Operating a summer camp?
Working in someone else's summer camp?
Getting into a vehicle operated by someone running or working in a summer camp?
A judge's decision earlier this year regarding a summer camp owned by a Lakewood company highlights how imperative it is for camps to have all necessary insurance, including on their vehicles.
Camp Machane Richmond operated a summer camp in Richmond, Virginia during the month of August 2019. Machane offered participants transportation to Richmond from both Lakewood and Brooklyn.
On July 9, 2019, Machane contacted Hertz Entertainment
Services, a vehicle rental company, requesting “4 fifteen seater Transit vans” for the
purpose of transporting campers to and from Richmond, Virginia.
Subsequently, Machane contacted Gross & Co LLC to procure insurance coverage for the
2019 summer camp, including $1 million in Non-Owned/Hired Auto coverage.
On July 30, 2019, Gross submitted an application for insurance on behalf of Machane to FL Dean, the national program administrator for U.S. Fire’s Sport and Entertainment Insurance Program.
FL Dean advised Gross that in order to obtain $1 million in Non-Owned/Hired Auto,
Machane must complete a Non-Owned/Hired Auto Supplemental Form. The Supplemental Form, which consisted of six questions with subparts, was sent to Machane. Machane's representative completed the form.
Question Number 4, which appears under a “Hired Auto Liability” subheading, read as follows:
4. Do you hire or rent vehicles during your fair/festival/event? □ Yes □ No If yes, please
describe vehicle types, estimated number, duration and usage.
If yes to #4, are any of these vehicles 12 or 15-passenger vans?
□ Yes (How many?)
□ No
Machane responded to the first part of #4 “no” and the second part “N/A”. Machane did not answer the final part of question #4 pertaining to 12 or 15-passenger vans.
Relying on the information provided in the Supplemental Form, FL Dean provided coverage pursuant to U.S. Fire Insurance Company’s underwriting guidelines. The underwriting guidelines explicitly state that “12 or 15 passenger vans are ineligible for Non-Owned/Hired Auto coverage.
On August 6, 2019, Gross provided Machane with a price quotation which included
Accident, General Liability, and Hired/Non-Owned Auto coverages. The price quotation
explicitly stated that 12 and 15+ passenger vans are excluded from the coverage. On that same
day, Gross requested that FL Dean bind coverage pursuant to the price quotation.
In response, U.S. Fire issued Commercial General Liability coverage to Machane.
The key takeaway so far is that the camp operators did not obtain the proper insurance for their 15-passenger vans.
On August 15, 2019, one of the 15-passenager vans rented by Machane was involved in a single-car accident in Henrico, North Carolina. The police report indicates that the vehicle veered out of its lane of travel, crossed into a ditch, and flipped over completely.
Multiple campers filed lawsuits in U.S. District Court of New Jersey, NYS Supreme Court in Kings County, and NJ Supreme Court in Ocean County against Machane and the driver of the vehicle for alleged personal injuries as a result of the accident.
The lawsuits alleged that the driver operated the
motor vehicle in such a negligent, careless and reckless manner so as to attempt to switch lanes as
high rate of speed, causing him to lose control of the vehicle that exited the roadway and
overturned.
As a result of the said collision, the passengers were thrown about violently
inside the automobile and sustained serious diverse personal injuries, which led to medical costs.
These lawsuits also sought monetary damages from U.S. Fire Insurance Co.
In response, U.S. Fire Insurance Co. filed their own lawsuit in Ocean County Superior Court, seeking to obtain a declaration that the U.S. Fire policy should be declared void ab initio due to Machane’s material misrepresentations regarding rental of 15-passenger vans from the 2019 summer camp when applying for the U.S. Fire Policy.
The insurance company also sought a declaration that it is not obligated to provide Machane with a defense or indemnification under the U.S. Fire Policy in connection with any and all claims (including for the lawsuits filed in the other courts).
The insurance company noted that after being notified of the motor vehicle crash, they investigated to ascertain that the camp was properly insured, and that is when they realized that the camp did operate rented 15-passenger vans, which their insurance policy explicitly did not cover.
The insurance company further argued that they relied on the camps representations in issuing the policy, that in applying for the policy, Machane knowingly, intentionally and/or failed to disclose and/or misrepresented material information, including information with regard to Machane’s use of non-owned autos, and had they been aware that Machane rented and used twelve- to fifteen-passenger vans, they would not have issued the policy to Machane.
One of the passengers who also filed his own lawsuit in U.S. District Court of New Jersey, filed a Motion to Intervene, writing emphatically that "Machane has no assets other than the Policy to satisfy any possible judgment in the camper's federal action, and case law states that parties with separate personal injury suits should be allowed to intervene in a declaratory judgment action regarding coverage under the insurance policy because a ruling in favor of the insurance company “probably would render any judgment entered in favor of the [proposed intervenors] in the other litigation uncollectable”).
The case was originally filed in June 2020.
In a decision released earlier this year, Superior Court Judge Craig Wellerson granted summary judgement in favor of the insurance company.
Judge Wellerson wrote:
To establish a claim for rescission based on material misrepresentations in a policy application, an insurer needs to prove equitable fraud, but not legal fraud.
In the present matter the court finds that the questions on the Supplemental Form asking whether Machane would use rental vehicles, and whether it would use 12-15 passenger vans during the time of the policy are objective questions. In response to the objective questions, Machane indicated that it did not intend to use rental vehicles nor 12-15 passenger vans.
The Court also finds that whether Machane intended to defraud U.S. Fire is irrelevant because an objective question was posed.
The court finds that prior to answering the Supplemental Form, in late July of 2019,
Machane contacted Hertz Entertainment Services, a vehicle rental company, requesting
“4 fifteen seater Transit vans” for the purpose of transporting campers. Therefore, Machane
knew at the time it completed the Supplemental Form that it intended to use both rental vehicles
and 12-15 passenger vans. Therefore, Machane misrepresented these presently known facts on
the Supplemental Form provided to U.S. Fire.
U.S. Fire asserts that it relied on the statements made on the Supplemental Form when issuing the U.S. Fire Policy. U.S. Fire specifically sought this information from Machane
because U.S. Fire’s underwriting guidelines provide that 12 to 15 passenger vans are ineligible for Hired/Non-Owned Auto coverage. Therefore, U.S. Fire would not have issued Non-
Owned/Hired Auto coverage to Machane if it had known that
Machane would be using 15-passenger vans in connection with the camp.
Machane knew that it was utilizing rental vans in the form of 12-15 passenger vans at the time it filled out the Supplemental Form and U.S. Fire detrimentally relied on this information when issuing the insurance policy.
Under these circumstances, the court finds that recission of the insurance policy issued by U.S. Fire is the appropriate remedy, and the Motion for Summary Judgment seeking recission of the U.S. Fire Insurance policy is Granted.
Included in this insurance policy was a benefit that the insurance company would provide the camp with an attorney in case any lawsuits were filed against the camp. When the lawsuits were filed, the insurance company provided the camp with an attorney while they investigated the policy limits. Once Judge Wellerson declared the policy to be rescinded, the insurance company also withdrew the camp's attorney, causing the camp to default on some of the cases.
At least one lawsuit against the camp remains pending in Ocean County Superior Court. It was filed earlier this year.
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