JOHN W. RUIZ, et al. v. CLARENDON NATIONAL INSURANCE COMPANY

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-6157-03T26157-03T2

JOHN W. RUIZ, and GENERAL

ELECTRIC CAPITAL AUTO LEASE,

INC.,

Plaintiffs-Respondents,

v.

CLARENDON NATIONAL INSURANCE

COMPANY,

Defendant-Appellant.

_________________________________

 

Argued September 19, 2005 - Decided

Before Judges Alley, C. S. Fisher and Yannotti.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, MID-L-6120-01.

Randolph A. Newman argued the cause for appellant (Newman & Andruizzi, attorneys; Mr. Newman, on the brief).

John R. Parker argued the cause for respondent, General Electric Capital Auto Lease, Inc.

Marc J. Rogoff, attorney for respondent, John Ruiz, has filed a letter of non-participation.

PER CURIAM

Clarendon National Insurance Company (Clarendon or defendant) appeals from an order declaring that its policy covering an automobile leased by Ruiz from General Electric Capital Auto Lease, Inc. (GECAL) was in effect when Ruiz had an accident because the Acknowledgement of Requirement for Photo Inspection form utilized by its authorized producers did not comply with N.J.A.C. 11:3-36.5(c). After a bench trial, the Law Division found that Clarendon's form was defective because it did not clearly state the deadline for completion of the inspection and was a general form in which the insured had to figure out which category it belonged in order to determine when the inspection had to be completed.

John W. Ruiz, a forty-year old Hispanic male, who came to this country approximately eleven years ago, could not read or write English but was able to understand some English. He lived at 15 Sewel Avenue in Piscataway for the past five years. He leased a new 1999 Mercury Grand Marquis from GECAL on September 29, 1999.

On January 27, 2000, Ruiz went to the Minard Insurance Agency (Minard) in Edison, to get the new Mercury insured, because he had to switch insurance carriers due to the accrual of points on his license. Minard, which is owned by Allstate, was operated by Roland Minard, who had been in the business for thirty-seven years. Minard employed Victor Coronado for approximately four years and was working there in January 2000. Coronado was born in the Dominican Republic and Spanish is his native language. At Minard, Coronado serviced approximately 400 to 600 customers per year, about 60 percent to 75 percent of whom were Spanish speaking.

Ruiz spent about twenty-five minutes at the agency, and spent fifteen to twenty minutes talking to Coronado. The rest of the time was used for investigation of Ruiz's license. At the trial, Ruiz testified on direct that Coronado, although speaking to him in Spanish, told him to just "sign here and here." One of the documents signed was entitled "Acknowledgement of Requirement for Photo Inspection." This form required Ruiz to get his car inspected within seven days of the effective date of the policy. After paying about $1,200, Ruiz was given a temporary insurance card. It is undisputed that Ruiz did not get the car inspected.

According to Josephine DiMarzio, a coverage specialist employed by Clarendon for nine and a half years, Clarendon received Ruiz's initial application for car insurance on February 11, 2000. On February 23, 2000, Clarendon issued Ruiz a Declarations of Insurance Policy showing full physical damage coverage, with a copy to GECAL as the lien holder. Five days later, on February 28, 2000, Clarendon mailed Ruiz a notice stating that the physical damage coverage had been suspended because Ruiz had not satisfied the photo inspection requirement. GECAL was shown as being copied on the suspension letter. The effective date of the suspension was February 6, 2000.

The discrepancy, DiMarzio indicated, was due to a computer problem. As Clarendon's computer system was set up, it would first assign a policy number, then issue the actual identification card and the new business declaration form before checking to see if the premium has been paid and photo inspection completed. When the computer determined that the photo inspection had not been completed, the suspension notice issued on February 28, 2000, was generated, with an effective date back to the date the photo inspection was due. Ruiz was credited with $1395, representing the cost of the suspended physical damage coverage from the effective date of the suspension, February 6, 2000, up to January 29, 2001.

Ruiz had a car accident with the 1999 Mercury Marquis on February 29, 2000, and he filed a claim with Clarendon to cover the damage from the accident. Clarendon denied coverage. As a result, Ruiz filed a complaint on June 15, 2001, against Clarendon for damages to the Mercury resulting from the accident. But, he continued to pay premiums to Clarendon until July when the policy was terminated. GECAL, as owner of the leased vehicle and an additional insured, was permitted to intervene as a plaintiff by consent order dated July 20, 2001.

On July 26, 2001, GECAL filed a complaint against both Ruiz and Clarendon, claiming breach of contract against Ruiz for failing to make lease payments and breach of contract against Clarendon for failing to pay for the damage to the vehicle.

On December 19, 2003, the court granted summary judgment in favor of GECAL against Ruiz in the amount of $32,505.51, plus attorney's fees of $9,101, for a total judgment of $41,606.51.

At the trial of the case by GECAL and Ruiz against Clarendon in May 2004, Ruiz testified through an interpreter. After reviewing each of the exhibits at trial, Ruiz acknowledged his own signature on the insurance application forms but stated that the producer actually filled in the forms for him. Ruiz denied that the producer explained anything to him or told him that he had to get his car inspected or that he would lose his collision coverage if he did not get the inspection. Ruiz also denied any prior knowledge of the State's requirement for a photo inspection, but Clarendon read a portion of Ruiz's deposition in which he admitted that he knew about the photo requirement from another car because his wife told him. Ruiz also testified that he would have gotten the inspection if he had been advised.

Coronado did not have an independent recollection of speaking with Ruiz, but his normal procedure when dealing with customers who do not speak or understand English was to give them a list of inspection places, and explain that the customer must take the car to one of the places listed on a form, and that the coverage would be cancelled after seven days if the vehicle was not examined and photographed. Coronado would not read the forms word for word, but would summarize their contents.

DiMarzio testified that the suspension notice was mailed in a window envelope by regular mail and was part of a mailing list dated February 28, 2000, that she personally brought to the post office. Ruiz did recall receiving the declaration of coverage from Clarendon but denied ever receiving the suspension notice, although he did not move and never complained to the post office about not receiving mail.

Minard testified that the acknowledgement form used by the agency was provided by CARCO, the company that handles the car inspections. Although the testimony is conflicting, it appears that Minard believed the CARCO form was authorized by the State and Allstate based on Allstate's training and it is the only form they use for photo inspections. Coronado testified that Allstate instructed him to use that particular form. The testimony is conflicting, however, as to whether the form came from Allstate. DiMarzio testified that she believed the acknowledgement form used by Clarendon was approved by the State.

DiMarzio acknowledged that after Clarendon was assigned Ruiz's file on February 11, 2000, the computer system knew that Ruiz had not completed the photo inspection by the February 6, 2000, deadline. Although it is not their normal procedure and is difficult to maneuver, someone could have checked the system as early as February 12, 2000, to learn that the inspection had not been completed prior to issuing the February 23, 2000, declaration of coverage.

The trial court found that the form used by Clarendon for photo inspections did not provide the minimum information requirements contained in Appendix A of N.J.A.C. 11:3-36.5; the form did not list the date when the inspection had to be completed, and it was a general form that applied to more than one type of policy.

Further, the court found that Ruiz did not understand his obligations when he left the Minard Agency, even assuming that Coronado had explained the forms in Spanish and even if Coronado told him that he had seven days to get the photo inspection. The court held that:

[t]he failure to have a [sic] authorization for inspection form signed which contains the minimum standard is a fatal defect on the part of the insurance company which is bound by the actions of the producer in this case because the insurance company relies on the producer and is the only way that the insurance company gets these forms in issuing its policies which it utilizes to issue the policies.

Since N.J.A.C. 11:3-36.7(d) does not allow suspension of physical damage coverage if the car is not inspected due to the fault of the insurer or if it failed to obtain the acknowledgment of requirements for insurance inspection form containing the minimum requirements set forth in Appendix A, Clarendon was not entitled to suspend coverage.

The Law Division made no finding of fault on the part of Clarendon, but based its decision on the failure to obtain a form containing the minimum requirements of the N.J.A.C. 11:3-36.7(d), Appendix A. The court also ruled that Clarendon had complied with the mailing requirements of N.J.A.C. 11:3-36.7(b), but that this compliance was not significant since a failure to comply would not allow suspension of coverage but would merely subject Clarendon to a penalty.

As a separate finding, the Law Division stated that Clarendon could be estopped from claiming that there was no collision coverage on February 29, 2000, because it mailed a policy on February 23, 2000, indicating full coverage but then sent notice five days later, on February 28, 2000, suspending coverage retroactive to February 6, 2000. The court held that the initial policy Clarendon sent misled both plaintiffs and, although there was little evidence of detrimental reliance, the insurance company should "be held to a standard which does not require its insured to prove that it was misled or that it--or that the loss payee be held to that standard."

At the June 11, 2004, hearing on Clarendon's motion for a judgment notwithstanding the verdict or for a new trial, Clarendon challenged the court's determination that the acknowledgement form was defective and that it did not meet the minimum standards set in Appendix A of N.J.A.C. 11:3-36.7. Clarendon argued again that the differences between its form and Appendix A were enhancements permitted by N.J.A.C. 11:3-36.7(l) and that there was no testimony that the form confused Ruiz. The court repeated that its decision was not based on whether the form confused Ruiz or on his credibility but was "based almost entirely on the fact that the insurance company did not have a right to cancel the policy, the property damage portion of the policy because it did not conform to the regulation which permit it to cancel a policy. That's all." The court also reiterated that estoppel was not the "essential basis" of its decision.

Clarenden argues on this appeal that the form it obtained from Minard contained the minimum information required by N.J.A.C. 11:3-36.5(c)(1), that any differences were enhancements permitted by N.J.A.C. 11:3-36.7(l), and that even if the form is different, it substantially complied with the regulatory requirements. GECAL counters that the court correctly determined that Clarendon's failure to obtain either Appendix A or a form containing those minimum requirements was a fatal defect that prohibited Clarendon from suspending collision coverage.

Clarenden mistakenly characterizes the court's finding that the acknowledgment form was defective as factual. The trial judge made a legal determination based on undisputed facts that the form did not meet the minimum standards set forth in Appendix A, N.J.A.C. 11:3-36.7. Thus, the standard of review is de novo. The trial court's legal rulings are not entitled to deference. Manalapan Realty v. Manalapan Tp. Comm., 140 N.J. 366, 378 (1995).

N.J.S.A. 17:33B-34(a) states "[a] newly issued policy shall not provide coverage for automobile physical damage perils prior to an inspection of the automobile by the insurer." This provision was "designed to locate and penalize uninsured drivers and cut down on fraud and other unnecessary costs to the automobile insurance system." Assembly Appropriations Committee Statement A. 1. The record contains no allegation of fraud in this case.

Additionally, N.J.A.C. 11:3-36.5(a) allows an insurer to defer the mandatory inspection for seven calendar days following the effective date of the coverage. When the inspection is deferred on new business, however, the regulations provide that "the insurer or producer shall: (1) At the time the insurance application is completed, obtain the Acknowledgment of Requirement for Insurance Inspection form (as set forth in Appendix A and incorporated herein by reference) signed by the insured . . . " N.J.A.C. 11:3-36.5(c)(1) (emphasis added).

Pursuant to N.J.A.C. 11:3-36.6(a), "[i]nspections shall be made by an authorized representative of the insurer at a time and place reasonably convenient to the insured." The insurer, or its authorized producer, "shall provide the insured with

. . . an Acknowledgment of Requirement for Insurance Inspection as set forth in Appendix A." N.J.A.C. 11:3-36.6(d). Appendix A provides the minimum standards and "[i]nsurers may enhance or alter the form of these documents provided the minimum information requirements are met." N.J.A.C. 11:3-36.7(l) under N.J.A.C. 11:3-36.7(a).

Physical damage coverage may be suspended "[i]f the inspection is not conducted prior to the expiration of the deferral period." N.J.A.C. 11:3-36.7(d) (emphasis added) states:

If the automobile is not inspected pursuant to this subchapter due to the fault of the insurer, or if the insurer fails to give the verbal or telephone notice required by the subchapter or mail or deliver the Notice of Insurance Inspection (Appendix B) or obtain the Acknowledgement of Requirements for Insurance Inspection (Appendix A) as set forth in this subchapter, physical damage coverage on the motor vehicle shall not be suspended.

The judge's findings put no weight upon the point that, while Ruiz apparently understood some English, he could not read or write English. Indeed, the judge appeared to reject any contention that the form was ineffective because Ruiz could not read it. ("He does have some obligation to have somebody with him who understands and can explain to him if he doesn't understand English."). Moreover, the record reflects that Coronado, a representative of the producer, spoke Spanish and spent time (approximately 15 to 20 minutes) with Ruiz regarding his completion of paperwork for coverage on this vehicle. As a result of having owned and insured another vehicle in the past, Ruiz was aware that vehicles require a photo inspection.

In our view, the judge's decision rendered Ruiz's limited knowledge of English irrelevant to the issues presented, as it indeed was. Instead, the judge properly decided the case by considering whether the form in question comported with Appendix A of the regulation. He erred, however, in his resolution of that question. The form, Appendix A, has blanks to be completed for the vehicle "to be inspected," for the "effective date of coverage," and for the date "[i]nspection shall be completed by." The form that Ruiz signed has a blank space for a description of the vehicle to be inspected (which identifies the 1999 Mercury), has a blank space for the "effective date of coverage" (which identifies that date as January 29, 2000), but has no blank space for the date by which the vehicle was required to be inspected. Instead, it has a statement within its body that states that the vehicle must be inspected when "for a new application . . . within seven calendar days of the effective date of the coverage."

The only substantive difference between this form and the regulation's Appendix A is that the recipient of the form in question would have to compute the date upon which the deferral would terminate by adding seven to the effective date of the coverage. It is this minor distinction that led the trial judge to conclude that "there is no date . . . that says when the inspection shall be completed by." This conclusion, in our view, is mistaken and contrary to the form itself. The form contains the date for the completion of the inspection. It is the effective date of coverage plus seven. This is beyond legitimate dispute.

The judge also found the form inadequate because it required the recipient to determine whether the seven-day or the thirty-day rule applies (the form, as noted above requires photo inspection for a new application within seven days and for a renewal policy within thirty days). It is unquestionable that this was not a renewal policy, and thus there could be no confusion as to what the form meant.

Thus, we reject the approach by which the trial judge compared the form in question and Appendix A. The form provided the minimum information required by Appendix A, and more.

We conclude that Ruiz's failure to have the vehicle inspected in a timely fashion required the trial judge to enter judgment in favor of Clarendon.

 
Reversed.

We have modified the caption because there is only one Law Division docket number, and GECAL's "complaint" against Ruiz should be viewed as a cross-claim.

The Law Division also heard motions by both plaintiffs about counsel fees but those determinations are not part of this appeal.

(continued)

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15

A-6157-03T2

October 11, 2005