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For Whom The Bell Tolls? – Widening The Scope Of New Jersey Condominium Association Alternative Dispute Resolution

For Whom The Bell Tolls? – Widening The Scope Of New Jersey Condominium Association Alternative Dispute Resolution After Bell Tower Condominium Association V. Haffert

By: Angela B. Kosar, Esq.

Condominium Associations in New Jersey have recently found themselves with a new order of business on their meeting agendas – reexamining their existing alternative dispute resolution procedures between and among their unit owners and the condominium association. This year, The New Jersey Appellate Division in Bell Tower Condominium Association v. Haffert, 423 N.J. Super. 507 (App. Div.) cert. denied 210 N.J. 217 (2012) broadly construed the term “housing-related disputes” as set forth in the New Jersey Condominium Act to include a dispute between a unit owner and the condominium association board over the manner in which a special assessment was approved. However, it is the use of the word “broadly” in the opinion that has far reaching ramifications. Continue reading

NJ Superior Court Judge Dismisses Texting Lawsuit

By: Amelia Lolli, Esquire

On May 25, 2012, a New Jersey Superior Court Judge granted summary judgment in the case of Kubert v. Best, in favor of a defendant, Shannon Colonna, who was accused of sending a text message to a friend while he was driving. On September 19, 2009, Kyle Best, age 19, received a text message from a female friend while operating his motor vehicle in Randolph, Morris County, New Jersey. Mr. Best lost control of his vehicle, crossed the yellow line and struck David and Linda Kubert on their motorcycle. Both individuals suffered very serious personal injuries. Continue reading

Limits Condo Property Liability

By: Michael S. Mikulski, Esquire
(Originally Posted on: December 27, 2011)

The New Jersey Supreme Court recently decided the case of Luchejko v. City of Hoboken. This case significantly limits the potential liability of condominium associations and property managers for removing snow and ice from public sidewalks.

Brief Summary – there is no sidewalk liability for a condominium complex for failure to remove snow and/or ice as a condominium complex is determined to be residential, and therefore residential immunities apply. Continue reading

Types of Disability Coverage in Life and Health Insurance

Definition of disability
The definition of “disability” is subjective because some people can work without complaint with a condition that would disable and incapacitate others. A typical life and health insurance policy may define disability insurance as including insurance related to injury, disablement, or death resulting to the insured from accidents or sickness.

Forms of coverage
The two principal forms of disability coverage in life and health insurance are disability income insurance and waiver of life insurance premium payment during disability.

Disability income insurance
Disability income insurance pays certain monetary benefits to the insured during his disability as defined in the policy. These benefits are common in group insurance.

Waiver of life insurance premium
Waiver of premium payment during disability is a benefit whereby the insured need not pay the premium on a life insurance policy during his disability. Although the premium is considered “waived,” in effect, the insured pays a premium that provides a cash credit toward the premium on the policy in case he becomes disabled.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.

The Distinction Between an Insurance Agent and an Insurance Broker

Insurance agents act on behalf of one or more insurance companies. That relationship between the insurance agent and the insurance company provides authority for the agent to act for and bind the insurance company. Insurance brokers, on the other hand, represent insurance purchasers rather than insurance companies even though insurance brokers may receive their commissions from insurance companies. Insurance brokers do not have authority under principal-agent or employer-employee theories to bind the insurance companies that provide the policies insuring companies or individuals.

Insurance agencies may differ according to the amount of authority granted by insurance companies to the agency. A general agency may have authority to issue its own contracts of insurance under which an insurance company will be bound to provide coverage. Soliciting agencies may have authority only to receive and forward insurance applications but not have authority to bind the insurance company. However, such soliciting agencies still may be found to have apparent authority to bind an insurance company depending upon the factual situation presented to the court.

Generally, insurance brokers represent only the insurance purchaser. However, because the income of the broker normally comes from the insurance companies providing the insurance, questions may arise as to the degree to which an agency relationship between a broker and an insurance company should be inferred.

An insurance broker will have a duty to the purchaser to carry out its obligation to obtain correct types and amounts of insurance for the purchaser to the extent possible. Normally, a broker would not be responsible to meet obligations to the insurer or to meet obligations of the insurer to the purchaser. However, depending upon the factual situation, there may be sufficient reasons for a court to decide that obligations of an agent have arisen for an insurance broker.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.

Innocent Co-Insured

Who is an innocent co-insured?
When multiple insureds obtain an insurance policy, usually on jointly owned property, and one insured causes a loss through wrongdoing, the other insureds are considered “innocent co-insureds.” When the innocent co-insureds submit a claim to the insurer to obtain coverage for the loss, an issue arises as to whether the claim should be paid because it would benefit the insured who committed the wrongdoing.

Example: A husband and wife obtain a homeowner’s policy on their jointly owned home. The parties begin an unfriendly divorce, and the wife burns down the home out of spite. If the husband, as the innocent co-insured, submits a claim and receives coverage, the wife, as the wrongdoer, benefits because she partly owns the home. If the insurer denies coverage, the husband is punished for the wife’s wrongdoing.

Public policy
There are several public policy considerations that some courts consider when determining whether or not an innocent co-insured should be compensated for his loss. Denials of claims are based on the public policies of barring the wrongdoer from benefiting from his wrongdoing and preventing the perpetration of fraud on the insurer. However, claims may be paid based on the public policies of preventing the unjust enrichment of the insurer and not allowing an innocent victim to be blamed for a wrongdoer’s acts.

Recovery barred
Traditionally, most courts barred the innocent co-insured from recovery if a co-insured intentionally caused the loss or perpetrated some type of fraud or misrepresentation against the insurer. The principle supporting the denial of recovery was that a wrongdoer should not be rewarded, directly or indirectly, for his wrongful act.

Recovery allowed
Under the modern rule, the majority of courts allow an innocent co-insured to recover based on the public policy that he should not be penalized for another insured’s wrongdoing unless the policy provides no coverage. Generally, if the policy states that responsibility for the fraud is several or separate, rather than joint, an innocent co-insured will not be punished for another insured’s fraud. If the policy is ambiguous, it is usually construed in favor of the innocent co-insured.

Change in insurance policies
In response to the approach of allowing innocent co-insureds to recover despite another insured’s wrongdoing, insurers began inserting language in policies that voids the policy if “an” or “any” insured, rather than “the” insured, is guilty of wrongdoing. However, despite the change in policy language, courts still seek to allow innocent co-insureds to recover. They may do so by using a contract-based approach to give effect to the intent of the parties to the policy.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.

Methods of Selling Life Insurance

Life insurance companies may sell their insurance policies through full-time agents, brokerage markets, direct sales, or mass marketing.

Full-time life insurance agents are usually licensed by the state and by a particular insurer, and they cannot sell life insurance for other insurance companies without the primary insurer’s consent. They usually work through a general agency of the insurer. A general agent recruits and trains other agents, and the applications submitted through those agents are processed by the general agent. Field agents, also called producers, also sell life insurance. A soliciting agent usually has less authority from the insurer than a fully licensed agent does.
Brokerage market

An insurance broker is traditionally the insured’s representative, except that he is the insurer’s agent when he collects the initial premium and delivers the policy. A general agent of the brokerage market life insurer is compensated on the basis of the production of the brokers who work for him. The brokerage market also includes agents who have not contracted to sell insurance for one particular insurer.

Direct sales
Few life insurers sell life policies through direct sales. Those that do utilize direct mail or advertising by television or radio calling for coupon or telephone response. The reason for the lack of use of direct sales is because selling life insurance tends to require a personal touch to deal with the topic of death. Group life insurance, however, is a popular product sold through direct sales, usually as large sales to companies and employers.

Mass marketing
Mass marketing is the presentation of a selling message to induce a number of insureds at one time to purchase life insurance policies. Mass marketing allows the insurer to issue volumes of policies at lower costs because it does not pay agents for one-on-one sales. An insurer may choose to conduct the mass marketing program itself through direct mail, radio, television, or publication, or it may be accomplished by cooperating organizations, such as credit card companies. The organization solicits its own customers to purchase the insurance and then bills the customers for both the organization’s product and the insurance premiums.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.

Mass Marketing

Mass marketing in the insurance field is the presentation of a selling message to induce a number of insureds at one time to purchase insurance policies. It has changed the traditional method of selling insurance on a one-on-one basis.

Mass marketing is advantageous in that it reaches insureds who generally have no access to their own brokers or agents. It also brings the policies to the insureds usually at lower prices than those charged in one-on-one sales because it reduces the “middleman” cost of agents.

Opponents of mass marketing assert that it has disadvantages because it may use scare tactics and gimmickry to sell volumes of policies of low value. Mass marketing also lacks the personal aspect that agents give to customers, such as helping insureds apply for the insurance policy. In addition, it may cause unlicensed persons or entities to act as agents in selling insurance without a license.

Mass marketing is generally accomplished either by the insurer and its agents through direct mail, radio, television, or publication or by cooperating organizations that solicit their own members or customers.

An insurer conducts direct mass marketing by associating itself, often through an independent agent, with another type of commercial business that has a large number of customers. The business in effect gives its approval of that insurer, as opposed to other insurers, to its customers.

Issues arise, however, in relation to the business’ collection of premiums from its customers on behalf of the insurer. The business usually bills the premium at the same time that it sends its own statement to the customer, sometimes on the same statement. Thus, if an insured fails to pay, the business is sometimes required to advance the premium to the insurer on behalf of the customer, who continues to receive coverage, without a convenient way of recouping the premium from the customer. Other arrangements avoid this issue by having the insurer’s premium bill merely included in the business’ mailings. Issues may also arise if an insurer attempts to have its insureds pay premiums through a credit card company because some jurisdictions do not permit such activity.

Mass marketing has contributed to the sales of insurance to certain classes of people, such as students, and associations, such as labor unions. The agency contracts differ with respect to class-based marketing as opposed to those involved with an insurer’s relationship with commercial businesses.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.

Business & Corporate Entities: Corporations

Lawyers and doctors in the past often have conducted their businesses through corporations known as professional corporations. Such corporations served dual purposes: to shield the lawyer or doctor from personal liability for the debts and liabilities of the person’s professional practice and to obtain a corporate tax rate on profits of the business that in the past were lower than rates on individual income.

Tax structures change, and a professional corporation that once obtained a lower tax rate on retained earnings now may classified by the Internal Revenue Service as a personal service corporation with a flat tax rate. That rate may exceed the rate that the professional would pay if there were no professional corporation.

Professional corporations still serve to shield their owners from personal liability for debts and liabilities of the corporation with an important exception for liability of the professional for malpractice. Thus, a professional corporation made up of two lawyers would shield one of the lawyers from personal liability for acts attributable to the other lawyer. In another example, a doctor’s professional corporation would shield the doctor’s personal assets from liability or debts of the corporation attributable to the acts of the doctor’s staff.

Limited liability companies or limited liability partnerships are other structures that may be considered by professionals to shield personal assets from debts or liabilities of the professional’s business. Such structures are established according to the particular laws of each of the states, and a state government office should have helpful information available to assist the professional in examining the suitability of a business structure providing greater protection of personal assets from liability than a sole proprietorship or traditional partnership. Professionals other than doctors and lawyers may also wish to consider such alternative business structures.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.

Criminal Liability of Corporate Officers

Under Section 807 of The Sarbanes-Oxley Act of 2002 (Act), any person who knowingly commits securities fraud is subject to a hefty fine, a prison term of up to 25 years, or both. Section 807 does not criminalize securities laws violations for the first time; however, it does combine several existing laws so as to facilitate and streamline federal prosecutions. Section 807 does impose significantly harsher criminal penalties than the penalties prescribed under prior laws.

Severe criminal penalties may also be imposed pursuant to the Act (up to 20 years in prison and a $5,000,000 fine) if chief executive officers and chief financial officers provide materially inaccurate information in financial statements that are filed with the Securities Exchange Commission (SEC). Chief executive officers or chief legal officers who sign these statements must personally certify the information contained therein. If the statements are materially inaccurate, the signing official can face a fine of up to $5,000,000 and prison terms of up to 20 years. The penalty depends on whether the certification of materially inaccurate information was done knowingly or willfully. A knowing violation subjects the signing official to 10 years in prison and/or a $1,000,000 fine. A willful violation subjects the signing official to faces a maximum $5,000,000 fine and up to 20 years in prison.

Additionally, the Act now makes it a felony to knowingly alter, destroy, conceal, or otherwise falsify a document with intent to impede, obstruct, or influence “any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter.” It is also a felony to commit any of those acts knowingly with intent to impede, obstruct, or influence a federal court or congressional proceeding. A person convicted of these crimes can be fined, imprisoned up to 20 years, or both. The Act targets the actual perpetrator, not just the person who may have directed the prohibited activity.

The Act also targets any person who attempts or conspires to commit securities fraud violations under the Act. Enhanced criminal penalties are available for mail and wire fraud convictions and violations of the Employee Retirement Income Security Act of 1974 (ERISA).

The penalties under the Act resulted from the United States Sentencing Commission’s review and amendment of the Federal Sentencing Guidelines. Congress directed that the Sentencing Guidelines be amended “where appropriate to ensure that they “reflect the serious nature of the offenses and the penalties set forth in this Act, the growing incidence of serious fraud offenses . . ., [and] the need to modify the sentencing guidelines and policy statements to deter, prevent, and punish such offenses.” The Federal Sentencing Guidelines basically increased the offense level for corporate (organizational) crimes such as securities fraud, frauds that cause catastrophic loss, crimes involving more than 250 victims, crimes that endanger a public company’s solvency, and the conduct prohibited under the Act.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.