ERNEST EHRHARDT v. AMGUARD INSURANCE COMPANY
Annotate this CaseNOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2128-16T2
ERNEST EHRHARDT and BODY
MIND NUTRITION,
Plaintiffs-Appellants,
v.
AMGUARD INSURANCE COMPANY,
Defendant,
and
KAPATOES INSURANCE SERVICES and
MARK KAPATOES,
Defendants-Respondents.
_________________________________
Submitted November 27, 2017 – Decided December 7, 2017
Before Judges Sabatino and Whipple.
On appeal from Superior Court of New Jersey,
Law Division, Somerset County, Docket No. L-
0424-15.
Merlin Law Group, PA, attorneys for appellants
(Verne A. Pedro, on the briefs).
Zarwin Baum DeVito Kaplan Schaer Toddy, PC,
attorneys for respondents (Lisa Z. Slotkin,
of counsel and on the brief; Eitan D. Blanc,
on the brief).
PER CURIAM
Plaintiffs appeal from the trial court's entry of summary
judgment dismissing their claims against defendants Kapatoes
Insurance Services, a licensed insurance producer, and Mark
Kapatoes (collectively, "Kapatoes"). The dismissal was based on
plaintiffs' failure to serve an Affidavit of Merit ("AOM"),
pursuant to
N.J.S.A. 2A:53A-26 to -29, attesting that defendants'
conduct did not comport with applicable professional standards of
care.
The trial court rejected plaintiffs' argument that no AOM is
needed in this case because their claims against Kapatoes are
allegedly founded solely upon "common knowledge" principles that
require no supporting opinion from an insurance expert. For the
reasons that follow, we affirm.
I.
Plaintiff Ernest Ehrhardt is the owner and operator of a
medical practice and nutritional health business known as Body
Mind Nutrition, which is the co-plaintiff in this case. The
businesses operate out of two commercial properties in Basking
Ridge owned by plaintiffs. Prior to April 2012, plaintiffs'
businesses and property had been insured by certain insurance
companies. That prior coverage included, among other things,
2 A-2128-16T2
coverage for business interruption, "extra expense," and personal
property losses.
Upon learning that their prior insurer would no longer
continue coverage, plaintiffs contacted Kapatoes to obtain
replacement coverage with a different insurer. After a series of
e-mail exchanges and other communications, Kapatoes procured for
plaintiffs a commercial business insurance policy with co-
defendant, Amguard Insurance Company. The Amguard policy was
effective for the one-year period from April 21, 2012 through
April 21, 2013. Plaintiffs apparently paid the premiums due under
that Amguard policy.
In October 2012, during the Amguard policy period, Superstorm
Sandy struck New Jersey. The storm caused considerable damage to
plaintiffs' business and property. Plaintiffs have estimated
their damages from the storm to exceed $100,000. Accordingly,
they presented a claim to Amguard for their losses.
Amguard paid plaintiffs only $8,911.10, a fraction of the
claimed losses. Amguard asserted that the remaining portion of
plaintiffs' damages were not covered under the terms of its policy.
Among other things, Amguard determined that a portion of
plaintiffs' claims was for excluded pre-existing damage, that
losses resulting from off-site utility interruption were not
covered, and that losses to inventory and business-related
3 A-2128-16T2
personal property likewise were not covered. In addition, Kapatoes
explained to plaintiffs that, although their previous insurer may
have covered such losses, the Amguard policy did not.
In April 2015, plaintiffs filed a complaint in the Law
Division against Amguard and Kapatoes. In Count One, plaintiffs
sought a declaratory judgment ruling that their claimed losses
were covered under the Amguard policy. In Count Two, plaintiffs
asserted breach of contract claims against Amguard. In Counts
Three and Four, plaintiffs sought compensatory damages against
Kapatoes arising from a failure to procure proper coverage. Count
Three asserted negligence and Count Four asserted breach of
contract.
Specifically, in Count Three, plaintiffs alleged that if
"Amguard is correct in its determination and denial [concerning a
lack of coverage] . . . , then Defendant Kapatoes was liable for
failing and neglecting to advise and inform Plaintiffs that the
Insured Business was not adequately, properly and fully covered
for property damage and business interruption loss, including
business personal property, as [was] required and requested."
Plaintiffs further alleged in Count Three that Kapatoes breached
their duty to procure proper coverage, and to inform and advise
them about the coverage obtained. As a direct proximate result,
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plaintiffs were allegedly deceived about the scope of the actual
insurance coverage, and were thereby harmed.
In Count Four of their complaint, alleging a breach of
contract, plaintiffs contended they had requested and Kapatoes had
agreed to procure from an insurer "replacement coverage . . . as
comprehensive as [the policy] previously issued to [them] through
prior insurance carriers." The alleged breach of contract caused
plaintiff to be wrongfully deprived of an opportunity to purchase
the "requested and required" coverage.
As the litigation progressed, plaintiffs voluntarily
dismissed their claims against Amguard.1 Plaintiffs did not obtain
and serve an AOM with respect to Kapatoes, the remaining
defendants. Although plaintiffs acknowledge that the Kapatoes
firm as a licensed insurance producer and its principal Mark
Kapatoes are within the ambit of the AOM statute, they maintain
their claims against Kapatoes involve matters of "common
knowledge" within the ken of a jury and, as such, do not require
the service of an AOM.
It is undisputed that plaintiffs, having deliberately taken
the position that no AOM is required to support their particular
1
Given the dismissal, we need not address here the coverage and
policy exclusion issues implicated under the Amguard policy.
5 A-2128-16T2
claims against Kapatoes, did not serve an AOM within the 120-day
maximum period prescribed under
N.J.S.A. 2A:53A-27.2 After the
statutory 120 days expired, defendants moved to dismiss the claims
against them because of the lack of an AOM. Plaintiffs opposed
the motion, relying on the common knowledge doctrine. As part of
their opposition, plaintiffs' presented the court with copies of
various e-mails exchanged between January 2011 and June 2012 before
the Amguard policy began. The e-mails generally reflected the
efforts of Kapatoes to obtain a new policy for plaintiffs.
Although a representative of plaintiffs appears to have been copied
as a recipient on some of those e-mails, the parties have not
contended that any of the e-mails emanated specifically from
plaintiffs.
After hearing oral argument, the trial court granted
defendants' motion to dismiss, based on the lack of an AOM. The
court's reasons were detailed in a comprehensive written opinion
issued by Judge Thomas C. Miller on December 2, 2016.
With respect to plaintiffs' negligence allegations in Count
Three, Judge Miller characterized these as being "professional
2
We note that no conference with the court took place pursuant to
Ferreira v. Rancocas Orthopedic Associates,
178 N.J. 144 (2003),
before or after the AOM deadline passed. However, we do not
believe that any such Ferreira conference in this matter would
have made a difference, in light of plaintiffs' steadfast legal
position that no AOM is necessary.
6 A-2128-16T2
negligence" claims falling within the scope of the AOM statute.
The judge noted the undisputed fact that Kapatoes, as an insurance
broker and producer, is expressly deemed by the Legislature to be
a "licensed person" subject to the AOM requirement. See
N.J.S.A.
2A:53A-26(o). As the judge observed, "[t]he purpose of the
[Legislature's] inclusion of insurance producers within the realm
of the protection offered by the AOM requirements is based upon
the proposition that the intricacies of the insurance business are
generally thought to be beyond the realm of understanding of the
average juror."
Judge Miller rejected plaintiffs' reliance on the common
knowledge doctrine. In doing so, the judge closely examined
plaintiffs' allegations of negligence, set forth in Count Three
of the complaint. The judge pointed out that plaintiffs
specifically asserted that Kapatoes owed them "a duty to exercise
reasonable skill, diligence and good faith in advising them and
procuring specific insurance coverage on their behalf." Given the
tenor of those claims, the judge declared them to be "exactly the
type that requires an Affidavit of Merit."
The judge additionally dismissed plaintiffs' breach of
contract claims in Count Four. Upon examining the nature of these
allegations, the judge determined that they, too, implicated
professional standards of care within the insurance producer
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business and were "tantamount" to the claims of negligence. As
the judge elaborated:
At issue in this claim is whether
Defendants breached the standard of care by
not advising and assisting Plaintiff to
procure an insurance policy which provided
appropriate coverage for Plaintiff's business
needs. What the standard of care requires of
a broker or agent in regard to determining how
specific clauses contained in complex
insurance policies relate to specific business
needs is not a matter within the province of
a layperson's common knowledge. Nor is it
within the province of a layperson's common
knowledge to determine whether an insurance
agent breached the standard of care in regard
to his analysis and determination of whether
a particular insurance policy's complex
provisions satisfied his client's needs.
Whether the standard of care required
Defendants to procure insurance with different
policy terms, including exclusions, based on
Defendant's knowledge of Plaintiff's business
is precisely the type of issue that requires
an Affidavit of Merit and expert testimony.
Plaintiff's claims, even if couched as a
breach of contract claim, require proof of a
deviation from a professional standard of care
for insurance producers, and therefore
required an Affidavit of Merit to be filed.
[(Emphasis added).]
Lastly, the motion judge rejected plaintiffs' request to be
granted more time to obtain and serve an AOM. The judge noted in
this regard that nineteen months had passed since the filing of
the complaint, plaintiffs had never requested an extension to
serve an AOM, discovery had already ended, and plaintiffs never
8 A-2128-16T2
moved to extend discovery. The judge further observed that the
court's failure to hold a Ferreira conference did not toll the
deadline for an AOM in the context presented here.
II.
Plaintiffs now appeal, arguing that the trial court
misapplied the common knowledge exception in concluding that their
negligence and breach-of-contract claims necessitated an AOM.
We review the legal issues presented under the AOM statute
de novo. Triarsi v. BSC Grp. Servs. LLC,
422 N.J. Super. 104, 113
(App. Div. 2011) (citing Manalapan Realty L.P. v. Twp. Comm. of
Manalapan,
140 N.J. 366, 378 (1995)). Having done so, we affirm
the trial court's dismissal of plaintiffs' claims, substantially
for the thoughtful reasons expressed in Judge Miller's opinion.
We add only a few comments.
Our courts have recognized that not all lawsuits against
licensed professionals require an AOM. Case law has applied a
"common knowledge" exception to the AOM requirement in discrete
situations where expert testimony is not needed to establish
whether the defendants' "care, skill or knowledge . . . fell
outside acceptable professional or occupational standards or
treatment practices." Hubbard v. Reed,
168 N.J. 387, 390 (2001).
Those situations are limited to where the jurors' knowledge as
laypersons suffices to enable them, using their ordinary
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understanding and experience, to assess a defendant's alleged
negligence without the benefit of specialized knowledge of
experts. Id. at 394. "[T]he threshold of merit should be readily
apparent from a reading of the plaintiff's complaint." Id. at
395.
Thus, in Hubbard, the Supreme Court ruled that the common
knowledge exception applied to a negligence claim against a dentist
who had pulled the wrong tooth. Id. at 396-97. As the Court
instructed in Hubbard, the common knowledge exception is construed
narrowly in order to avoid non-compliance with the legislative
objectives of the AOM statute. Id. at 397. See also Triarsi,
supra,
422 N.J. Super. at 116-17 (holding that the common knowledge
exception did not apply to breach of fiduciary duty claims asserted
against an insurance broker and an agent because those claims
implicated professional standards of care, but the exception did
apply to claims for breach of a "special relationship" with respect
to the defendants' conduct in allowing plaintiff's life insurance
policy to be cancelled for non-payment).
Here, the trial court logically found that plaintiffs'
negligence claims against Kapatoes substantially encompassed
professional standards of care within the insurance producer
industry, and are not amenable to fair evaluation by lay jurors
merely based on their common knowledge.
10 A-2128-16T2
The selection of appropriate coverage for an insured
business, and an understanding of the complexities of insurance
policy definitions, exclusions, and exceptions, is patently a
subject outside of the understanding of lay jurors lacking the
benefit of expert testimony. Indeed, the insurance business in
our State is highly regulated by a complex and intricate scheme
of statutes and regulations. See generally
N.J.S.A. 17:1-1 to
17:52-27; N.J.A.C. 11:17-1.1 to -7.7. See also Triavsi, supra,
422 N.J. Super. at 115-16. The propriety of an insurance
producer's conduct in selecting and obtaining appropriate coverage
for an insured's business – involving, for example, such technical
concepts as "off-site business interruption" – manifestly calls
for expert testimony. See N.J.R.E. 702.
We reach the same conclusion respecting plaintiffs' breach
of contract claims. The label applied by the plaintiffs to those
claims as being "contract-based" rather than "negligence-based"
is not dispositive. See Couri v. Gardner,
173 N.J. 328, 340
(2002). What is dispositive to the AOM analysis is the actual
substance of the claims, and the extent to which the claims
fundamentally concerns whether the professional defendant's
conduct "fell outside acceptable professional or occupational
standards." Id. at 334.
11 A-2128-16T2
We agree with Judge Miller that plaintiffs' contract claims
here fall within the classification requiring an AOM. We are
mindful that Count Four alleges that plaintiffs sought coverage
"as comprehensive as those [in the policies] previously issued"
to them. However, the assessment of what coverage in a certain
insurance policy is equally "comprehensive" as the coverage
provided in another insurer's policy can readily entail a
sophisticated assessment of policy-specific language, definitions,
exclusions, exemptions, and the like. Lay jurors are simply not
equipped to make those assessments.
Moreover, plaintiffs have provided no contemporaneous
documentation, nor any motion affidavit, to establish that they
had specifically requested Kapatoes to furnish identical coverage
with a different insurer. As we noted, the e-mails provided in
the record do not appear to include any communications from
plaintiffs to Kapatoes making such an explicit request, nor any
reciprocal promise by Kapatoes to fulfill such request. In fact,
at least one of the e-mails suggests a desire to explore a
"cheaper" premium, indicating a possible willingness by the
insured to accept non-identical coverage for a lower cost. In any
event, plaintiffs have failed to demonstrate that these issues of
replacement coverage can be litigated fairly and sensibly in the
absence of supporting expert opinion.
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Finally, we affirm the trial court's denial of an extension
of time for plaintiffs to obtain an AOM. This is not a situation
in which plaintiffs reasonably could have been caught off-guard
by a novel interpretation of an unsettled question of law. Cf.
Shamrock Lacrosse, Inc. v. Klehr, Harrison, Branzburg & Ellers,
LLP,
416 N.J. Super. 1, 28-29 (App. Div. 2010). Instead, this is
a situation in which the established law is clear, and where the
need for an AOM should have been apparent from the outset.
Affirmed.
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