which had occurred at the direction of PNC. PNC, in turn, explained that it had directed CNA to cancel the Policy because of Mr. Horvath's 1996 cancellation request. PNC further explained that Mr. Horvath would necessarily have had to make his request to PNC in writing, or else PNC would never have directed that the policy be cancelled.
Unfortunately for PNC, PNC has never been able to produce the letter allegedly written by Mr. Horvath, or any other documents from an 11 month period spanning January 1996 through November 1996. PNC concedes that these documents were lost, and likely destroyed. For the same reason, PNC has been unable to produce any evidence that it actually sent a letter to Mr. Horvath telling him he could only cancel his policy in writing.
Regardless, PNC argues that its computer files demonstrate that the policy was in fact cancelled in July, 1996. Because one of PNC's employees testified that PNC would only cancel a policy after receiving a written request, PNC contends somewhat speciously that the mere fact it cancelled the policy presumptively demonstrates that it must have received a letter from Mr. Horvath.
In response, Plaintiffs' case rests in part on their alleged belief that their insurance policy had been in effect until the day of Mr. Horvath's death. Plaintiffs claim to have believed this because they claim to have paid the premiums for the insurance policy along with every mortgage payment. They note that the evidence demonstrates they made mortgage payments in the amount of $1,465.54 per month both before and after the Policy was allegedly cancelled, which shows that they were remitting insurance premiums each month, even if PNC was not crediting them as such. PNC has responded that a detailed examination of its billing records reveals that the billed amount remained the same after the Policy was cancelled because in July, 1996 the Horvaths' required escrow contributions and Forced Placed Hazard Insurance premiums happened to increase by exactly the same amount as the decrease in their optional insurance premiums.
There is evidence that in at least one month the Horvaths sent in a check for more than the billed amount, and that the payment overage was allocated to escrow by PNC.
By way of further response, PNC argues that Plaintiffs cannot claim they lacked knowledge of the Policy's cancellation, because their itemized monthly mortgage bills would have reflected that they were not being billed for the Policy. PNC has submitted one of Plaintiffs' monthly mortgage statements from 1999, which PNC claims demonstrates that Accidental Death Insurance premiums were not deducted from that month's payment. PNC contends that because such deductions would have been present in 1995 and 1996 when the Policy was in effect, Plaintiffs would have realized that the Policy had been cancelled when the deductions ceased appearing.
Submitted as an example of a typical bill.
The Court notes that PNC has not produced any of these 1995/1996 bills for comparison. Similarly, PNC has failed to provide any evidence that Plaintiffs were sent any sort of termination notice, modification of benefits notice, or any other report that might have expressly indicated to them after the fact that their existing Policy had been terminated.
II. DISCUSSION
A. The Summary Judgment Standard
The standard for granting summary judgment pursuant to Federal Rule of Civil Procedure 56 is a stringent one. Summary judgment is appropriate only if all the probative materials in the record "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Hersh v. Allen Prods. Co., 789 F.2d 230, 232 (3d Cir. 1986); Lang v. New York Life Ins. Co., 721 F.2d 118, 119 (3d Cir. 1983). An issue involving a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Healy v. New York Life Ins. Co., 860 F.2d 1209, 1219 n. 3 (3d Cir. 1988).
The court must resolve all reasonable doubts in favor of the nonmoving party when determining whether any genuine issues of material fact exist.Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307 n. 2 (3d Cir. 1983);Smith v. Pittsburgh Gage Supply Co., 464 F.2d 870, 874 (3d Cir. 1972). Even though a court must resolve reasonable doubts in favor of the nonmoving party, because a motion for summary judgment is designed to go beyond the pleadings, factual specificity is required of a party who opposes such a motion. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Accordingly, in order to defeat a properly supported motion for summary judgment, a party may not merely restate the allegations of its pleadings, or rely upon self-serving conclusions, unsupported by specific facts in the record. Celotex, 477 U.S. at 322-23; Farmer v. Carlson, 685 F. Supp. 1335, 1339 (M.D.Pa. 1988). A non-moving party must point to concrete evidence in the record which supports each essential element of its case. Id. If the party fails to provide such evidence, then it is not entitled to a trial and the moving party is entitled to summary judgment as a matter of law. Fed.R.Civ.P. 56(e).
B. Plaintiffs' Breach of Insurance Contract Claims
Defendant PNC has moved for summary judgment on Plaintiffs' Breach of Contract claims that seeks to establish the existence of coverage under the Policy. PNC's position is that it is entitled to summary judgment because its records reflect that the Policy was cancelled at the request of Richard Horvath, and because there are no facts in the record to contradict its version of events. Plaintiffs argue that PNC is not entitled to summary judgment, because they can produce evidence that the policy was validly issued, and that tends to demonstrate that they acted as if the Policy had never been cancelled. Because PNC can not produce solid evidence to disprove their version of events, Plaintiffs contend summary judgment should not issue.
In New Jersey, "[t]he party asserting that the policy is cancelled has the burden of proof." Meier v. Mew Jersey Life Ins. Co., 101 N.J. 597, 608 (1986), citing Joslin v. Hudson Cas. Ins. Co., 8 N.J. Misc. 195, 197 (1930) ("burden on the defendant insurance company to prove that it had issued a policy to the plaintiff and that plaintiff had cancelled it"). In most situations, an insurer would presumably meet this burden by producing either an insured's correspondence asking to terminate a policy, or by producing its own correspondence to the insured confirming a request for termination.
The parties agree that the law of the State of New Jersey applies to this dispute.
Damaging to PNC's case is its concession that it lost the letter Mr. Horvath allegedly sent cancelling his policy. PNC also lost the letter allegedly sent to Mr. Horvath that would have confirmed his alleged telephone request to cancel the policy and asking that the request be put in writing.
Plaintiff has introduced evidence that demonstrates the Policy was validly issued, and stated at her deposition that Mr. Horvath never sought to cancel the Policy. Plaintiff has also provided circumstantial evidence that Plaintiffs remitted identical mortgage payments in the months before and after the alleged cancellation, allegedly believing that they were paying for insurance.
Although PNC has introduced evidence from its computer files that it claims demonstrates the Policy was cancelled by request, all of PNC's evidence is undeniably of a circumstantial variety. While it does tend to demonstrate that PNC cancelled the Policy, it does not clearly show that this cancellation occurred at Plaintiffs' request, or that Plaintiffs were even aware the cancellation had occurred.
When considering PNC's motion for Summary Judgment all of this circumstantial evidence must be construed in favor of Plaintiffs. Although PNC can swear that it would never cancel a policy without receiving a written request, a reasonable trier-of-fact could find Plaintiffs' version of event surrounding the cancellation of the Policy to be more credible. The Court reaches this conclusion in part because there is evidence in the Record that may demonstrate that when Mr. Horvath called to modify his Hazard Insurance, his Accidental Death Insurance was cancelled instead. Additionally, although PNC has produced its billing records to demonstrate how the Horvaths' mortgage payments were applied, in several instances these records fail to demonstrate why and how PNC made the choices it did when it came to the allocation of the Horvaths' payments.
Given the circumstantial nature of the evidence produced by both sides in this dispute, determining whose circumstantial case is stronger is uniquely the province of the jury. It is certainly not a matter to be determined by the Court on a motion for summary judgment. Noting also that PNC ultimately bears the burden of proving that it validly canceled Plaintiffs' Policy at Plaintiffs' request, summary judgment is not appropriate in this matter. For those reasons, Defendant's motion is denied as to Plaintiffs' Breach of Contract claims.
C. Plaintiffs' Punitive Damages and Bad Faith Denial of Coverage Claims
Plaintiffs contend that in addition to the wrongfully denied insurance benefits that they hope to recover from their Breach of Contract claims, they are also entitled to punitive damages as a result of Defendants' actions, including Defendants' bad faith denial of coverage. PNC has moved for summary judgment on these additional claims, on the grounds that punitive damages are not available in contract cases, and on the grounds that Plaintiffs have failed to establish Defendants acted with either actual malice or wanton and willful disregard of the rights of another. Similarly, PNC contends Plaintiffs' bad faith allegations are without merit, as they have failed to demonstrate Defendants knowingly terminated Plaintiffs' policy.
It appears to the Court that Plaintiffs have not opposed this portion of PNC's summary judgment motion.
In order for a plaintiff to succeed on a bad faith non-payment of insurance benefits claim in New Jersey, she must meet a high standard. The rule adopted by the New Jersey Supreme Court is that:
If a claim is `fairly debatable,' no liability in tort will arise . . . To show a claim for bad faith, a plaintiff must show the absence of a reasonable basis for denying benefits of the policy and the defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim . . . the tort of bad faith is an intentional one.Picket v. Lloyd's, 131 N.J. 457, 471 (1993). Given the preceding legal threshold, even if Plaintiffs are ultimately successful in proving their version of the case, the Court concludes for the following reasons that they will not be able to recover on their bad faith claims.
The actual denial of benefits in this dispute was made by CNA, the insurer. Even if all of the evidence is taken in a light most favorable to Plaintiffs, they cannot overcome the fact that CNA had every reason to believe the Policy had been cancelled, because of PNC's representations. PNC's wrong, then, was not a denial of benefits, but instead a cancellation of benefits. Because there is no evidence in the record to demonstrate that PNC cancelled Plaintiffs' benefits knowingly, or even recklessly, summary judgment is granted in favor of Defendants on Plaintiffs' bad faith termination claims.
Similarly, there is no evidence in the record to demonstrate that this is anything more than a breach of contract dispute between Plaintiffs and Defendants. In New Jersey, "punitive damages are only justified when there is a finding of: (1) actual malice, which is nothing more or less than intentional wrongdoing — an evil-minded act; or, (2) an act accompanied by a wanton and willful disregard of the rights of another."Enright v. Lubow, 202 N.J. Super. 58 (App.Div. 1985), cert. den. 104 N.J. 376 (1986), on recon. 215 N.J. Super. 306 (App.Div. 1987),cert. den. 108 N.J. 193 (1987), citing LaBruno v. Lawrence, 64 N.J. Super. 570, 575 (App.Div. 1960), cert. den. 34 N.J. 323 (1961); Accord, Di Giovanni v. Pessel, 55 N.J. 188, 191 (1970).
Even if all of the facts are taken in a light most favorable to Plaintiffs, there are no substantiated allegations in the record that might demonstrate Defendants' conduct was sufficiently wilful, wanton, or evil-minded so as to justify an award of punitive damages. For that reason, the Court grants Defendants summary judgment on Plaintiffs' punitive damages claims.
D. Plaintiffs' Consumer Fraud Act Claims
Plaintiffs claim that Defendants violated the New Jersey Consumer Fraud Act ("CFA") when they offered to pay the premiums on the first $1,000 of Plaintiffs' insurance benefits, but then failed to pay Plaintiffs $1,000 after decedent's death. Plaintiffs theorize that even if they did cancel the $150,000 in supplemental insurance for which they had been paying premiums, the $1,000 basic policy should have remained in effect. Because Plaintiffs state that the offer of $1,000 in free benefits originally enticed them to purchase the Policy, Plaintiffs assert that Defendant violated the CFA by advertising the free benefits but not providing them.
Defendant PNC argues that the receipt and/or payment of insurance benefits are beyond the scope of the CFA. PNC asserts that when Richard Horvath cancelled his optional insurance CNA was notified, and the entire policy was cancelled. Any dispute stemming from that conduct is a dispute over benefits, which PNC theorizes entitles them to summary judgment on Plaintiffs' CFA Claims.
"The CFA is intended to protect consumers `by eliminating sharp practices and dealings in the marketing of merchandise and real estate.'"Lemelledo v. Beneficial Management Corp. of America, 150 N.J. 255, 263 (1997), quoting Channel Cos. v. Britton, 167 N.J. Super. 417, 418 (App. Div. 1979). Although the New Jersey Supreme Court held in Lemelledo that the CFA was applicable to the sale of insurance policies, they let stand a series of Appellate Division cases which expressly held that the CFA was not applicable to the payment of insurance benefits. Lemelledo, 150 N.J. at 265, citing Nikiper v. Motor Club of America, 232 N.J. Super. 393, 401 (App.Div.), cert. den., 117 N.J. 139 (1989); Pierzga v. Ohio Casualty Group of Ins. Cos., 208 N.J. Super. 40, 47(App.Div.), cert.den., 104 N.J. 399 (1986).
There is no evidence that CNA would not have paid $151,000 in insurance benefits, had it believed the Policy was still in effect. As a result, CNA's failure to pay does not amount to a fraudulent or impermissible business practice; it was instead a benefits decision. While that benefits decision may ultimately prove erroneous, and while PNC might ultimately be found culpable in its decision to inform CNA that the Policy had been cancelled, such incorrect benefits decisions are beyond the scope of the CFA. Even if the CFA were applicable to this matter, Defendants would still be entitled to summary judgment because there is no evidence that the CFA's provisions were violated by Defendants' practices. Accordingly, Defendant CNA's summary judgment motion is granted as to Plaintiffs' Consumer Fraud Act claims.
E. Defendants' Cross-Motions for Summary Judgment of Indemnification
Having found that Plaintiffs are entitled to proceed to trial on their wrongful denial of benefits claims, the Court must address Defendants' cross-motions for summary judgment. Each Defendant has moved for summary judgment against the other on their respective cross-claims for indemnification. CNA argues that if Mr. Horvath is found not to have cancelled the Policy, PNC should be held solely liable to Plaintiffs for their injuries. Conversely, PNC contends that if Plaintiffs prove their case at trial, PNC's liability should be limited solely to the "un-remitted" premium payments owed to CNA, and that CNA should be found liable to Plaintiff for any coverage under the Policy. Both PNC and CNA agree that the indemnification issue is a purely legal issue suitable for the Court to resolve.
As an initial matter, the Court must determine the relationship between PNC and CNA. Although the agreement between CNA and PNC states that PNC is not an "insurance agent," PNC concedes it was CNA's agent for purposes of collecting premiums from insureds and remitting them to CNA.
Given that relationship, PNC argues that "when an insurer entrusts an insurance policy to an agent for the purposes of delivering the policy to and collecting premiums from the insured, the insured's payment of such premiums to the agent is deemed payment to the insurer." Commercial Inc. Co. Of Newark v. Apgar, 111 N.J. Super. 108, 115 (Law Div. 1970). Based on the foregoing, PNC argues that so long as the Horvaths continued to make payments to PNC on their policy the Policy would have remained in effect, even if PNC failed to remit the premiums to CNA. Relying on this line of reasoning, PNC contends that so long as it ultimately remits the un-remitted premiums to CNA, CNA should pay Plaintiffs the benefit owed under the Policy.
PNC finds support for its position in an Appellate Division case,Regino v. Aetna Casualty and Surety, 200 N.J. Super. 94 (App.Div. 1985). In Regino, an insurance agent received an oral binder from an insurer that an insured's policy could be extended to cover an additional piece of construction equipment. The agent then negligently failed to forward the paperwork that would have formally modified the insurance policy. After the equipment was stolen, the insured was denied coverage by the insurer, and the insured sued both the agent and the insurer.
After the agent was found to be liable, the trial court granted the agent's cross-claim for indemnification against the insurer. The insurer appealed, and the Appellate Division ruled that because the insurer had orally committed to insure the property, the negligence of the agent caused no prejudice or loss to Aetna. Given the lack of prejudice to the insurer, the Court held "[w]here the agent has failed to [forward the necessary written confirmation of coverage] the agent is responsible for any unpaid premiums, as may be the insured, but the insurer is liable nonetheless to the insured for the loss." Regino, 200 N.J. Super. At 99. PNC argues that Regino supports its argument that it should only be liable to CNA for any un-remitted premiums paid by Plaintiffs, and that CNA, which had agreed to insure Plaintiffs, should bear the cost of the claim itself.
As CNA rightly notes in its cross-motion, PNC entirely ignores a New Jersey Appellate Division decision directly on point that clearly distinguishes Regino. See Echevarias v. Lopez, 240 N.J. Super. 104, 110 (App.Div. 1990). In Echevarias, an insured's liability insurance policy was coming to the end of its term, and the insurer required either a renewal or notice that the policy was not to be renewed. The insurer sought guidance from its agent about whether the insured would be renewing the policy. The agent wrote to the insurer and negligently informed it that the policy should not be renewed. Acting on the agent's representation, the insurer cancelled the policy. Subsequently the insured attempted to make a claim under the policy, and was told the policy had been cancelled. The insured sued both the agent and the insurer.
After being sued by the insured, the agent in Echevarias attempted to rely on Regino to escape liability from all but payment of the un-remitted insurance premiums. The Appellate Division disagreed:
The present case is different [from Regino]. Here, [the agent] did not imperfectly bind [the insurer] to a risk: rather, he negligently told [the insurer] not to insure at all. His action was not, in effect, the creation of a policy; it was, instead, the cause of its nonrenewal. Regino does not apply where the agent's negligent act was to terminate coverage, and not to create it.Echevarias, 240 N.J. Super at 110(emphasis added). Although theEchevarias court ultimately ruled that the insurer was not entitled to indemnification because it had itself been negligent in not notifying the insured of the termination of coverage, the rule announced by Echevarias is clear: an innocent insurer who is ultimately found liable to its insured should be indemnified by an agent whose negligence solely caused the nonrenewal of the policy. Echevarias, 240 N.J. Super. at 112 (Michels, P.J.A.D. dissenting in part).
CNA argues that because the evidence demonstrates it acted properly in terminating Plaintiffs' policy, Echevarias mandates PNC to indemnify it against any liability it may ultimately be found to have to Plaintiffs. By way of response, PNC argues that a more legally sound outcome would be for the Court to embrace the Regino rule, and find PNC liable for any un-remitted payments, but not for the Policy itself.
PNC has argued at length that the Echevarias decision and theRegino decision turn on a distinction without a difference, namely negligent origination of a policy vs. negligent termination of a policy. The Court disagrees, and finds there to be a real distinction in such cases: in Regino, the insurer had actual knowledge that it would be bound to insure the given loss in the future, whereas in Echevarias the insurer believed that its risk of loss ceased at the time of termination. Notice of a future obligation to insure would certainly provide a reasonable grounds to justify the distinction drawn in Echevarias, although concededly the Appellate Division did not explicitly rule on that basis.
Having reviewed the parties' briefs and the relevant case law, the Court finds PNC's arguments to be unavailing. PNC essentially asks the Court to rely on arguments cobbled together from a number of tangentially related cases in other jurisdictions, while simultaneously asking that the Court find Echevarias to be wrongly decided.
This Court is mindful that in this diversity action, it is bound to "follow the law as decided by the highest court of the State of New Jersey. The decisions of lower appellate courts may be persuasive, should be accorded proper regard and are presumptive evidence of state law."Commercial Union Ins. Co. v. Bituminous Casualty Corp., 851 F.2d 98, 100 (3d Cir. 1988) (emphasis added).
PNC has spent many pages arguing about why the Court should not follow the Echevarias decision. PNC contends it was wrongly decided, and implores the Court to rely on cases from other jurisdictions to justify following the Regino decision. In its many pages of briefing, however, PNC has never once argued that the New Jersey Supreme Court would have overruled Echevarias if confronted with the issue. More importantly, PNC has not provided any evidence that other New Jersey courts have foundEchevarias to be wrongly decided. Given that fact, the Court will take the decision of the Echevarias appellate panel to be presumptive evidence of New Jersey state law, and rely on it as persuasive authority in this matter. Accordingly, there is no reason for the Court to address PNC's lengthy arguments that Echevarias was wrongly decided.
In addition to PNC's arguments about Echevarias's flaws, PNC attempts to distinguish this matter from the Echevarias decision. For example, PNC attempts to escape primary liability by defining itself to be something other than CNA's agent. Although it is undisputed that PNC was not an insurance agent in the classic sense, it is apparent that PNC did have an obligation to provide an accurate list to CNA of all those who had terminated their insurance policies in a given month. PNC necessarily acted as CNA's agent in this capacity, and it was in this capacity that PNC was allegedly negligent. Accordingly, PNC was undeniably bound to "act in good faith . . . and use due care and reasonable diligence in the transaction of the business entrusted to [it]." Echevarias, 40 N.J. Super at 113 (Michels, P.J.A.D., dissenting in part). Because the "business entrusted to" PNC included providing correct lists to CNA of all those who had terminated their insurance, the Court agrees with Echevarias's rationale that PNC should "be held liable to the insurance company for `the losses resulting proximately from a failure or departure in such duties.'" Id.
The Court also finds unavailing PNC's argument that it should escape primary liability because the potential loss to CNA in this matter resulted proximately from Mr. Horvath's death, and not from PNC's alleged negligence. It is undisputed that to the best of CNA's knowledge, it had ceased being obligated for Mr. Horvath's insurance policy in 1996. Presumably, CNA ceased factoring potential claims on Mr. Horvath's policy into the operation of its business, and stopped taking necessary steps to provide for the risk of loss generated by the Policy. When CNA was suddenly asked in 1999 to pay a $151,000 claim, its failure to contemplate having to pay that claim was directly tied to PNC's negligence, not Mr. Horvath's death.
While it is true CNA would likely have continued to insure Mr. Horvath but for PNC's alleged negligence, the fact of the matter is CNA did not continue to insure him. In such situations, Echevarias is directly on point. Echevarias clearly guides that CNA should be indemnified by PNC against the claim that has now arisen against it.
Another glaring inconsistency is present in PNC's argument thatEchevarias should be distinguished on the grounds that in Echevarias the agent failed to renew the policy for no reason, whereas in this case PNC terminated the policy because Mr. Horvath asked them to. This argument is patently defective. If Mr. Horvath asked PNC to terminate the Policy, then neither PNC nor CNA are liable, and there is nothing for PNC to indemnify. If, on the other hand, Mr. Horvath did not ask PNC to terminate the policy, then PNC was negligent in telling CNA to do so. Such circumstances would make this matter factually identical toEchevarias. Given the inherent contradiction of these positions, PNC's effort to distinguish Echevarias fails. Either Mr. Horvath requested in writing that the policy be cancelled or he did not; in either event, given the holding in Echevarias Defendant CNA would ultimately not be liable to either Plaintiffs or PNC.
Finally, PNC contends that "if Plaintiff prevails, it necessarily means that the Policy will be deemed to have been in full force and effect as of the time of Richard Horvath's death such that there was never a lapse in coverage." PNC's contention is incorrect, as the uncontroverted evidence is that CNA cancelled the Policy. If Plaintiffs prevail, it will necessarily mean that the Policy should have remained in effect; it will also mean that PNC's negligence was the reason why the policy was cancelled. Given the unambiguous ruling of the Appellate Division inEchevarias, the potential liability flowing from PNC's alleged negligence is wholly PNC's, and should be borne accordingly. For that reason, and for all of the preceding reasons, the Court grants Defendant CNA summary judgment on its cross-claim for indemnification. Similarly, the Court hereby denies Defendant PNC's motion for summary judgment on its cross-claim.
As an administrative matter, Defendant CNA asks that it be dismissed from the action if its cross-claim for indemnification is granted. Defendant CNA has failed to cite any legal authority to support its request; although the Court is prepared to accept that the requested result may be correct, the Court would ask that Defendant CNA make a properly supported dispositive motion setting forth the basis upon which it can be released from the action prior to trial.
III. CONCLUSION
For the foregoing reasons, Defendant PNC's Motion for Summary Judgment is denied as to Plaintiffs' Breach of Contract claims. Defendant PNC's Motion for Summary Judgment is granted as to Plaintiffs' punitive damage, bad faith, and Consumer Fraud Act claims.
Defendant CNA's Motion for Summary Judgment on its cross-claim for indemnification against PNC is granted. Defendant PNC's Motion for Summary Judgment on its cross-claim for indemnification against Defendant CNA is denied.
An appropriate Order follows.