TIMOTHY HARRINGTON v. HARTAN BROKERAGE, INCAnnotate this Case
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
DOCKET NO. A-0
HARTAN BROKERAGE, INC.,
ASSET INDEMNITY BROKERAGE
CORP., WILLIAM L. MINDERJAHN,
Individually, and PAUL KUSHNER,
SIKORA ASSOCIATES, INC., and
ROBERT SIKORA, Individually,
DAVID A. BERTUS,
Before Judges Yannotti, St. John and Leone.
On appeal from Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-2291-09.
Charles J. Stoia argued the cause for appellant (Porzio, Bromberg & Newman, P.C., attorneys; Mr. Stoia, on the briefs).
Anthony P. Pasquarelli argued the cause for respondents (Sweet Pasquarelli, P.C., attorneys; Mr. Pasquarelli and Jennifer N. Cortopassi, on the brief).
Plaintiff Timothy Harrington challenges the pro rata apportionment of liability to third-party defendant David A. Bertus (Bertus), based upon the percentages of fault assigned by the trier of fact. He contends that defendants Robert Sikora (Sikora) and Sikora Associates, Inc. (collectively, the Sikora defendants), had a duty to him which encompassed the obligation to prevent the specific misconduct of Bertus and therefore apportionment was in error. We agree, and therefore reverse and remand.
The record discloses the following facts and procedural history relevant to the issues raised by plaintiff on appeal.
In the 1980s, Harrington started Able Oil Company, and engaged Sikora as his broker to obtain both business and personal insurance. In 1999, Harrington took all of his companies public under the name Able Energy, Inc. (Able). Able issued 2,000,000 shares. Harrington kept 1,000,100 shares for himself. The rest were publicly sold for an amount between $7-7.5 million, which Harrington reinvested in the company.
In March 2003, Able suffered losses as a result of an explosion. Sikora assisted in handling the many insurance claims, but, after the event, Harrington had difficulty obtaining insurance and ultimately used another broker. Also at that time, Harrington began looking for a buyer for his Able stock. Frank Nocito, a co-owner of a truck stop business called AAP, expressed interest in purchasing Harrington's stock.
Pursuant to the March 19, 2004 stock purchase agreement, AAP was to purchase Harrington's shares for $7.5 million. In addition to cash at the closing, Harrington was to be paid through a promissory note or notes bearing 8.5% interest. Each promissory note was to be secured by "a letter of credit, surety bond or other form of security acceptable to" him.
Closing occurred on December 15, 2004. Each promissory note set forth that payment was "secured by a bond of an issuer selected by the Maker, with an A.M. Best rating of at least B+, in the amount of the principal sum of this note." However, at closing, AAP had not yet obtained the surety bond. Harrington nevertheless closed and felt secure because AAP had pledged collateral; Nocito personally guaranteed payment pending obtaining the bond; and Harrington's shares were being held in escrow, to be returned upon non-payment.
AAP was unsuccessful in obtaining a surety bond. On December 27, 2004, Harrington contacted Sikora for assistance in obtaining a bond. He provided Sikora with some terms and conditions of his sale of his stock, including that the note be secured by "a letter of credit, surety bond or other form of security acceptable to the Seller," but not the requirement that the bond be B+ rated.
Sikora's expertise was primarily in casualty insurance. He had no expertise or experience in placing surety bonds, and whenever he placed bonds for clients, for example, fuel tax bonds or contract bonds, he would go through an intermediary such as Hartan Brokerage, Inc. (Hartan). Sikora told Harrington that he would see what he could do and that he would look for a market. Sikora contacted people in the industry, including William L. Minderjahn from Hartan, who explained that it would be difficult to find anybody willing to write such a bond. Nevertheless, Minderjahn said he would "test the market," and he asked to meet with Harrington.
Minderjahn met with Harrington and Sikora for lunch in Rockaway. Harrington understood that Minderjahn had expertise with respect to bonds and was going to assist in placing the surety bond. Once Minderjahn determined that Harrington needed a type of surety bond known as a financial guarantee bond, he knew he would be unable to place the bond because no licensed insurance company in New York or New Jersey was allowed to write such a bond. He told Sikora that he could not place the bond, but said he would call Paul Kushner, who Minderjahn knew had a reputation in the industry of placing difficult bonds utilizing offshore companies. Minderjahn had never previously done business with Kushner. Minderjahn then called Kushner, who purportedly had significant experience and expertise in placing surety bonds. Kushner concurred with Minderjahn's assessment that, for legal reasons, the only market for a financial guarantee bond was the offshore, unlicensed market.
On February 11, 2005, Harrington executed a service fee agreement with Hartan and Asset Indemnity Brokerage Corp. (Asset Indemnity), the terms of which he negotiated through Sikora.1 The agreement set forth that Harrington had engaged the services of Asset Indemnity and Hartan to serve as his "agent to make recommendations, give advice, review, evaluate, secure, negotiate and procure the placement of the bond or bonds . . . and to assist . . . in the preparation of any and all applications and other documentation which may be requested for procurement of the bond or bonds."
Nevertheless, even after executing the service fee agreement, Harrington relied upon Sikora. He never met with Minderjahn after the initial lunch meeting, never met with or spoke to Kushner, and he did not speak with anyone from the surety bond company. Communications were effected from Harrington or his counsel to Sikora, from Sikora to Minderjahn, from Minderjahn to Kushner, and from Kushner to the surety bond company.
Sikora admitted that he was one of Harrington's brokers with respect to placement of the bond, and that Harrington relied upon him to protect his interests, regardless of the service fee agreement. Minderjahn also conceded that he was "[t]echnically" a broker in connection with the 2005 surety bond, as was Kushner. Kushner, however, perceived Hartan as his client, and AAP as Hartan's client; he did not view Harrington or Able as his client, notwithstanding the service fee agreement.
Kushner was purportedly able to place a financial guarantee surety bond with United Assurance Co. (UAC), a foreign insurance company that is not licensed in any state and has no assets in the United States. At UAC, Kushner dealt with Bertus, a licensed insurance agent whom Kushner had known for twenty years. Bertus represented that he was serving as UAC's attorney-in-fact for the issuance of the surety bond. However, he admitted that in the past his authority had been revoked.
Kushner admitted that he did not investigate whether UAC was licensed in New York or New Jersey, and that this was an error. Indeed, he admittedly performed no analysis of UAC; he merely passed along UAC's financial statement and believed it was Minderjahn's role to do due diligence on the company. Similarly, Minderjahn did not investigate whether UAC was licensed in New York or New Jersey, or elsewhere in the United States; the circumstances of the transaction suggested to him that it was not, but he understood that the company had offices in the United States and did business here. After reviewing UAC's financial statement and its website, Minderjahn determined that it was an appropriate company to issue the bond. However, he relied on Kushner's expertise to do whatever was necessary in connection with the bond, and he did not see the final version of the bond until after the closing.
On February 10, 2005, Hartan faxed to Sikora a copy of UAC's December 31, 2003 audited financial statement. The statement reflected that in 1993, UAC was registered in Montserrat, West Indies, and that in 1999, it moved to the Republic of Grenada. It was not licensed to sell insurance in the United States, but was licensed to do so in Mexico and Nigeria.
Nevertheless, Sikora denied knowing that UAC was unlicensed in the United States. He believed Minderjahn had told him that it was licensed, and he relayed that information to Harrington. Although he admittedly had the ability to determine UAC's licensing status, he never did so. Sikora felt comfortable with the transaction because UAC seemed to be operating in a normal fashion, requesting typical information, documentation, and collateral.
For his part, Harrington stated that UAC's financial statement was not shared with him, and Sikora never told him that UAC was not an authorized insurer in the United States, or that the bond was very risky. To the contrary, according to Harrington, Sikora was "quite excited" about the UAC bond and presented it to him as "the best thing since sliced bread."
Harrington attempted to establish that Sikora erroneously informed him that UAC possessed a B++ rating. In this regard, he noted that in February 2005, while Sikora was attempting unsuccessfully to assist Harrington in financing the bond premium, a person from Sikora's office wrote a letter to the financing company, and the letter set forth that UAC was a subsidiary of United Security Assurance Company of Pennsylvania, which had an AM Best rating of B++. However, Sikora did not recall the letter, and he denied ever telling Harrington that UAC was B++ rated.
On February 16, 2005, Harrington closed on the bond with UAC, at the New York City offices of AAP's attorneys. Harrington's attorneys were present at the closing. Sikora traveled to the closing with Harrington, and provided the attorneys with any necessary documents. Harrington paid him for his time. Bertus signed the bond, representing he was the attorney-in-fact for UAC. Although the documentation reflects that he appointed himself attorney-in-fact, he claimed he had authorization to do so from the company. The bond had a term of two years. The bond documents noted that UAC's principal office was in Georgetown, Grenada, and that it had offices in California and Pennsylvania.
At closing, Harrington released Nocito from his personal guaranties, released the collateral pledged by AAP, and received an amended promissory note, which provided that the outstanding amount would be due if the surety bond was not extended after its two-year term. Harrington stated that he would not have given up his collateral in exchange for the bond if he had known the bond was so risky.
Harrington paid the bond premium of $525,000 to Bertus. Bertus kept about half of the premium money for himself, claiming that he was entitled to it as repayment of a loan he had made to UAC. Bertus paid Kushner a $62,000 commission from the premium, and wired $200,000 to the account of International Synergy Holding Company, in California, which he stated was the parent corporation of UAC. There is no documentary evidence that Bertus sent any documentation of the bond transaction to UAC, although he was "sure" he did.
Harrington paid Hartan the negotiated service fee of $50,000. Hartan retained $7084, and Asset Indemnity received $42,916. Harrington also paid a commission of $52,500 (ten percent of the bond premium), of which Sikora received $30,800, and Hartan received $21,700; the division of fees and commissions had been the subject of negotiations among the insurance brokers. Sikora collected the commission, and a portion of the premium, and distributed the monies accordingly.
After the bond was executed, in March 2005, Sikora also assisted Harrington with respect to the escrow of his Able stock.
In early 2006, when principal became due under the terms of the promissory note, AAP continued paying interest only, and did not make principal payments. AAP pursued alternate financing that would have allowed Harrington to be paid, but those attempts were unsuccessful. While AAP was pursuing this alternate financing, Harrington began communicating directly with Bertus. In 2006 and 2007, Harrington also communicated with Sikora and Bertus about extending the bond. During these exchanges, Harrington made Bertus aware of AAP's non-payment of principal.
Harrington worked with Sikora to effect an extension of the surety bond, but he was dissatisfied with the bond extension offer received through Sikora. Harrington began dealing with Bertus directly, and was able to extend the bond by two years at a cost of $125,000. Harrington paid Sikora $5000 for the bond extension, although Sikora stated that he never requested any payment. Bertus presented business opportunities to Sikora, but Sikora viewed them skeptically, perceiving Bertus a "high flier," and someone who "could talk a dog off a meat wagon."
Harrington continued communicating with Nocito, attempting to get paid, without success. Continued attempts to find financing or a buyer for AAP also were unsuccessful. On May 29, 2007, Harrington wrote to Bertus and requested payment under the surety bond because AAP was failing to make monthly principal payments, and its interest payments were untimely. Two days later, on May 31, Harrington unsuccessfully attempted to retrieve his stock from the escrow due to AAP's non-payment of principal. On June 11, Harrington's attorneys sent a letter to AAP declaring it in default based upon its failure to pay principal under the terms of the promissory note, and demanding full payment of all amounts due and owing. Harrington did not receive payment from AAP or UAC. UAC later denied that Bertus had any authority to act on its behalf, which Bertus disputed. Harrington filed suit against both companies. AAP filed for bankruptcy, and UAC defaulted.
Harrington filed the present litigation in December 2009. In March 2011, the Sikora defendants filed a motion for leave to file a third-party complaint against Bertus, which plaintiff opposed. By order dated May 4, 2011, the court granted the motion and allowed the proposed third-party complaint.
In their third-party complaint, the Sikora defendants asserted claims against Bertus for fraud and negligence, as well as contribution and indemnification. Bertus did not answer, so the Sikora defendants requested that the court enter a default.
In October 2011, plaintiff moved to bar apportionment of liability to Bertus, which the Sikora defendants opposed. By order dated November 4, 2011, the court denied the motion. All defendants settled before trial except for the Sikora defendants and third-party defendant Bertus.
A jury trial was held between April 2 and 12, 2012. The parties stipulated as to damages ($4.75 million), so trial was as to liability only, and the Sikora defendants pursued only their third-party claim against Bertus.
At trial, Harrington's insurance expert, Frank Siegel explained surety bonds and insurance producers. "Surety bonds are a guarantee by the surety that if the principal does not perform its obligation under the contract that the principal has with the obligee, the surety will step into the place of the principal and complete the contract." Insurance producers receive commissions for placing surety bonds, which are built into the premium. In addition, insurance producers may charge a service fee to cover the cost of placing the bond. In order to receive a fee, the insurance producer must be licensed, and the fee agreement has to be in writing and specifically state the services provided in exchange for the fee.
Siegel stated that placing a policy or bond with an ineligible unauthorized surplus lines carrier was "a very risky proposition," because if the company failed, or did not pay a claim, the company had "no place of domicile in the [United States]. So if they're an offshore company, there's no jurisdiction" to pursue them.
Siegel stated that the New Jersey State Department of Insurance has ordered that, in the case of a policy issued by an ineligible authorized surplus lines carrier, or an ineligible unauthorized surplus lines carrier, prior to binding, a document must be presented to the insured, acknowledging that they know the policy is being placed with a surplus lines carrier, and that there is no guarantee fund applicable to the policy. In other words, such carriers are not subject to the more stringent rules and regulations applicable to admitted carriers, including financial stability and management expertise requirements. And with ineligible unauthorized surplus lines carriers, if the company fails, there is no guarantee fund: "You're on your own."2
In terms of Harrington's claims against the insurance producer defendants, Siegel opined that all three producers (Sikora, Hartan and Asset Indemnity) breached the standard of care owed to him. As for Sikora, he was the retail producer, acting as Harrington's representative for the insurance placement. His obligation was to place the coverage in accordance with Harrington's desires; that is, to obtain the appropriate insurance, within the limits requested by Harrington, from an insurance company capable of paying a claim.
Hartan and Asset Indemnity also owed a duty of care to Harrington because they signed a service fee agreement with him. According to Siegel, however, the fee agreement did not in any way affect Sikora's duties and obligations to Harrington because, as the retail insurance broker, Sikora remained primarily responsible for correct placement of the insurance.
According to Siegel, the term "facilitator" was not a term of art used in the insurance industry, nor was the term "referrer." Moreover, there was no way an insurance producer could have substantial contact with the policyholder and have no duty whatsoever to him. Thus, it was not acceptable for Sikora to merely parrot information between Hartan and Harrington. Even though Sikora was not an expert in bonds, as a licensed insurance producer whose insurance office, Sikora Associates, had surplus lines authority, he had an obligation to attempt to place the bond, which he did not do. Sikora also had the ability to determine UAC's status as an ineligible unauthorized surplus lines carrier. And finally, Sikora had the ability to look at the bond form and determine if it complied with Harrington's expressed needs. Sikora had a duty to inform Harrington that UAC was an ineligible unauthorized carrier, that the bond did not comply with Harrington's needs, and to advise him that the bond being placed with UAC was very risky. It was not sufficient for Sikora to simply provide Harrington with financial information about UAC.
Sikora's insurance expert, Jeffrey Perlman, opined that Sikora "did not deviate from standards of practice of a licensed insurance producer in New Jersey." With respect to the 2005 bond, Perlman noted that Sikora informed Harrington that he was not an expert in surety bonds, but he would introduce him to someone who might be able to help. Minderjahn, in turn, contacted Kushner, who was able to place the bond. And Harrington executed a service fee agreement with Hartan and Asset Indemnity, Minderjahn's and Kushner's companies.
According to Perlman, the existence of a service fee agreement was unusual, and it gave greater responsibility to Hartan and Asset Indemnity than they otherwise would have had. Without the agreement, those companies would have been acting merely as wholesale brokers. However, pursuant to the agreement, they were acting as Harrington's agents. Typically, Sikora would have been acting as Harrington s agent. In this case, however, Sikora was relegated to "the bottom of the chain," relaying information to and from Harrington.
In Perlman's view, with respect to the 2005 bond placement, Sikora acted merely as a liaison, and as Harrington's friend, rather than in his capacity as a licensed insurance producer. Therefore, he owed no duty to Harrington other than to perform his liaison duties, and he was compensated for those efforts. In Perlman's opinion, Hartan and Minderjahn acted as brokers, and Asset Indemnity and Kushner acted as both brokers and agents. Perlman stated that this was a "[m]ost unusual" transaction. It was not something he had ever seen before. He conceded that, if Sikora received a "commission" for his services, then he would probably be considered an insurance producer with respect to the transaction. And he conceded that, prior to the service fee agreement being executed, Sikora was acting as Harrington's broker.
With respect to the bond renewal, Perlman explained that in 2006 and 2007, Harrington interacted directly with Bertus. Thus, the $5000 payment Harrington made to Sikora was sui generis, as there had been no fee agreement, Sikora had not acted as an agent, and Sikora had not presented Harrington with a bill.
During trial, the court denied plaintiff s motion to exclude testimony from Perlman on the ground that his opinions were inadmissible net opinions. At the close of evidence, plaintiff moved for a directed verdict to dismiss the third-party complaint against Bertus, which the court denied.
The jury found in favor of plaintiff and apportioned liability as follows: Sikora defendants, 7%; Hartan Brokerage and Minderjahn, 25%; Asset Indemnity Brokerage and Kushner, 38%; and Bertus, 30%.
Harrington moved for a new trial, which the Sikora defendants opposed. The court denied the motion by order dated May 29, 2012. The court then entered judgment in accordance with the jury's verdict. The court dismissed all claims asserted against the settling defendants, and all claims asserted against third-party defendant Bertus, who had filed for bankruptcy protection. On July 13, 2012, plaintiff filed a notice of appeal, and subsequently filed an amended notice of appeal on July 23, 2012.
We owe no deference to the trial court's "'interpretation of the law and the legal consequences that flow from established facts.'" Town of Kearny v. Brandt, 214 N.J. 76, 92 (2013) (quoting Manalapan Realty v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)). We are not bound by the trial court's application of law to the facts or its evaluation of the legal implications of facts where credibility is not in issue. State v. Harris, 211 N.J. 566, 578-79 (2012). Although a trial court's factual findings are ordinarily given great deference, pure legal decisions are subject to plenary review. N.J. Div. of Youth & Family Servs. v. R.M., 411 N.J. Super. 467, 474 (App. Div. 2010).
Plaintiff argues the court erred by denying his motion to bar apportionment of liability to Bertus. Plaintiff contends Bertus was not a "joint tortfeasor" as to plaintiff. Although we disagree, this does not end our inquiry. Plaintiff also asserts that, even if Bertus was a joint tortfeasor, the Sikora defendants owed plaintiff a duty to protect him from Bertus's fraud. Harrington further contends that the court erred in denying his motion to exclude Perlman's testimony as inadmissible net opinions.
We first examine the duty of the Sikora defendants. An insurance broker owes a fiduciary duty of care to the insured. Aden v. Fortsh, 169 N.J. 64, 78 (2001); Carter Lincoln-Mercury, Inc. v. Emar Group, Inc., 135 N.J. 182, 189 (1994). "A broker is not an 'order taker' who is responsible only for completing forms and accepting commissions." Aden, supra, 169 N.J. at 82. Thus, "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." Id. at 79. "Liability resulting from the negligent procurement of insurance is premised on the theory that a broker 'ordinarily invites [clients] to rely upon his expertise in procuring insurance that best suits their requirements.'" Ibid. (quoting Rider v. Lynch, 42 N.J. 465, 477 1964)). In that regard,
[o]ne who holds himself out to the public as an insurance broker is required to have the degree of skill and knowledge requisite to the calling. When engaged by a member of the public to obtain insurance, the law holds him to the exercise of good faith and reasonable skill, care and diligence in the execution of the commission. He is expected to possess reasonable knowledge of the types of policies, their different terms, and the coverage available in the area in which his principal seeks to be protected.
[Rider, supra, 42 N.J. at 476.]
A plaintiff can establish a prima facie case of negligence against a broker if: (1) the broker neglects to procure the insurance; (2) the broker secures a policy that is either void or materially deficient; or (3) the policy does not provide the coverage the broker undertook to supply. President v. Jenkins, 180 N.J. 550, 569 (2004); Rider, supra, 42 N.J. at 476.
Generally, "a duty arises when there is a special relationship between the insurance agent and the client which indicates reliance by the client on the agent." Sobotor v. Prudential Prop. & Cas. Ins. Co., 200 N.J. Super. 333, 342 (App. Div. 1984). In Sobotor, the court found that by asking for the "best available" insurance, the insured put the agent on notice that he was relying on the agent's expertise to obtain the desired coverage. Id. at 336-39. Here, as in Sobotor, the duty arose based on the "special relationship" between plaintiff and defendant, namely the Sikora defendants' agreement to undertake the duty of finding a company to issue the surety bond, and Harrington's reliance on the Sikora defendants' expertise to do so. See also Rider, supra, 42 N.J. at 481-82 (duty encompasses claims alleging that the agent or broker obtained insurance that failed to meet the insured's needs).
Whether the broker's duty in the insurance context translates to the surety context before us, requires that we consider in the first instance whether surety relationships are equivalent to insurance relationships. There are certainly many similarities between the two. Like insurance relationships, surety relationships have three central players: the principal obligor, the insured (or obligee of the surety bond), and the insurer (or surety). See In re Liquidation of Integrity Ins. Co., 281 N.J. Super. 364, 374 (App. Div. 1995), aff'd 147 N.J. 128 (1996)).
Indeed, in many contexts New Jersey explicitly equates surety bonds with insurance policies. For example, the New Jersey Insurance Producer Licensing Act of 2001, N.J.S.A. 17:22A-26 to -48 expressly defines "insurance" as surety insurance. N.J.S.A. 17:22A-28. Additionally, the insurance rates statute also defines "policy of insurance" to include surety bonds. N.J.S.A. 17:29A-1(e). Also, suretyship is considered a form of insurance. Highlands Ins. Co. v. Hobbs Grp., LLC., 373 F.3d 347, 352 (3d Cir. 2004). Because surety is insurance, surety bondholders are equivalent to insurance policyholders. See Aetna Cas. & Sur. Co. v. Int'l Re-Insurance Corp., 117 N.J. Eq. 190 (Ch. 1934).
As a threshold issue, the Sikora defendants would be entitled to contribution from Bertus only if he was a joint tortfeasor, pursuant to the Joint Tortfeasors Contribution Law, N.J.S.A. 2A:53A-1 to -5 (JTCL). Under the JTCL, "'joint tortfeasors' means two or more persons jointly or severally liable in tort for the same injury." N.J.S.A. 2A:53A-1. "'It is common liability at the time of the accrual of plaintiff's cause of action which is the Sine qua non of defendant's contribution right.'" Cherry Hill Manor Assocs. v. Faugno, 182 N.J. 64, 72 (2004)(quoting Markey v. Skog, 129 N.J. Super. 192, 200 (Law Div. 1974)).
We agree with the trial judge's determination that Bertus was a joint tortfeasor. However, we disagree with his conclusion that "Sikora's belief that the other brokers were responsible for ensuring the credibility of the insurer coupled with the fact that Bertus held himself out as attorney in fact and UAC came recommended by Hartan suggests that [p]laintiff's potential injury was not so foreseeable as to preclude apportionment."
As we recently reiterated, "[p]ro rata apportionment of liability among negligent and intentional tortfeasors is appropriate based upon the 'percentages of fault assigned by the trier of fact.'" Innes v. Marzano-Lesnevich, 435 N.J. Super. 198, 247 (App. Div. 2014)(quoting Blazovic v. Andrich, 124 N.J. 90, 105, 107-12 (1991)). Nevertheless, "an exception to the general rule applies when the duty of one encompassed the obligation to prevent the specific misconduct of the other." Ibid. (internal quotation marks omitted).
Here, the trial judge correctly recognized that application of this exception relies upon both the foreseeability of the "specific misconduct" and its "adequate causal relationship" to the duty imposed on the other tortfeasor to prevent it. However, here a duty on the part of the Sikora defendants arose because the facts indicate a special relationship between the insurance broker, the Sikora defendants, and the client, Harrington, which indicates reliance by the client on the broker. As a result, the Sikora defendants owed a fiduciary duty of care to Harrington.
Once the Sikora defendants agreed to undertake the duty of finding a company to issue the surety bond, they undertook the duty to prevent the specific misconduct which damaged Harrington, namely the procurement of a policy that was either void or materially deficient. The record is clear that the Sikora defendants did not undertake even the minimum due diligence necessary to protect their client's interest.
As a result, Sikora defendants failed to prevent the "specific misconduct," the issuance of an unenforceable surety bond. Moreover, based upon the evidence adduced at trial, that specific harm was entirely foreseeable. Therefore, we conclude that the facts require an exception to the general rule of pro rata apportionment and no apportionment to Bertus.
Since the initial allocation of liability may have been tainted by the wrongful inclusion of Bertus on the verdict sheet, we remand for retrial of liability allocation as among the remaining defendants. See, e.g., Mavrikidis v. Petullo, 153 N.J. 117, 148 (1998)(remanding for a reallocation trial because "since the jury improperly considered [one defendant], its ability to accurately allocate the percentages of fault attributable to [the other defendants] was hindered"); Riley v. Keenan, 406 N.J. Super. 281, 301 (App. Div.)(vacating judgment against defendant that should not have been included on verdict sheet, and remanding "for retrial of liability allocation as between the remaining defendants"), certif. denied, 200 N.J. 207 (2009); Higgins v. Owens-Corning Fiberglas Corp., 282 N.J. Super. 600, 608-10 (App. Div. 1995)(new trial warranted based upon trial court's error in placing on verdict sheet a non-party who was not liable in the action because "[n]o one can say how liability would have been allocated had [the non-party] not been on the verdict sheet").
We now address plaintiff's contention the trial court erred and a new trial was warranted, by admitting Perlman's net opinion arguing that he was harmed because the jury relied upon the improper opinion to apportion only seven percent liability to Sikora.
We review the court's evidentiary ruling for an abuse of discretion. Pomerantz Paper Corp. v. New Cmty. Corp., 207 N.J. 344, 371-72 (2011); Hisenaj v. Kuehner, 194 N.J. 6, 12, 16 (2008). An evidentiary error will not warrant reversal unless it resulted in a manifest denial of justice. Green v. N.J. Mfrs. Ins. Co., 160 N.J. 480, 492 (1999). See also R. 2:10-2. Net opinions, defined as bare conclusions, not supported by factual evidence, are inadmissible. Pomerantz, supra, 207 N.J. at 372; Buckelew v. Grossbard, 87 N.J. 512, 524 (1981); Riley, supra, 406 N.J. Super. at 295. The net opinion rule requires "that the expert give the why and wherefore that supports the opinion, rather than a mere conclusion." Pomerantz, supra, 207 N.J. at 372 (internal quotation marks omitted).
Perlman testified that, in his opinion, Sikora did not act as a broker or an agent in the transaction except for the time before plaintiff signed the service fee agreement with Hartan and Asset Indemnity. According to Perlman, because Sikora did not serve plaintiff in his capacity as a licensed insurance producer, he had no duty to plaintiff other than to pass information back and forth. The judge determined that:
This court is satisfied that Perlman demonstrated a proper basis for his opinions as well as sufficient expertise in the insurance field to comment on a transaction of this nature. The jury was free to weigh any apparent discrepancy in the testimony of Sikora and Perlman in their deliberations. For the foregoing reasons, Plaintiff has not demonstrated that the testimony of Perlman resulted in a miscarriage of justice or resulted in unfair prejudice capable of warranting a new trial.
We determine that there was no abuse of discretion in allowing Perlman's testimony.
However, Perlman testified that the money Sikora received was for his efforts as a liaison and facilitator of the transaction, but not for any work he performed as an agent or broker, in his capacity as an insurance producer. The law, however, does not support this opinion. Under N.J.S.A. 17:22A-29, "[a] person shall not sell, solicit or negotiate insurance in this State unless the person is licensed for that line of authority in accordance with this act." N.J.S.A. 17:22A-28, defines the term "negotiate" as
the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract or policy of insurance concerning any of the substantive benefits, terms or conditions of the contract or policy, provided that the person engaged in that act either: sells insurance or obtains insurance from insurers for purchasers.
Further, under N.J.S.A. 17:22A-41(b), "[a] person shall not accept a commission, service fee, brokerage or other valuable consideration for selling, soliciting or negotiating insurance in this State if that person is required to be licensed under this act and is not so licensed." However, based upon the entire trial record, this particular testimony from Perlman, to which no objection was made, was not so prejudicial as to result in a manifest denial of justice warranting reversal of the liability verdict. Such testimony should not be presented at the retrial of liability allocation, however.
Reversed and remanded for proceedings consistent with this opinion. We do not retain jurisdiction.
1 Hartan and Asset Indemnity had requested a service fee of around $90,000, which was reduced to $50,000.
2 N.J.S.A. 17:22-6.45 provides in pertinent part:
Whenever any insurance risk or any part thereof is placed with an unauthorized insurer, as provided herein, the policy, binder or cover note shall bear conspicuously on its face in boldface type the following notation:
"All or some of the insurers participating in this risk have not been admitted to transact business in the State of New Jersey, nor have they been approved as a surplus lines insurer by the insurance commissioner of this State. The placing of such insurance by a duly licensed surplus lines agent in this State shall not be construed as approval of such insurer by the insurance commissioner of the State of New Jersey. Such insurance is not covered by the New Jersey Property-Liability Insurance Guaranty Association or the New Jersey Surplus Lines Insurance Guaranty Fund." All other provisions of this Title, except the provisions of P.L.1984, c.101 (C.17:22-6.70 et seq.), shall apply to such placement the same as if such risks were placed with an eligible surplus lines insurer.