The Power of a Power of Attorney

AMB Property, LP v. Penn America Ins. Co., 418 N.J. Super. 441 (App. Div. 2011).  The plaintiff’s warehouse tenant, Mystic, obtained a liability insurance policy from the defendant, through the defendant’s agent, Jimcor.  Imperial, a third party agent of Mystic, agreed to pay the policy premiums in full and then bill Mystic for repayment in installments.  The agreement between Mystic and Imperial contained a power of attorney provision that permitted Imperial to act as Mystic’s attorney in fact to cancel the insurance policy in the event of non-payment by Mystic.  Mystic itself did not sign the agreement with Imperial.  Instead, Mystic’s broker, Suburban, signed on Mystic’s behalf. 

Mystic repeatedly failed to make its required premium payments in timely fashion.  Imperial then employed the power of attorney to move to cancel the policy.  Each time, Mystic later made the payment, Imperial asked Jimcor to reinstate the policy, Jimcor required and Mystic and Imperial provided a “no known loss” letter as a prerequisite to reinstatement and, when the letter was received, the policy was reinstated.

Finally, the inevitable occurred.  Mystic was late with payment, notice of cancellation was issued, and a request for reinstatement was met with the requirement of the “no known loss” letter, but this time Mystic did not submit the “no known loss” letter.  Jimcor then processed the cancellation. 

Seventeen days after the cancellation, the warehouse roof collapsed.  Mystic sued the plaintiff landlord for its losses, and the landlord settled that case with a payment.  The plaintiff landlord then sued the defendant insurer for indemnification, and also named Suburban and Jimcor for their alleged professional negligence in causing the policy to be cancelled improperly and for failing to reinstate it.

All parties moved for summary judgment.  The motions of the insurer defendant, Penn America, and Jimcor, its agent, were granted.  The plantiff landlord appealed the grant of those motions.  The key issue before the Appellate Division was whether Imperial had the legal authority to cancel Mystic’s policy.  The court, speaking through Judge Parrillo, found that Imperial did have that authority, due to the power of attorney.

The plaintiff attacked the power of attorney because it did not comply with the statute governing the creation of a valid power of attorney.  N.J.S.A. 46:2B-8.9.  That statute, which in turn referred to provisions of N.J.S.A. 46:14, required Mystic’s acknowledgment in front of a notary or other authorized person.  But the Appellate Division held that the power of attorney was authorized under the Insurance Premium Finance Company Act (“IFPCA”), N.J.S.A. 17:16D-1 to -16, and was independently sustainable under that statute, irrespective of the power of attorney statute.  

The court observed that prior cases under the IFPCA had not suggested that powers of attorney had to conform to N.J.S.A. 46:14.  “[In the face of dueling statutory schemes, we have consistently held that where the insured expressly gives its premium financing company a power of attorney to act on its behalf in canceling the policy, the provisions of N.J.S.A. 17:16D-13 control.”

Moreover, even if compliance with the power of attorney statute were otherwise required, the doctrine of apparent authority applied, according to Judge Parrillo.  Imperial had apparent authority to act on Mystic’s behalf, and Jicor and Penn America had the right to cancel the Mystic policy in reliance on Imperial’s action under the power of attorney.