Plaintiff filed an amended complaint naming both Darnell M. and Darnell R. Thompson, GRM, LGI, American Transports Insurance Corp. (ATIC) and Short Term Auto Rental Incorporated (Short Term) as defendants. In addition to the negligence count, plaintiff alleged: 

• He was a third-party beneficiary of the SLI policy purchased by Thompson
• GRM violated the Consumer Fraud Act, N.J.S.A. 56:8-1 to -184 (the CFA), by “falsely represent[ing] that … plaintiff … would be indemnified for losses and damages arising from the use and operation of the rental vehicle” by Thompson 
• Common law fraud against GRM 
• All defendants violated the Racketeer Influenced and Corrupt Organizations statute, N.J.S.A. 2C:41-1 to -6.2 (RICO). 

Defendants answered the amended complaint. No answer was filed on behalf of either Thompson, ATIC or Short Term. Defendants were granted leave to deposit $15,000, the policy limits under the LGI policy, with the court. Defendants eventually moved for summary judgment on their own behalf and on behalf of Darnell M. Thompson, claiming the amended complaint was filed beyond the statute of limitations.

The motion judge, noting discovery had ended, concluded that plaintiff “ha[d] to present something more” regarding defendants' potential liability. He observed that GRM had produced a policy procured from ATIC, and, despite plaintiff's assertion that the policy was “a sham,” the judge concluded plaintiff failed to “present facts” permitting an inference that the policy “[wa]s not a real policy” and granted summary judgment.

Plaintiff first contends that it was error to grant summary judgment on his third-party beneficiary claim because GRM procured “an insurance policy with a nonexistent carrier that [wa]s not authorized to do business in the State of New Jersey.” Intrinsic to this argument was plaintiff's claim that GRM acted as an insurance broker or agent in procuring the SLI policy.

Related: Read an article by Richard Mintzer “History's Lesson.”

The record reveals that Thompson purchased the SLI policy when he rented the vehicle from GRM. He was charged an additional $8.95 per day for the coverage. Pursuant to the rental agreement, the vehicle was to be returned on June 11, 2007, the day before the accident.

It is undisputed that the LGI policy only provided liability coverage in the amount of $15,000 per person and $30,000 per accident. The SLI policy was furnished by ATIC, and was procured through an insurance broker, Paul Sweeney, who represented Cars.com and Cars Inc. A declaration page issued to GRM revealed that ATIC was headquartered in Pago Pago, American Samoa, and the limit of liability coverage under the SLI policy was $1 million.

Kathryn E. Coon, the owner of GRM, testified that she remitted premium payments for the SLI policy, although she could not produce documents to support the assertion at the deposition. There were no claims ever presented to GRM implicating the ATIC policy or any other SLI policy GRM had purchased. Coon was distressed over the problems that arose during this litigation regarding ATIC's policy, noting, “when I buy insurance, if I sign for something, I expect the insurance company to provide that coverage in a time of need.”

 It is universally accepted that an insured has a viable claim for professional negligence against an insurance broker or agent who fails to procure the policy requested. The duty imposed on a broker or agent includes an obligation to investigate the financial viability of the insurer. The duty of a broker or agent extends beyond the insured to those who “are within the zone of harm emanating from a broker's negligence.” However, every case is premised upon the professional duty owed by an insurance broker or agent. Therefore, in this case, plaintiff's claim against GRM rests upon a showing that it acted as an insurance broker or agent. 

GRM was in the business of renting cars, not selling insurance. GRM was itself the named insured on the ATIC policy. By choosing the optional coverage, Thompson became an additional insured under the ATIC policy. Plaintiff has secured a judgment against ATIC. If indeed the policy was a sham, plaintiff may have a cause of action against Sweeney, the broker who represented Cars.com. The undisputed testimony is that the policy was acquired on GRM's behalf through Sweeney, a broker who solicited her business. Arguably, Sweeney did not perform his duties in a professional manner but he only represented GRM and its agent. 

In this case, plaintiff asserted only that GRM affirmatively misrepresented the existence of SLI coverage. Plaintiff had no contact with GRM. His theory of liability is premised upon the attenuated claim that GRM made its misrepresentation to Thompson. GRM produced the ATIC policy. Coon testified that she remitted policy premium payments to Sweeney. 

LESSON

Although failure to produce a policy can expose an insurance agent or broker to a claim for professional negligence, a claimant who is injured cannot create an agency that does not exist. 

The duties and obligations of an agent or broker is usually established by statute or case law. In New Jersey, by statute, an insurance agent is defined to be an individual, a resident of New Jersey or whose principal office for the conduct of his insurance business is in New Jersey, authorized in writing by any insurance company lawfully authorized to transact business in New Jersey, to act as its agent, with authority to solicit, negotiate and effect contracts of insurance in its behalf, to collect the premiums thereon, and who has a bona fide office in New Jersey in which is kept a record of the contracts of insurance countersigned or issued by him. 

Related: Read another Zalma column “Just the Facts.”

Clearly, GRM was not an insurance agent and, regardless of the need of the plaintiff, could not be made an insurance agent and so could not be held liable for insurance agent malpractice. 

GRM could have avoided the suit and the cost of defending itself had it exercised diligence in learning about the assets and liabilities of the insurer situated in Pago Pago, American Samoa. An insured should never rely on the unsupported representation of an agent of a foreign insurance and an insurance agent should never take on the representation of a foreign insurer without first checking its assets and liabilities and its ability to respond to claims. As the New Jersey Court noted, GRM might have a case against the agent that sold it the policy but the claimant, who had no relationship with the insurer or the agent, had no case.