NANCY L. HOLM, ETC. VS. DANIEL M. PURDY (L-0098-17, MONMOUTH COUNTY AND STATEWIDE) ( 2021 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1529-19
NANCY L. HOLM,
individually and as
Administratrix of the
Estate of CHRISTOPHER R.
FRIEDAUER, deceased,
Plaintiff-Appellant,
v.
DANIEL M. PURDY,
Defendant-Respondent.
____________________________
Argued February 10, 2021 – Decided July 16, 2021
Before Judges Geiger and Mitterhoff.
On appeal from the Superior Court of New Jersey, Law
Division, Monmouth County, Docket No. L-0098-17.
Ryan Milun argued the cause for appellant (The Killian
Firm, PC, attorneys; Ryan Milun, on the briefs).
Michael J. Dunn argued the cause for respondent.
PER CURIAM
Plaintiff Nancy L. Holm, individually and as Administratrix of the Estate
of Christopher R. Friedauer (Christopher), 1 deceased, brought this professional
negligence action against defendant Daniel M. Purdy, a licensed insurance
broker who procured insurance for Holmdel Nurseries, LLC (Holmdel or the
LLC), including workers' compensation coverage. Plaintiff alleged Purdy was
negligent (count one) and breached his fiduciary duty (count two) by
"negligently advising or failing to advise [Christopher] regarding insurance that
was clearly and obviously necessary to protect [Christopher], his family, and his
business in the event of [Christopher's] injury or death, and for procuring grossly
inadequate coverage." Plaintiff appeals from a May 10, 2019 order denying her
cross-motion for summary judgment and a November 20, 2019 order granting
Purdy's motions for involuntary dismissal under Rule 4:37-2(b) and judgment at
trial under Rule 4:40-1. We affirm in part, reverse in part, and remand for retrial.
Until 2012, Christopher's father, Robert Friedauer (Robert), and uncle,
Walter Friedauer (Walter), each owned a fifty percent interest in Holmdel, a
family-run nursery and landscaping business. Christopher and his brother
Michael Friedauer (Michael) were long-time employees of Holmdel. As
1
Because the members of the LLC share the same surname, we use their first
names for ease of reading and mean no disrespect.
A-1529-19
2
employees, Christopher and Michael were covered for work-related injuries or
death under Holmdel's workers' compensation policy (the Policy).
In 2011, Christopher and Michael began discussing a buy-out of their
uncle Walter's fifty percent ownership of Holmdel. Soon after, Robert, Walter,
Michael, and Christopher agreed that Michael and Christopher would purchase
Walter's fifty percent ownership of Holmdel, with each owning twenty-five
percent. The agreement was finalized in 2012. Following the buyout, Robert
retained a controlling fifty percent interest in Holmdel.
Purdy served as the longtime insurance agent for Holmdel. He met with
Robert annually to review Holmdel's insurance coverage needs. Purdy secured
numerous insurance coverages for Holmdel each year, including the mandatory
workers' compensation coverage for employees.
In contrast to employees, members of an LLC are not covered under the
Policy unless they elect to opt in for such coverage at extra cost. Every member
of the LLC must opt in for such coverage for any member to be eligible for
workers' compensation benefits. The decision to opt in must be made at the
inception or renewal of the policy. The substantial premium for opting in is
based on the salary and earnings of all the members of the LLC.
A-1529-19
3
Robert was charged with securing Holmdel's insurance coverage. Prior to
2012, Purdy advised Robert that members of the LLC were not eligible for
workers' compensation benefits unless every member opted in for that coverage
at additional cost. From 2002 to 2012, Robert declined to opt in for workers'
compensation coverage for Holmdel's members.
At Holmdel's annual meeting in 2012, Purdy discussed insurance coverage
with Holmdel's members. Purdy learned that Christopher and Michael, who
were both present at the meeting, had become members. Michael told Purdy
that he wanted "to make sure that [he and Christopher] were protected now that
[they] were owners." Purdy never notified Michael or Christopher of their right
to elect worker's compensation coverage as LLC members and failed to inform
them they were no longer covered under the Policy.
There was no evidence about what else Christopher said or asked Purdy
during the meeting. Apparently, the brothers did not discuss workers'
compensation eligibility with each other or Robert before Christopher's death.
In 2015, Christopher died shortly after a slip and fall accident while
working. Because the members had not opted in for coverage, Christopher was
not eligible for workers' compensation benefits relating to his accident.
Christopher was survived by his wife, Nancy L. Holm, and two young children.
A-1529-19
4
On January 6, 2017, plaintiff filed a professional negligence action against
Purdy. The complaint alleged:
10. On February 15, 2015, [Christopher] was tragically
killed at age [thirty-six] in an accident while on the job
for Holmdel Nurseries. [Christopher] was in the
process of entering a truck to conduct snowplowing
operations, when he apparently slipped and hit his head
on the pavement. Although he had no apparent signs of
injury, [Christopher] passed away several hours later as
a result of his fall.
In his answer, Purdy provided the following response to this allegation: "Denied
as stated. Answering defendant is without knowledge or information sufficient
to form a belief as to the truth of the averments of paragraph [ten] and denies
same and demands proof thereof at the time of trial." Purdy also asserted a
separate defense that plaintiff failed to state a claim upon which relief could be
granted. The answer did not expressly deny that Christopher's death was caused
by a work-related accident.
Following the close of discovery, the parties cross-moved for summary
judgment. In her oral decision, the judge noted that "[w]hether a defendant owes
a legal duty is a question of law for the [c]ourt to decide." "Here, there is no
dispute that there was a duty. The issue seems to be whether that duty was
breached and whether there exists a genuine issue of material fact . . . ."
A-1529-19
5
The parties disputed "the nature of the relationship" and the
communications between Purdy and Christopher. In addition, the judge found
there were material facts in dispute regarding the discussions between Purdy and
Robert concerning workers' compensation coverage for members.
After considering the opposing expert reports, the judge further found
there was a genuine issue of material fact as to whether Purdy met industry
standards and satisfied the duties he owed. The judge denied both motions,
concluding these genuine issues of material fact required credibility
determinations by a jury, as did whether Purdy's actions rose to the level of
negligence or gross negligence.
After Christopher's death, the remaining members of the LLC opted in for
workers' compensation coverage. A decision was subsequently made to opt out
of the coverage and replace it with disability policies.
The trial commenced in November 2019. Plaintiff testified on her own
behalf and called Robert, Michael, Paul Amoruso, an insurance brokerage
expert, and June Toth, a damages expert, as witnesses. Purdy testified on his
own behalf and James Klagholz testified without objection as an expert in the
field of insurance agency and brokerage relating to commercial insurance
policies, including workers' compensation coverage.
A-1529-19
6
On the third day of trial, plaintiff sought to introduce the autopsy report
as evidence that Christopher suffered a work-related injury. The preliminary
autopsy report contained the following pertinent findings:
EVIDENCE OF RECENT TRAUMATIC INJURY: No
body surface or internal traumatic injuries are
identified. It should be noted, there is no subgaleal
hemorrhage. There is no cranial fracture. There is no
epidural, subdural or subarachnoid hemorrhage. The
brain parenchyma is intact throughout showing no
contusion or laceration.
There are no intrathoracic or intra-abdominal injuries.
GENERAL DESCRIPTION: No significant findings
are noted externally except bluish purple cyanotic
facial skin.
The head is unremarkable. The scalp is intact . . . . The
ear canals, nostrils and oral cavity are free of
hemorrhage. The gums reveal natural dentition.
....
HEAD AND CENTRAL NERVOUS SYSTEM:
Reflection of the scalp reveals intact subgaleal soft
tissue with no hemorrhage. The cranial bones are
intact, showing no fracture. . . . Sectioning of the brain
parenchyma reveals mild diffuse congestion and
edema. There is no parenchymal hemorrhage, infarct,
tumor or any other focal lesion. The cerebellum, pons
and medulla are free of hemorrhage. The ventricles
contain clear [cerebral spinal fluid].
NECK: No traumatic injuries are identified.
A-1529-19
7
CHEST: No traumatic injuries are identified.
The preliminary report stated there was an "[a]lleged history of fall during
snow removal" and diagnosis of "post-concussion head injury due to fall on ice."
The cause and manner of death were "[p]ending additional studies." The
medical examiner's final report stated: "Based upon the history/circumstances,
investigation reports, autopsy findings, and toxicology findings, the report was
amended" to reflect the cause of death as "[h]ead injury with concussion due to
fall" and the manner of death as an "accident."
Plaintiff attempted to introduce the autopsy report after Purdy requested
an offer of the proof plaintiff would rely upon to establish that a compensable
work-related injury caused Christopher's death. The court engaged in the
following analysis:
In a malpractice action, a plaintiff must prove that the
damages suffered were suffered as a result of the
malpractice. Hence, the plaintiff must not only prove
the breach of the standard of care to establish liability,
but also the alleged resulting harm was caused by that
breach.
Given that the resulting harm centers on the
compensability of the alleged injury, the plaintiff has
the burden to establish that compensability.
To establish that compensability, the parties
agree that the alleged injury must be work related
injury. And that the work[-]related injury ultimately
A-1529-19
8
led to the death that forms the basis of the alleged
damages, the loss, death and/or survivor benefits.
The judge noted Purdy argued that "plaintiff had not disclosed or provided any
medical evidence" to establish: (a) "the injury, or injuries, or conditions suffered
by [Christopher]"; (b) "that these injuries and/or conditions were the cause of
death"; and (c) "that the cause of the death was the work-related injury."
In response, plaintiff contended that Purdy should have raised the defense
that Christopher's injuries were not a compensable injury under the Act as an
affirmative defense. She argued that Purdy's answer "did not include anything
about the injury to [Christopher] not being work related." Purdy claimed,
however, that his position—that plaintiff failed to meet her burden of proof—
did "not fall within the ambit of an affirmative defense, but rather [fell] squarely
within the obligations of the plaintiff to prove each and every element of [her]
claim."
The judge noted that Purdy asserted an affirmative defense that the
complaint failed to state a cause of action upon which relief could be granted.
She found defendant's position was not an affirmative defense but simply a
demand of the proofs upon which plaintiff would rely.
The judge further found that "plaintiff ha[d] not provided exceptional
circumstances by which the autopsy report should be provided at this late hour."
A-1529-19
9
She concluded that aside from the discovery violation, the autopsy report did
not "overcome the evidentiary hurdles." First, as to authentication, the autopsy
report was not a certified copy signed by the custodian of the report.
Second, for the autopsy report "to be admissible, the opinions of the
medical examiner would have to be excised." If that were done, it "would then
simply leave some findings on examination, which . . . would be beyond the ken
of an average juror to interpret."
Third, even if the autopsy report were admitted, it "would not provide the
jury with any probative evidence absent medical testimony to explain the
findings in that report that would be helpful to the juror." The assistant medical
examiner who performed the autopsy was not named as an expert or called as a
witness. Plaintiff offered no witnesses with the qualifications, skill, and
knowledge to explain or interpret the findings in the autopsy report even if the
court admitted the report after redacting the medical examiner's opinions.
Fourth, the preliminary report listed certain findings and opinions, but the
opinions were not conclusive and were subject to "additional studies." The final
report simply indicated that the cause of death was a head injury with concussion
due to fall and the manner of death was an accident based upon the history,
circumstances, investigation reports, autopsy, and toxicology findings. The
A-1529-19
10
judge found that the final report failed to provide "the whys and wherefores" for
its conclusions.
Lastly, the judge addressed the prejudice Purdy would suffer if the autopsy
report, which was not provided in discovery despite plaintiff receiving it in
2015, were admitted in evidence. She found that Purdy had no opportunity to
rebut its findings by having it reviewed by his own expert.
Once plaintiff rested, Purdy moved for involuntary dismissal pursuant to
Rule 4:37-2(b). The court reserved judgment. After the defense rested, Purdy
moved for judgment at trial under Rule 4:40-1. The court granted both defense
motions on November 12, 2019, at trial, and issued a November 20, 2019 order.
Purdy, who served as the insurance agent for Holmdel since 2002,
procured several policies for Holmdel, including the workers' compensation
coverage required by statute. He also procured coverage for Robert, Walter,
Christopher, and Michael on their homes and autos. This was usually done by
telephone. Purdy spoke with Christopher five or six times over the course of his
thirteen-year relationship with Holmdel, and these conversations typically
occurred "while Purdy was meeting with the LLC owners regarding the
insurance" and business needs. Purdy's interactions with Christopher were
A-1529-19
11
"limited" and related primarily to the procurement of "personal coverage to
Christopher."
Robert "was the person in charge of the insurance." Purdy had a
longstanding relationship with Robert and met with him at least annually to
review Holmdel's insurance coverage, including its workers' compensation
policy. Robert was responsible for providing information to Purdy regarding
the LLC's employees and "received the annual audits and reviewed the insurance
policy renewals" for the LLC. Christopher and Michael were not involved in
the audits. When Michael became an owner, he began participating in the
insurance renewal meetings in a limited capacity.
Prior to becoming members of Holmdel, Christopher and Michael were
covered by workers' compensation insurance as employees of the company.
When Robert and Walter were the sole owners of Holmdel, they had at one point
opted in for workers' compensation coverage but later opted out of such
coverage because Robert was dissatisfied with the process. Robert knew that
owners of LLCs needed to opt in for coverage if they wished to be covered.
However, Robert was unaware that each LLC member needed to opt in for there
to be coverage. Robert assumed that Christopher and Michael still had workers'
compensation coverage when they became LLC members because they had
A-1529-19
12
coverage as employees of the LLC. Although Robert, Michael, and Christopher
never asked Purdy about workers' compensation insurance coverage, all three
told Purdy that they wanted "to be protected."
No one witnessed Christopher fall. Michael testified that when he saw his
brother on the day of the accident, "his whole back was completely covered in
snow, his hat, his back, and he just didn't look like himself. He was just
completely out of it." When Michael asked his brother what happened,
Christopher responded, "I can't get [my truck] running. I don't know what's
wrong with it. I was working on it. I slipped. I fell down. I hit my head. I hit
my head so hard I saw stars." Robert also testified that Christopher told them
that he had fallen while working on a truck and hit his head so hard he saw stars.
Later that same day, Michael went to look for Christopher once he realized
his brother was taking longer than usual to return. Michael found his brother
seemingly "dead in the truck." He was later pronounced dead at the hospital.
In support of his motion, Purdy argued that he only owed a legal duty to
Holmdel to provide workers' compensation coverage for its employees, not to
Christopher once he became a member. He also argued that plaintiff presented
no medical evidence to establish the cause of Christopher's death and whether it
A-1529-19
13
was work-related, and thereby failed to prove a compensable injury under the
Workers' Compensation Act, (the Act), N.J.S.A. 34:15-1 to -128.
The judge found that Purdy met his duty to inform the LLC about workers'
compensation coverage and noted that Robert, who "managed insurance
coverage for the LLC," was aware that "members of an LLC are not covered
unless they opt in." Christopher, as an individual, could not procure workers'
compensation insurance for the LLC because the Act requires the employer to
procure such coverage for its employees.
The judge concluded that the LLC was charged with knowledge through
Robert, who consciously opted out of workers' compensation as a member and
owner of the LLC. Robert decided to opt out in 2002 and continued to opt out
for over ten years.
The judge rejected plaintiff's claim that an insurance broker duty extended
beyond the LLC to its individual members, even if the harm is foreseeable. She
concluded that extending the duty to individual members was inappropriate
because "[a]n individual member may have a different interest [than] another
member and both may have different interests [than the] LLC itself." For
example, an insurance policy with a lower premium may be beneficial to the
LLC but not provide coverage for its members.
A-1529-19
14
The judge further explained that even if a special relationship existed to
justify the extension of Purdy's duty to Christopher as a member of the LLC,
plaintiff still needed to prove that the breach of the duty proximately caused the
loss. The judge found there was no evidence that Christopher would have opted
in for workers' compensation coverage.
The judge also found the record lacked evidence of who possessed the
power to make decisions concerning workers' compensation insurance for LLC
members—whether such decisions required a majority vote or unanimity. Also
lacking was evidence concerning the LLC's operating agreement to determine
whether each member could bind the company and make decisions on its behalf.
The judge concluded that, even if Michael and Robert would have opted in for
coverage had they been given the option by Purdy, plaintiff presented no
evidence that such action would have been sufficient to bind the LLC.
The judge rejected plaintiff's claim that a special relationship existed
between Christopher and Purdy, even though Purdy procured homeowner's and
auto insurance coverage for Christopher, noting their interactions were limited
and usually occurred by telephone. The judge further noted that the LLC and
Robert are not plaintiffs.
A-1529-19
15
The judge further found that plaintiff failed to prove damages because
plaintiff failed to prove that Christopher suffered a compensable injury, a
requirement to receive death benefits. The court noted the lack of any medical
evidence concerning the injury. Plaintiff did not present any expert medical
testimony to interpret the medical examiner's report, any EMT records, or any
hospital records. Without expert testimony or medical evidence of an injury,
the judge concluded she could not reach the issue of whether the injury was a
work-related, compensable injury.
Lastly, the judge found Purdy acted within the scope of his duties and
obtained the requested coverage. Purdy regularly met with Robert, the LLC's
controlling member, to discuss workers' compensation coverage, and he
preferred lower premiums.
On appeal, plaintiff argues:
I. IN HOLDING THAT PURDY HAD NO DUTY TO
CHRISTOPHER, THE TRIAL COURT
INEXPLICABLY IGNORED THE FACT THAT
PURDY WAS CHRISTOPHER'S PERSONAL
INSURANCE BROKER, AND THE POTENTIAL
BENEFICIARY OF NURSERIES' WORKERS'
COMPENSATION COVERAGE.
II. PURDY[] VIOLATED THE WORKERS'
COMPENSATION STATUTE BY FAILING (A) TO
PROVIDE NOTICE OF THE ELECTION OF
COVERAGE IN EACH WORKERS'
A-1529-19
16
COMPENSATION APPLICATION AND (B) TO
PROVIDE THE WORKERS' COMPENSATION
ELECTION FORM
III. THE TRIAL EVIDENCE WAS MORE THAN
ENOUGH TO ESTABLISH A COMPENSABLE
INJURY UNDER THE NEW JERSEY WORKERS'
COMPENSATION STATUTE.
IV. THE TRIAL COURT ERRED IN PERMITTING
"TRIAL BY AMBUSH," BY ALLOWING PURDY TO
CONTEST CAUSATION DESPITE HAVING
CONCEDED THE ISSUE BEFORE TRIAL.
V. AFTER ALLOWING PURDY TO ENGAGE IN
TRIAL BY AMBUSH, THE TRIAL COURT
COMMITTED REVERSIBLE ERROR BY
REFUSING TO ALLOW CHRISTOPHER TO
INTRODUCE RELEVANT EVIDENCE TO REBUT
THE BELATEDLY[]ARGUED CAUSAL
CONNECTION ISSUE, INCLUDING THE
ADMISSION OF CHRISTOPHER'S AUTOPSY
REPORT.
Plaintiff contends the court erred in denying her cross-motion for
summary judgment by concluding Purdy owed no duty to Christopher, thereby
ignoring the fact that Purdy was Christopher's personal insurance broker, and
Christopher asked Purdy to advise him on the insurance implications of
becoming a member of the LLC. We disagree.
We review a ruling on summary judgment de novo, applying the same
standard as the trial court. Davis v. Brickman Landscaping, Ltd., 219 N.J. 395,
A-1529-19
17
405 (2014). "The trial court's conclusions of law and application of the law to
the facts warrant no deference from a reviewing court." W.J.A. v. D.A., 210
N.J. 229, 238 (2012) (citing Manalaplan Realty, L.P. v. Twp. Comm. of
Manalapan, 140 N.J. 366, 378 (1995)).
"Our court rules require summary judgment to be granted when the record
demonstrates that 'there is no genuine issue as to any material fact challenged
and that the moving party is entitled to a judgment as a matter of law.'" Davis,
219 N.J. at 405-06 (quoting R. 4:46-2(c)). The court considers "whether the
competent evidential materials presented, when viewed in the light most
favorable to the non-moving party, are sufficient to permit a rational factfinder
to resolve the alleged disputed issue in favor of the non-moving party." Brill v.
Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). "In applying that
standard, a court properly grants summary judgment 'when the evidence is so
one-sided that one party must prevail as a matter of law.'" Davis, 219 N.J. at
406 (quoting Brill, 142 N.J. at 540). Thus, both the trial and appellate court
must "review the motion record against not only the elements of the cau se of
action but also the evidential standard governing that cause of action." Bhagat
v. Bhagat, 217 N.J. 22, 40 (2014).
A-1529-19
18
"To sustain a cause of action for negligence, a plaintiff must establish four
elements: '(1) a duty of care, (2) a breach of that duty, (3) proximate cause, and
(4) actual damages.'" Townsend v. Pierre, 221 N.J. 36, 51 (2015) (quoting Polzo
v. Cnty. of Essex, 196 N.J. 569, 584 (2008)). "[W]hether a defendant owes a
legal duty is generally a question of law for the court to decide." Clohesy v.
Food Circus Supermarkets, Inc., 149 N.J. 496, 502 (1997) (citing Carvalho v.
Toll Bros. & Devs., 143 N.J. 565, 572 (1996)).
"[A]n insurance broker owes a duty to the insured to act with reasonable
skill and diligence in performing the services of a broker." Carter Lincoln-
Mercury, Inc. v. EMAR Group, Inc., 135 N.J. 182, 189 (1994). See also Rider
v. Lynch, 42 N.J. 465, 476 (1964) ("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."). An
insured can establish a prima facie case of negligence against an insurance
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). See also Aden v. Fortsh, 169 N.J. 64, 79 (2001) (if a
broker "neglects to procure the insurance or if the policy is void or materially
A-1529-19
19
deficient or does not provide the coverage he undertook to supply, because of
his failure to exercise the requisite skill or diligence, he becomes liable to his
principal for the loss sustained thereby") (quoting Rider, 42 N.J. at 476);
Restatement (Second) of Agency, § 401 (Am. Law Inst. 1957) ("An agent is
subject to liability for loss caused to the principal by any breach of duty.").
Here, in denying the summary judgment motions, the judge found there
were genuine issues of material fact for a jury to determine, including disputed
communications and credibility. The facts regarding whether the duty to inform
and advise as to workers' compensation coverage flowed to Christopher
remained in dispute. The parties disputed the following issues: (1) "the nature
of the relationship [between Christopher and Purdy] and to what extent that
relationship bears upon the obligations of" Purdy; (2) the actual discussions
between Christopher and Purdy; (3) "whether . . . the level of communication
with [Christopher] in this matter was sufficient"; and (4) Purdy's
communications with the LLC through Robert or during other meetings in 2012.
These genuine issues of material fact precluded granting summary judgment to
plaintiff because the court was unable to determine whether Purdy's duty of care
extended to Christopher. Clohesy, 149 N.J. at 502 (citing Carvalho, 143 N.J. at
572).
A-1529-19
20
We next address plaintiff's argument that the court erred in granting
Purdy's motions for involuntary dismissal and judgment at trial because the
testimony was more than sufficient to establish Purdy's duty and demonstrated
that he "was the longtime insurance broker for [the LLC] and its members,
including Christopher." Relying on Carter Lincoln-Mercury, plaintiff contends
that Purdy "owed a duty to Christopher both individually and as a member of
[the LLC]." She alleges that Purdy "violated the workers' compensation statute
by failing (A) to provide notice of the election of coverage in each workers'
compensation application and (B) to provide the workers' compensation election
form." Plaintiff argues this alleged violation of the workers' compensation
statute was evidence of negligence.
After plaintiff rests, the defendant "may move for a dismissal of the action
or of any claim on the ground that upon the facts and upon the law the plaintiff
has shown no right to relief." R. 4:37-2(b). The "motion shall be denied if the
evidence, together with the legitimate inferences therefrom, could sustain a
judgment in plaintiff's favor." Ibid. The defendant does not waive the right to
offer evidence if the motion is denied. Ibid. The defendant may also move for
judgment at the close of all the evidence or after plaintiff rests. R. 4:40-1. The
A-1529-19
21
same evidential standard governs motions for judgment. Verdicchio v. Ricca,
179 N.J. 1, 30 (2004).
In Smith v. Millville Rescue Squad, the Court summarized the standard of
review of motions for involuntary dismissal and for judgment at trial:
In reviewing a motion for involuntary dismissal
under Rule 4:37-2(b) or a motion for judgment under
Rule 4:40-1, we apply the same standard that governs
the trial courts. ADS Assocs. Grp. v. Oritani Sav.
Bank, 219 N.J. 496, 511 (2014); Frugis v. Bracigliano,
177 N.J. 250, 269 (2003). Both motions are governed
by "the same evidential standard: 'if, accepting as true
all the evidence which supports the position of the party
defending against the motion and according him the
benefit of all inferences which can reasonably and
legitimately be deduced therefrom, reasonable minds
could differ, the motion must be denied[.]'"
Verdicchio, 179 N.J. at 30 (quoting Estate of Roach v.
TRW, Inc., 164 N.J. 598, 612 (2000)). The motion
should only "be granted where no rational juror could
conclude that the plaintiff marshaled sufficient
evidence to satisfy each prima facie element of a cause
of action." Godfrey v. Princeton Theological
Seminary, 196 N.J. 178, 197 (2008).
[225 N.J. 373, 397 (2016) (alteration in original).]
As with summary judgment motions, the court must determine whether
the evidence is "so one-sided that one party must prevail as a matter of law."
Frugis, 177 N.J. at 269 (quoting Brill, 142 N.J. at 536). Like the trial court, an
A-1529-19
22
appellate court is not concerned with the weight, worth, nature, or extent of the
evidence. Dolson v. Anastasia, 55 N.J. 2, 5-6 (1969).
"A limited liability company is an entity distinct from its members."
N.J.S.A. 42:2C-4(a). See also Touch of Class Leasing v. Mercedes-Benz Credit
of Canada, Inc., 248 N.J. Super. 426, 441 (App. Div. 1991) ("[A] corporation is
an entity separate and distinct from its principals."). Here, no claim was brought
by the LLC since workers' compensation benefits are paid to the injured
employee or member that opted in for the coverage.
Applying these principles to the evidence adduced at trial, we reverse the
trial court's decision to grant defendant's motions for involuntary dismissal
under Rule 4:37-2(b) and for judgment under Rule 4:40-1.
The Act was amended to allow members of an LLC, "who actively
perform services on behalf of the" LLC, to be "deemed an 'employee' of the"
LLC "for purposes of receipt of benefits and payment of premiums pursuant to
this chapter, if the" LLC "elects, when the [LLC's] workers' compensation
policy" "is purchased or renewed, to obtain coverage for the" LLC's members.
N.J.S.A. 34:15-36. "[T]he election may only be made at purchase or at renewal
and may not be withdrawn during the policy term." Ibid. For any member of
an LLC to opt in for workers' compensation coverage, all members must do so.
A-1529-19
23
38 N.J. Practice, Workers' Compensation Law § 3.4 at 35 (Jon L. Gelman) (3d
ed. 2000, 2020 Supplement).
Plaintiff contends that the trial court erred in concluding that Purdy only
owed a duty to the LLC, which suffered no damages because of the lack of
coverage. We agree.
N.J.S.A. 34:15-36 imposes a non-waivable duty on an insurance broker to
advise new members of an LLC of the availability of workers' compensation
coverage and the right to elect to opt in for such coverage. Indeed, the statute
requires every workers' compensation insurance application to "include notice,
as approved by the Commissioner of Banking and Insurance, concerning the
availability of workers' compensation coverage for . . . [LLC] members or
partners." N.J.S.A. 34:15-36. The application must also "contain a notice of
election of coverage and shall clearly state that coverage for . . . [LLC] members
and partners shall not be provided under the policy unless the application
containing the notice of election is executed and filed with the insurer or
insurance producer." Ibid.
Here, Purdy failed to provide Michael and Christopher, the new LLC
members, with notice as required under N.J.S.A. 34:15-36 and failed to inform
them that they were no longer covered. Robert's prior experience of opting in
A-1529-19
24
and out of workers' compensation coverage as a member did not serve to advise,
constructively or otherwise, Christopher and Michael about the change in
coverage and their right to elect to opt in for such coverage. Without providing
Michael and Christopher with notice, the new members—who presumably were
not knowledgeable regarding the change in coverage upon becoming members
of the LLC—would not have been able to make an informed decision.
In addition, after Michael and Christopher became members of the LLC,
they both met with Purdy in a 2012 to discuss insurance renewal and to "make
sure that [they] were protected . . . ." 2 During the 2012 meeting, the parties did
not specifically discuss workers' compensation coverage, but Michael testified
that he and Christopher informed Purdy they wanted protection. During his
testimony, Michael specifically stated that he "tried to give [Purdy] as much
information as possible just to make sure [they] were protected."
Giving plaintiff "the benefit of all inferences which can reasonably and
legitimately be deduced" from the evidence presented, a rational juror could
conclude that Michael and Christopher sought protection during the 2012
2
Although Purdy testified that Christopher did not attend the 2012 meeting, we
"accept[] as true all the evidence which supports [plaintiff's] position" and
accord plaintiff "the benefit of all inferences which can reasonably and
legitimately be deducted therefrom . . . ." Smith, 225 N.J. at 397 (quoting
Verdicchio, 179 N.J. at 30).
A-1529-19
25
renewal meeting and Purdy negligently failed to inform them about the change
in workers' compensation coverage. Smith, 225 N.J. at 397 (citations omitted).
We conclude that there was sufficient evidence presented to require submission
of this issue to the jury.
We next address plaintiff's argument that the evidence presented
established that Christopher's death was a compensable injury under the Act.
Plaintiff argues that the burden of proof is construed liberally in favor of a
workers' compensation claimant and medical evidence of causation is not
required, especially where the cause of death is obvious.
The Act provides a benefit to the dependents of an employee whose death
resulted from a work-related injury, illness, or medical condition. N.J.S.A.
34:15-13(a), (h). "Dependent" is defined by the Act to include the deceased
employee's wife and children under eighteen. N.J.S.A. 34:15-13(f).
"To succeed in an action against an insurance broker, the plaintiff must
prove that in addition to being negligent, the broker's negligence was a
proximate cause of the loss." Harbor Commuter Serv., Inc. v. Frenkel & Co.,
401 N.J. Super. 354, 368 (App. Div. 2008) (citing Regino v. Aetna Cas. & Sur.
Co., 200 N.J. Super. 94, 99 (App. Div. 1985)). New Jersey has adopted the
substantial factor test, which holds a tortfeasor liable if his "negligent conduct
A-1529-19
26
was a substantial factor in bringing about the injuries . . . ." Conklin v. Hannoch
Weisman, 145 N.J. 395, 419 (1996) (quoting Brown v. United States Stove Co.,
98 N.J. 155, 171 (1984)). In cases involving an alleged failure to procure
insurance coverage, the measure of damages is "the amount that would have
been due under the policy provided it had been obtained." Robinson v. Janay,
105 N.J. Super. 585, 591 (App. Div. 1969) (quoting 43 Am. Jur. 2d Insurance §
174 (1982)).
Generally, proximate cause is an issue for the jury. Miller v. Est. of
Sperling, 166 N.J. 370, 386 (2001) (citing Perez v. Wyeth Labs, Inc., 161 N.J.
1, 27 (1999)). However, a court may decide the issue where "no reasonable jury
could find that the injuries were proximately caused by the [defendant's
conduct]." Vega by Muniz v. Piedilato, 154 N.J. 496, 509 (1998).
An injury is compensable under the Act when it "is caused to an employee
by accident arising out of and in the course of his employment . . . ." N.J.S.A.
34:15-1. The right to compensation under the Act is not affected by the
negligence of the employee unless the employee was "willfully negligent," ibid.,
or "the injury or death is intentionally self-inflicted," N.J.S.A. 34:15-7.
A workers' compensation petitioner for has "the burden of proof to
establish all elements of his case." Bird v. Somerset Hills Country Club, 309
A-1529-19
27
N.J. Super. 517, 521 (App. Div. 1998). A successful petitioner "generally must
prove both legal and medical causation when those issues are contested."
Lindquist v. City of Jersey City Fire Dep't, 175 N.J. 244, 259 (2003). "[P]roof
of medical causation means proof that the disability was actually caused by the
work-related event. Ibid. (citing Hone v. J.F. Shea Co., 728 P.2d 1008, 1011
(Utah 1986)). Proof of legal causation means proof that the injury is work
connected." Ibid. (citing Kasper v. Bd. of Trs. of Tchrs.' Pension and Annuity
Fund, 164 N.J. 564, 591 (2000) (Coleman, J., concurring); In re Lockheed
Martin Corp., 786 A.2d 872, 874-75 (N.H. 2001)). "It is the petitioner's burden
to establish a causal link between the employment and the [injury]." Kiczula v.
Am. Nat'l Can Co., 310 N.J. Super. 293, 303 (App. Div. 1998) (citing Laffey v.
Jersey City, 289 N.J. Super. 292, 303 (App. Div. 1996)).
Nevertheless, the Act is social legislation that is liberally construed "to
implement the legislative policy of affording coverage to as many workers as
possible." Lindquist, 175 N.J. at 258 (quoting Brower v. ICT Group, 164 N.J.
367, 373 (2000)). To that end, the workers' compensation judge "conducting the
hearing shall not be bound by the rules of evidence." N.J.S.A. 34:15-56. "The
purpose of this section was to simplify the nature of proof that can be offered
without regard to technical exclusionary rules of evidence. Thus, hearsay
A-1529-19
28
evidence need not be excluded but the ultimate award must be based on legally
competent evidence." Gunter v. Fischer Sci. Am., 193 N.J. Super. 688, 691
(App. Div. 1984) (citing Gilligan v. Int'l Paper Co., 24 N.J. 230, 236 (1957)).
"Nonetheless, the doctrine of liberal construction does not extend to 'the
evaluation of credibility, or of weight or sufficiency of evidence.'" Lindquist,
175 N.J. at 258 (quoting Oszmanski v. Bergen Point Brass Foundry, Inc., 95 N.J.
Super. 92, 95 (App. Div. 1967)).
The trial court found that plaintiff offered no admissible evidence to
establish the elements of proximate cause and damages. However, plaintiff's
cause of action is based, in part, on whether the death was compensable under
the Act. Because this professional liability action results in the proverbial "trial
within a trial," Gautam v. De Luca, 215 N.J. Super. 388, 397 (App. Div. 1987),
the relaxation of the evidence rules applies to that aspect of this case. Plaintiff
is not held to the technical rules of evidence on the issue of compensability under
the Act. Gunter, 193 N.J. Super. at 691 (citing Gilligan, 24 N.J. at 236).
In addition, whether medical evidence is required to establish a
compensable injury depends upon the complexity of the medical issues. 12 Lex
K. Larson, Larson's Workers' Compensation Law, § 128 (rev. ed. 2020).
In line with the general tendency of
administrative law to recognize the expertise of
A-1529-19
29
specialized tribunals, compensation boards may rely to
a considerable extent on their own knowledge and
experience in uncomplicated medical matters, and in
such cases, awards may be upheld without medical
testimony or even in defiance of the only medical
testimony. Nevertheless, medical testimony is
indispensable when the medical question is no longer
an uncomplicated one, carrying the factfinders into
realms that are properly within the province of medical
experts.
[Ibid.]
As explained by this distinguished commentator:
To appraise the true degree of indispensability
which should be accorded medical testimony, it is first
necessary to dispel the misconception that valid awards
can stand only if accompanied by a definite medical
diagnosis. True, in many instances it may be
impossible to form a judgment on the relation of the
employment to the injury, or relation of the injury to
the disability, without analyzing in medical terms what
the injury or disease is. But this is not invariably so. In
appropriate circumstances, awards may be made when
medical evidence on these matters is inconclusive,
indecisive, fragmentary, inconsistent, or even
nonexistent.
....
This view—that in appropriate circumstances
medical testimony need not necessarily establish
specifically and positively the pathological diagnosis
and etiology of a disease or condition—has been
accepted by most courts.
[Id. at § 128.02 (footnotes omitted).]
A-1529-19
30
"Similarly, when the issue is causal connection between an injury and
death, medical testimony may be dispensed with" when the injury "occur[s]
suddenly as a result of an obvious accident . . . ." Ibid. One reason for this rule
is that "lay testimony, including that of the claimant, is of probative value in
establishing such simple matters as the existence and location of pain, and
sequence of events leading to the compensable condition . . . ." Id. at § 128.04.
However, "as the degree of complexity of the medical issue increases, so does
the degree of requisite thoroughness and definiteness of diagnosis." Id. at §
128.05.
Another circumstance warranting relaxation of the need for medical
testimony is "where there has been an unwitnessed fatal mishap occurring within
the time and space limits of the employment, the claimant's standard of proof
will be considerably relaxed." Williams v. Corby's Enter. Laundry, 64 N.J.
Super. 561, 568 (App. Div. 1960). "[O]ne cannot be expected, in such a
situation, to do more than present the more believable of the competing
hypotheses." Ibid. In such cases, petitioners are permitted to use circumstantial
evidence to satisfy the burden of proof because "[p]robability, and not the
ultimate degree of certainty is the test." Verge v. Cnty. of Morris, 272 N.J.
Super. 118, 125 (App. Div. 1994) (citing Jochim v. Montrose Chem. Co., 3 N.J.
A-1529-19
31
5 (1949)). See also Crotty v. Driver Harris Co., 49 N.J. Super. 60, 71 (App. Div.
1958) (holding where there are no witnesses to an employee's death, courts are
satisfied with "scant circumstantial evidence that the accident arose out of and
in the course of the employment" (citing Macko v. Herbert Hinchman & Son, 24
N.J. Super. 304, 307-308 (App. Div. 1953))).
In Aladits v. Simmons Co., 47 N.J. 115 (1966), the employee was
performing heavy work when he collapsed and died from a heart attack. The
Court addressed the evidence of causation required when an unwitnessed death
occurs:
This was an unwitnessed death. No one knows
what Aladits was doing or what signs or symptoms he
manifested when stricken. It is known that he was in
the course of his work, that it was heavy work and that
he had been doing it for about four and one-half hours
before he collapsed. In such cases causal connection
between the work effort and the death must depend
upon circumstantial evidence. It is a matter of common
knowledge also, that in such cases justice requires a
more tolerant appraisal of the evidence supporting the
thesis of causation. Although the standard to be met for
compensability remains the same, where the 'collapse
is unwitnessed and the employee's lips are sealed by
death, the courts throughout the country show an
understandable readiness' to find the necessary
reasonably probable connection on a less formidable
quantum of testimony.
[Id. 121-22.]
A-1529-19
32
The Court concluded that "[h]eavy reliance must be placed on the surrounding
circumstances, and they must be carefully explored and appraised for the
existence of every fact or element which points the way toward or away from
work connection." Id. at 122.
In Coleman v. Cycle Transformer Corp., an employee suffered acute
trauma when her hair caught fire when she lit a cigarette during an unpaid lunch
break in the company's lunchroom. 105 N.J. 285, 286-87 (1986). The Court
noted the simply worded phrase "arose out of" the employment "has given rise
to 'a mass of decisions turning upon nice distinctions and supported by
refinements so subtle as to leave the mind of the reader in a maze of confusion.'"
Id. at 290 (quoting Note, "Arising 'out of' and 'in the Course of' the Employment
Under the New Jersey Workmen's Compensation Act," 20 Rutgers L. Rev. 599
(1966)). The Court considered the case to be "relatively straightforward, not
encumbered by such distinctions, refinements, or confusion." Ibid. We reach
the same conclusion in this case.
"The requirement that a compensable accident arise out of the
employment looks to a causal connection between the employment and the
injury. It must be established that the work was at least a contributing cause of
the injury and that the risk of the occurrence was reasonably incident to the
A-1529-19
33
employment." Ibid. (citing Note, 20 Rutgers L. Rev. at 601). The test is
"whether it is more probably true than not that the injury would have occurred
during the time and place of employment rather than elsewhere." Ibid. (quoting
Howard v. Harwood's Restaurant Co., 25 N.J. 72, 83 (1957)).
This Case does not involve an underlying heart condition or
environmental exposure to carcinogens or toxins. Cf. Aladits, 47 N.J. at 125(heart attack after engaging in prolonged, strenuous manual labor); Szumski v.
Dale Boat Yards, Inc., 48 N.J. 401, 405 (1967) (acute myocardial infarction
following manual labor on a hot, humid day); Lindquist, 175 N.J. at 249(firefighter, who was regularly exposed to heavy smoke conditions, developed
pulmonary emphysema). Claims based on environmental exposure or heart
attacks while performing strenuous physical labor present far more complicated
medical causation issues than claims based on trauma. The better view is that
workers' compensation claims based on environmental exposure or labor-
induced heart attacks require greater medical evidence of a causal connection
between the employment and the illness or injury than a claim based on an injury
caused by a discrete traumatic event unrelated to any underlying medical
condition.
A-1529-19
34
Christopher was injured during a slip and fall on a snowy surface while
performing snow removal work for the LLC. The fall occurred during regular
business hours on the client's property while trying to start the LLC's truck.
Entirely absent is any evidence that his death was related to environmental
exposure, an underlying medical condition, or non-work-related trauma.
Plaintiff presented strong circumstantial evidence that the accident caused
Christopher's death. This included Michael's testimony that when he saw
Christopher on the day of the accident, "his whole back was completely covered
in snow, his hat, his back, and he just didn't look like himself. He was just
completely out of it." In addition, Michael testified that Christopher told him:
"I slipped. I fell down. I hit my head. I hit my head so hard I saw stars."
As we have noted, a "considerably relaxed" burden of proof is applied
where "an unwitnessed fatal mishap occurring within the time and space limits
of the employment" occurs. Williams, 64 N.J. Super. at 568. Applying this
"more tolerant appraisal of the evidence supporting the thesis of causation ,"
Aladits, 47 N.J. at 122, we find that plaintiff presented sufficient circumstantial
evidence for a reasonable jury to find by a preponderance of the evidence that
the fatal injury "occurred during the time and place of employment rather than
elsewhere," Coleman, 105 N.J. at 290 (quoting Howard, 25 N.J. at 83). Because
A-1529-19
35
Christopher's fall was "unwitnessed and [his] lips [were] sealed by death," we
conclude plaintiff presented sufficient circumstantial evidence for a reasonable
jury "to find the necessary reasonably probable connection on a less formidable
quantum of testimony." Aladits, 47 N.J. at 122.
Since plaintiff presented sufficient evidence that Christopher suffered a
work-related injury that led to his death, the burden of proof shifted to employer.
Kolakowski v. Thomas Mfg. Corp., 88 N.J. Super. 478, 488 (App. Div. 1965).
It is well settled that where the employer disputes the
connection of the disability and the work injury after
petitioner has, by a preponderance of the credible
proofs, shown such relation, the burden shifts to the
employer to come forward with proof that the disability
might be the result of another cause.
[Ibid.]
See also Bird, 309 N.J. Super. at 521 (stating that once the petitioner has
established the elements of his case, "the burden to defeat [the] claim and
establish contrary facts and legal conclusions exonerating the employer or
mitigating liability shifted to the employer" (citations omitted)).
Here, the trial court granted the motions for involuntary dismissal and
judgment at trial after Purdy rested. Purdy did not come forward with any
evidence that Christopher's injury or death resulted from another cause.
Considering the evidential burden imposed on Purdy, which he clearly did not
A-1529-19
36
meet, "accepting as true all the evidence which supports [plaintiff's] position,"
and according plaintiff the benefit of all reasonable inferences, we find that a
rational juror could conclude that plaintiff presented "sufficient evidence to
satisfy each prima facie element of [the] cause of action." Smith, 225 N.J. at
397 (citations omitted). Consequently, the motions should have been denied.
Ibid. (quoting Verdicchio, 179 N.J. at 30).
The trial court erred in granting Purdy's motions for involuntary dismissal
and judgment at trial. Ibid. We express no opinion on plaintiff's right to
recovery against Purdy. The jury must make that decision. We reverse the order
granting the involuntary dismissal and judgment at trial and remand for retrial.
Affirmed in part, reversed in part, and remanded for retrial. We do not
retain jurisdiction.
A-1529-19
37