ZORAIDA CUNNINGHAM v. NEW JERSEY MANUFACTURERS INSURANCE COMPANY

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1406-05T21406-05T2

ZORAIDA CUNNINGHAM,

Plaintiff-Respondent,

v.

NEW JERSEY MANUFACTURERS

INSURANCE COMPANY,

Defendant-Appellant.

________________________________________________

 

Argued March 13, 2006 - Decided March 22, 2006

Before Judges Fall and C.S. Fisher.

On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. MER-L-0288-04.

Patricia Hart McGlone argued the cause for appellant (Law Offices of Patricia McGlone, attorneys; Ms. McGlone, on the brief).

Mark W. Davis argued the cause for respondent (Stark & Stark, attorneys; Mr. Davis, of counsel, Mr. Davis and Nehal Modi, on the brief).

PER CURIAM

In this appeal, we consider whether the trial judge mistakenly exercised his discretion when he compelled both the deposition of defendant's in-house attorney and defendant's production of training materials regarding its claims handling policies. We granted leave to appeal the interlocutory orders which granted plaintiff the right to pursue such discovery and now reverse.

Plaintiff Zoraida Cunningham commenced this action in order to recover personal injury protection (PIP) coverage benefits she claims are due from defendant New Jersey Manufacturers Insurance Company as the result of an automobile accident that allegedly occurred on May 28, 2002. It appears that plaintiff and the other driver disputed whether their vehicles made contact.

In her complaint, plaintiff seeks not only the payment of her medical bills, which payments she claims to be overdue, but also statutory interest penalties and attorneys' fees. In seeking interest penalties, plaintiff relies on N.J.S.A. 39:6A-5(b), which states that PIP benefits "shall be overdue if not paid within 30 days after the insurer is furnished written notice," and N.J.S.A. 39:6A-5(c), which states that "[a]ll overdue payments shall bear simple interest at the rate of 10% per annum." On the other hand, defendant asserts that it is not obligated to pay interest because PIP payments "shall not be deemed overdue where the insurer has reasonable proof to establish that the insurer is not responsible for the payment." N.J.S.A. 39:6A-5(b). In addition, the benefits defendant would be obligated to pay, if plaintiff sustained bodily injuries "as a result of an accident while occupying . . . an automobile," are those which were "reasonable, necessary and appropriate." N.J.S.A. 39:6A-4.

In responding to the complaint, defendant took the position, based upon the sworn statement of the other driver, that no accident occurred and that, as a result, PIP benefits were not due because plaintiff had not sustained any bodily injury as the result of an automobile accident. In attempting to refute defendant's position, plaintiff sought to depose defendant's adjuster and in-house attorney in order to examine defendant's motive in denying her claim. In the trial court, defendant asserted that the information sought was not relevant nor likely to lead to the discovery of relevant information and, also, with regard to the deposition of the in-house attorney, that requiring the attorney to divulge what was said in discussions with defendant's adjusters would violate the attorney-client privilege. We did not intervene with regard to the deposition of the adjuster in ruling upon defendant's motion for leave to appeal despite its questionable relevance. In now reversing the order which compelled the deposition of the in-house attorney and the turnover of what has been referred to as PIP aid and training materials, we agree with defendant that the information sought is not relevant nor likely to lead to the discovery of relevant information and we, thus, need not determine whether the testimony of the attorney may be shielded through application of the attorney-client privilege.

In Milcarek v. Nationwide Ins. Co., 190 N.J. Super. 358, 366 (App. Div. 1983), we held that, in determining whether a PIP payment is overdue, "the objective merit" of the insurer's defense is relevant. In so ruling, we quoted from Hopkins v. Liberty Mut. Ins. Co., 158 N.J. Super. 176, 178-79 (App. Div. 1978), where it was stated:

[T]he subjective good faith of the carrier in interposing a defense to payment is immaterial. Rather, the determining factor is the objective merit of the defense, whatever way it is ultimately decided -- not the good or bad faith of the carrier asserting it. Hence, a frivolous defense tendered in complete good faith as to its validity will not be held to excuse payment of statutory interest.

As a result, when it is determined that an interposed defense is of sufficient merit as to warrant judicial resolution, the payment of interest at the statutory rate, which is in excess of the legal rate, is excused. Milcarek, supra, 190 N.J. Super. at 366.

We discern the basis for plaintiff's arguments in support of her claimed right to seek the discovery in question, as well as the basis for the trial judge's ruling, which permitted the divulging of this information, was plaintiff's contention that defendant asserted its defenses to plaintiff's claim in bad faith. As we held in Milcarek, the subjective purpose for the assertion of a defense to PIP benefits is not relevant. All that is relevant in this regard is whether there is "objective merit" in the defenses interposed, a question which will not be illuminated by the discovery in question. Considering that the statutory scheme was intended to provide for the prompt payment of medical expenses "without having to await the outcome of protracted litigation," Milcarek, supra, 190 N.J. Super. at 366, we find it ironic that it is plaintiff's pursuit of irrelevant discovery -- including, perhaps, some of the discovery that has already occurred -- which is protracting this litigation. We conclude that the trial judge mistakenly exercised his discretion over the management of the discovery proceedings by permitting this unwarranted and irrelevant excursion into the question of whether defendant asserted its defenses in subjective bad faith.

As a result, we reverse the orders of May 13, 2005 insofar as they required that the in-house attorney submit to a deposition and insofar as they required the turnover of PIP aid and training materials, and we reverse also the order of August 23, 2005, which denied reconsideration. We do not retain jurisdiction.

 

Specifically, our order of November 7, 2005 granted defendant leave to appeal (1) the trial court's May 13, 2005 order, which compelled the deposition of an in-house attorney and which denied defendant's motion for a protective order; (2) a second May 13, 2005 order, which denied defendant's motion to quash a subpoena that called for the production of defendant's training materials; and (3) the August 23, 2005 order, which denied reconsideration of both May 13, 2005 orders. At the same time, we denied defendant's motion for leave to appeal regarding other discovery that the trial judge had ordered at or about the same time.

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6

A-1406-05T2

March 22, 2006