Superior Court of New Jersey,
Appellate Division.
STANDARD FUNDING CORP., Plaintiff-Respondent,
v.
UNIVERSAL ROADMASTER, INC., John Catania, Global Underwriters Agency, Inc.,
Defendants,
and
Lancer Insurance Company, Defendant-Appellant.
Argued Sept. 13, 2005.
Decided Oct. 12, 2005.
PER CURIAM.
Defendant, Lancer Insurance Company (Lancer), appeals from a judgment in the amount of $100,270.08 in favor of plaintiff, Standard Funding Corp. (Standard), entered after a bench trial. Standard’s claim against Lancer was for a return of unearned insurance premium that Standard had paid on behalf of its borrower, the insured, Universal Roadmaster Inc. (Universal), which owned a fleet of trucks used in interstate commerce. As part of its loan arrangement with Universal, Standard retained a security interest in any return on unearned premiums up to the amount of the unpaid balance on the loan. The premium paid to secure the policy was $171,494.00, and the policy period was from November 12, 2000 to November 12, 2001. The policy was cancelled effective April 9, 2001. Therefore, the policy was in effect for 149 days. Thus, on a prorated basis the return premium would be $101,486.86. As a result of an adjustment to reflect credit for a sum collected by Standard from a settling party, the judgment was entered for a slightly different amount, $100,270.08.
At trial, Lancer attempted to establish that Universal had misrepresented the number of vehicles in its fleet and that Lancer was entitled to recalculate the premium. By its methodology, Lancer asserted that the premium should have been $459,658.00, resulting in a net prorated return of premium owed to Standard of only $6,290.58. Judge D’Italia rejected Lancer’s contentions in this regard based upon the terms of the insurance contract and because Lancer failed to adduce competent evidence to establish the identity, dates of acquisition, and other required information regarding vehicles owned by Universal during the policy period.
When the two-day bench trial on July 14 and 15, 2003 concluded, the judge reserved decision. Before he issued his decision, Lancer filed a motion to “supplement the record” on September 24, 2003, seeking to furnish additional information regarding vehicles purportedly owned by Universal during the policy period. On October 25, 2003, Judge D’Italia heard argument and denied Standard’s motion. On January 27, 2004, the judge issued a written opinion. Final judgment in favor of Standard against Lancer for $100,270.08 was ordered on February 24, 2004. This appeal followed.
On appeal, Lancer argues:
POINT ONE
LANCER ACCEPTED THE RISK OF UNIVERSAL ROADMASTER’S UNDISCLOSED VEHICLES BECAUSE IT WAS REQUIRED TO PROVIDE COVERAGE FOR THOSE VEHICLES IN ORDER TO MEET THE MINIMUM FINANCIAL RESPONSIBILITY OBLIGATIONS UNDER THE FEDERAL MOTOR CARRIER ACT.
POINT II
THE LETTERS FAXED TO LANCER IN FEBRUARY 2001 ARE ADMISSIBLE AS EVIDENCE BECAUSE THEY FALL UNDER THE BUSINESS RECORDS EXCEPTION TO THE HEARSAY RULE.
POINT III
LANCER IS ENTITLED TO THE AMOUNT OF THE INCREASED PREMIUM BECAUSE THE RIGHT OF REIMBURSEMENT CREATED IN THE MCS-90 IS A NON-EXCLUSIVE REMEDY.
POINT IV
LANCER IS ENTITLED TO SUPPLEMENT THE RECORD BECAUSE THE TRIAL COURT RECORD MAY BE SUPPLEMENTED PURSUANT TO NEW JERSEY COURT RULES 1:7-4 AND 2:5-5.
We reject these arguments and affirm substantially for the reasons expressed by Judge D’Italia in his comprehensive and well-reasoned written decision of January 27, 2004.
In need of insurance coverage for its fleet of vehicles, Roadmaster contacted its retail insurance broker, Global Underwriters, which in turn contacted a wholesale insurance broker, New Century Global, in an effort to place coverage. In a September 18, 2000 letter, New Century wrote to the D.C. White Agency, the underwriting arm of Lancer that focuses on trucking policies, soliciting a quote for a truckers’ liability policy for Roadmaster. The letter noted that Roadmaster’s current policy was issued on a gross receipts basis and that Roadmaster would prefer to remain on a gross receipts basis if possible. With a gross receipts policy, the premium is based upon the gross revenue of the insured during the policy period. The premium paid at the inception of the policy is an estimated amount, and at the end of the policy period an audit determines the actual premium with an appropriate adjustment.
Although the application requested issuance of a policy on a gross receipts basis, the policy was issued on the basis of scheduled vehicles. The policy specifically enumerated thirty-four vehicles with a premium ascribed to each. The total premium was $171,494.00. Standard advanced that sum and paid it in full to Lancer. Standard notified Lancer of its premium finance agreement, resulting in Standard’s security interest in any return of premiums. The finance agreement also afforded Standard the right to cancel the policy if Universal defaulted in its loan payment obligations to Standard.
In January 2001, Lancer began receiving claims for accidents involving Universal’s vehicles, some of which pertained to vehicles that were not scheduled on the policy. Because of Universal’s alleged misrepresentation in its application for insurance in failing to identify all of its owned vehicles, Lancer cancelled the policy effective April 9, 2001. Simultaneously and independently, Standard exercised its right at about the same time to cancel the policy because of Universal’s default in payments to it. Standard’s cancellation date was April 20, 2001. Thus, the earlier cancellation date, April 9, 2001, controls, and the parties do not dispute that the policy was therefore in effect for 149 days.
Based upon his analysis of the policy language and his consideration of the testimony presented, including expert testimony presented by Standard, Judge D’Italia concluded that the policy was indeed issued on a scheduled vehicles basis, not a gross receipts basis. That finding is well supported by the evidence in the record, and we have no occasion to interfere with it. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974).
Lancer attempted to establish Universal’s ownership during the policy period of vehicles other than those listed in its application and scheduled on the policy. It proffered two exhibits, D-6 and D-7, which were faxes from New Century to D.C. White dated February 6, 2001 and February 27, 2001, respectively. Each contained a list of vehicles purportedly owned by Universal. The only witness called by Lancer at trial was the President of D.C. White. He was neither the author nor the recipient of the letters and he had no knowledge of the business practices and records of Universal. Lancer urged the admissibility of the documents under the Business Records Exception to the Hearsay Rule, N.J.R.E. 803(c)(6). Judge D’Italia rejected the proffer and excluded the documents as inadmissible hearsay. He wrote:
D6 and D7 are inadmissible hearsay. Defendant’s contention that they are admissible under Rule 803(c)6 is unavailing. That Rule provides that a statement contained in a writing made at or near the time of observation by a person with actual knowledge or from information supplied by such a person is admissible if the writing was made in the regular course of business and it was the regular practice of that business to make it unless the sources of the information or the method, purpose or circumstances of preparation indicate that it is not trustworthy.
D6 is a fax from New Century enclosing a fax from Global which contains VIN numbers. The New Century fax is, at best, a business record of both New Century and D.C. White. The Global fax is an included hearsay document. The substantive information sought to be conveyed is that the numbers listed on the Global fax are VIN numbers for trailers owned by Universal. The Global fax indicates that it is from “Audra Severiani x38”. No foundation has been laid with respect to whether Audra Severiani had any actual knowledge or had been supplied information by a person with actual knowledge of the trailers owned by Universal or their VIN numbers. There was no foundational testimony that it is the regular practice of insurance underwriters to accept a fax from a subagent of an insurance agent as the basis for accepting a risk.
The same analysis hold for D7. In this case, the fax comes directly from Universal’s agent but the document attached has no form of identification. There is no independent evidence that Global’s statement was made with actual knowledge or from information supplied by a person with actual knowledge or that the underlying list was made in the regular course of business.
We agree with the judge’s analysis and find no error or mistaken exercise of discretion in his exclusion of this evidence. Thus, Lancer failed to provide competent evidence establishing ownership by Universal during the policy period of additional vehicles.
Lancer also argued before the trial court, and it continues to argue before us, that it was entitled to assess additional premiums because it was required by federal law to provide coverage for all vehicles owned by Universal. Because of its interstate trucking activities, Universal was subject to the Federal Motor Carrier Act, 49 U.S.C.A. § 13501. Any vehicle operated by an interstate motor carrier must maintain at least $750,000 of insurance coverage. 49 U.S.C.A. § 31139. To comply with the minimum financial responsibility requirements of the Act, motor carriers must file with the Department of Transportation an insurance policy with the minimum required coverage limits. 49 U.S.C.A. § 13906. The Secretary of Transportation has promulgated regulations requiring that insurance policies covering motor carriers subject to the Act must include in their policy an endorsement, known as Form MCS-90, which states in pertinent part:
In consideration of the premium stated in the policy to which this endorsement is attached, the insurer (the company) agrees to pay, within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980 regardless of whether or not each motor vehicle is specifically described in the policy and whether or not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere. Such insurance as is afforded, for public liability, does not apply to injury to or death of the insured’s employees while engaged in the course of their employment, or property transported by the insured, designated as cargo. It is understood and agreed that no condition, provision, stipulation, or limitation contained in the policy, this endorsement, or any other endorsement thereon, or violation thereof, shall relieve the company from liability or from the payment of any final judgment, within the limits of liability herein described, irrespective of the financial condition, insolvency or bankruptcy of the insured. However, all terms, conditions, and limitations in the policy to which the endorsement is attached shall remain in full force and effect as binding between the insured and the company. The insured agrees to reimburse the company for any payment made by the company on account of any accident, claim, or suit involving a breach of the terms of the policy, and for any payment that the company would not have been obligated to make under the provisions of the policy except for the agreement contained in this endorsement.
[49 C.F.R. § 387.15 (2005).]
Lancer argues that because this legally-required endorsement obligated it to provide coverage for all of Universal’s vehicles, it was entitled to recalculate the premium charged to Universal to include all vehicles Universal owned. Judge D’Italia rejected that argument. He stated:
This endorsement requires the insurance company to cover all claims, even for vehicles not listed on the insurance policy, and gives the insurance company a right of reimbursement from the insured for claims paid on unscheduled vehicles. The purpose of the regulation is to insure that a financially responsible party will be available to compensate third parties injured in a collision with an ICC carrier. The endorsement attaches to all policies issued to interstate carriers regardless of whether it is physically appended to the policy and regardless of whether the insurer has charged a premium commensurate with the risk of covering all of the carrier’s vehicles and not just those listed on a specified vehicle policy. The mandated endorsement does not authorize the insurer to recalculate its premium in the event that the insurer fails to take its requirements into account. The insurer’s remedy is to seek reimbursement from its insured for any claims paid and is in the nature of indemnification. This remedy is clearly more favorable to the insurer than merely adjusting the premium to reflect an undisclosed vehicle. Where the insured fails to disclose and cover all of the vehicles in its fleet, it makes far more sense to require the insured to indemnify the insurer than to seek an after-accident adjustment of the premium.
We agree with the judge’s analysis. In any event, as we have stated, Lancer failed to prove by competent evidence the ownership by Universal of additional vehicles during the policy period.
Finally, we address the denial of Lancer’s post-trial motion to “supplement the record.” Standard correctly points out that the rules relied upon by Lancer as authority for its motion are inapplicable. Rule 1:7-4(b) authorizes a motion to amend findings, amend a final order or judgment, or grant a rehearing after a final order or judgment has been entered following a bench trial. When Lancer filed its motion, no final decision had been made and no final judgment had been entered. Rule 2:5-5 is likewise inapplicable; that rule authorizes supplementation of a record on appeal.
Judge D’Italia correctly characterized Lancer’s motion as one to reopen the case and, in effect, resume the trial by introducing additional evidence. The judge noted that the proffered evidence was plainly available to Lancer and could have been produced during the trial. The judge stated:
So what this amounts to is after a party has rested, and after in effect closing arguments have been made, the party is saying I think I detect in the judge’s reaction some slight deficiency, at least potentially, in my case and I would like to shore it up by introducing additional evidence. In my view that’s not a practice to be countenanced. I do not ascribe any bad motives to counsel in this case. This was not a case where evidence was held back intentionally and as a tactical matter, and now counsel has second thoughts about it. It’s– it’s just some additional evidence that was always available that counsel in retrospect decides that he wished he would have presented at an earlier time in the case.
You know, rules of court merely provide for only one bite at the apple, that we follow an orderly procedure with the plaintiff’s case, defendant’s case, rebuttal and sur-rebuttal, make your closing arguments, the case is over. It might be a rare circumstance where evidence comes to light which was not previously discoverable which might warrant opening of the record, but this is not such a case. Moreover, it’s not clear that this evidence is dispositive or that it is so self-evident that it doesn’t require additional clarification by testimony or that the plaintiff should not then be entitled itself to adduce additional evidence. For all those reasons I will exercise my discretion under KEEVIT VS. LOYAL PROTECTIVE (phonetic), 64 Super. 537, and MASSACHUSETTS MUTUAL VS. MANSO, 234 N.J.Super. at 266, to exclude this evidence. So the motion is denied.
The judge did not abuse his discretion by refusing to reopen the case and, in effect, resume the trial.
Affirmed.
