ROSEMARY DILLEY v. AGWAY INSURANCE COMPANY

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3331-05T53331-05T5

ROSEMARY DILLEY,

Plaintiff-Respondent,

v.

AGWAY INSURANCE COMPANY,

Defendant-Appellant.

____________________________________

 

Submitted November 15, 2006 - Decided December 11, 2006

Before Judges Lefelt and Parrillo.

On appeal from the Superior Court of New Jersey,

Law Division, Hunterdon County, HNT-L-29-5.

William J. Pollinger, attorney for appellant.

Levinson Axelrod, attorneys for respondent (Richard Del Vacchio, on the brief).

PER CURIAM

Defendant Agway Insurance Company (Agway) appeals from the: (1) October 21, 2005 order denying its motion to amend the August 18, 2005 order of judgment in the amount of $213,348.44 in favor of plaintiff Rosemary Dilley to conform to its uninsured motorist (UM) coverage limit of $100,000; and (2) the February 2, 2006 order denying its motion for reconsideration. We now reverse and remand.

This matter arises from plaintiff's automobile accident with an uninsured driver on December 24, 2000. The vehicle plaintiff was operating was owned by a third party and insured by Agway under a policy containing UM bodily injury coverage in the maximum amount of $100,000 per person. Since the other vehicle was uninsured, plaintiff pursued a UM claim against defendant. The matter was arbitrated on November 24, 2004, and defendant rejected the arbitrator's award. Consequently, on January 21, 2005, plaintiff filed a nine-count complaint against defendant, the first count seeking UM benefits and the remaining eight counts alleging bad faith in the handling of her UM claim. Eventually, the bad faith counts were dismissed with prejudice by stipulation of the parties dated April 8, 2005. The UM claim was then tried by a jury who returned a verdict in favor of plaintiff, awarding her $210,000 in damages. On August 18, 2005, the court, over defendant's objection, entered an order for judgment in that amount, plus $3,348.44 in prejudgment interest.

Defendant subsequently moved to amend the judgment to reflect its policy limit of $100,000. Plaintiff opposed the motion, arguing that defendant's unfair settlement practices occurring after the voluntary dismissal of her bad faith claims precluded the relief sought. Despite that dismissal and his own acknowledgement that the issue of bad faith was not before him, the trial judge nevertheless denied the motion, reasoning:

In the exercise of this court's discretion, I will deny the motion to amend the order of 18, August, entering judgment in the amount of $213,348.44. I will do so, however, preserving the defendant's right to assert any defenses to its liability under its insurance policy as, when and if the plaintiff makes the bad faith claim.

I am not ruling on the defendant insurance carrier's obligation to pay that judgment within a finite period of time, as has been suggested I do by the plaintiff. I am simply saying that on the basis of what is before me - - and I specifically find that the issue of bad faith so as to expose the carrier to that portion of the judgment in excess of its policy limit is not before me today.

I will preserve the status quo. I will deny the extant motion.

In denying defendant's motion for reconsideration, the judge once again explained that he was simply preserving the jury's verdict and deferring the issue of whether defendant was responsible for the full verdict because of alleged unfair settlement practices for another proceeding:

This court agrees with the proposition that ordinarily a plaintiff can generally only depend upon the ability to collect - - or reliably collect from the carrier the amount of money it is obligated to pay under its policy limits with its insured.

However, by declining to amend the judgment rendered by the petit jury in this case in the amount of $213,348.44, this court did not say and is not now saying - - and is not saying now that plaintiff is entitled to collect the full amount of the judgment from the defendant carrier or that plaintiff only has a right to collect the $100,000 policy limit.

It seems to me that a determination as to whether plaintiff is entitled to hold the defendant liable for the excess or not needs to be determined in separate proceedings. All of that begs the question as to where the individual insured is in all of this, but that is not before me either.

The judge further determined that the award of prejudgment interest was proper because there was evidence that defendant failed to negotiate in good faith and settle this matter after plaintiff voluntarily dismissed her bad faith claims.

On appeal, defendant contends that it was error for the court to have refused to conform the order of judgment to reflect the limits of its contractual obligation to plaintiff. We agree.

Although common law tort principles govern the uninsured's liability and the nature and extent of plaintiff's damages, plaintiff's rights under the UM endorsement are solely contractual and therefore governed by the insurance policy. Riccio v. Prudential Prop. & Cas. Ins. Co., 108 N.J. 493, 499 (1987). UM coverage is a "contractual liability required by statute between the insured motorist and his carrier." Id. at 498-99; see also Prudential Prop. & Cas. Ins. Co. v. Monmouth County Mun. Joint Ins. Fund 141 N.J. 235, 244 (1995). The contractual coverage relates to "payment of all or part of the sums which the insured or his legal representative shall be legally entitled to recover as damages from the operator or owner of an uninsured motor vehicle." N.J.S.A. 17:28-1.1a(2). The statute does not intend to provide full indemnity for an insured's damages but only a part of those sums to which the insured may be entitled to recover should the amount of those damages exceed the limit of contractual liability under the policy. In Hesser v. Harleysville-Garden State Ins. Co., 287 N.J. Super. 47 (App. Div. 1996), we noted:

UM is the worst case scenario-it involves a tortfeasor whose coverage is 100% less than the insured's policy limit. The UM/UIM policy limits are calculated from the personal injury and property damage coverage selected by the insured. The risk, for which the premium is assessed, is that the insured will be damaged by a tortfeasor or tortfeasors with less coverage than the insured chose to protect his or her own liability.

[Id. at 51.]

Thus, while N.J.S.A. 17:28-1.1 requires the inclusion of uninsured motorist coverage benefits within all automobile liability policies, the "terms of the contract will govern so long as they are not in conflict with the provisions of the statute or its underlying policy." Brown v. Selective Ins. Co., 311 N.J. Super. 210, 213 (App. Div. 1998); see also Rider Ins. Co. v. First Trenton Cos., 354 N.J. Super. 491, 495 (App. Div. 2002). Here, the policy of insurance issued by defendant provides with respect to UM coverage:

The limit of liability shown in the Declarations for each person for Uninsured Motorists Coverage is our maximum limit of liability for all damages, including damages for care, loss of services or death, arising out of "bodily injury" sustained by any one person in any one accident. Subject to this limit for each person, the limit of liability shown in the Declarations for each accident for Uninsured Motorists Coverage is our maximum limit of liability for all damages for "bodily injury" resulting from any one accident.

This is the most we will pay regardless of the number of:

1. "Insureds";

2. Claims made;

3. Vehicles or premiums shown in the declarations; or

4. Vehicles involved in the accident

As noted, the declarations page of the Agway policy provides for uninsured motorist bodily injury coverage for each person in the amount of $100,000.

Consequently, irrespective of the jury's higher damage award, the limit of defendant's contractual liability to plaintiff on its UM endorsement was $100,000 and accordingly the order of judgment should have been amended to properly reflect that amount. Simply put, plaintiff's damage claim as it related to defendant is subject to the insurance policy's $100,000 limitation. Indeed, the only claim before the jury, and which formed the basis of its damages award, was that for plaintiff's personal injury, inasmuch as her bad faith claims against defendant were all earlier dismissed with prejudice. As such, plaintiff's rights pursuant to the UM endorsement were governed exclusively by the insurance contract between Agway and the owner of the automobile plaintiff was operating. On its face, that contract plainly did not provide for additional liability beyond the $100,000 limit based simply on a jury verdict awarding damages greater than the coverage. We therefore conclude that the maximum amount recoverable against defendant pursuant to the UM coverage of its policy was the $100,000 contractual limit of liability.

Plaintiff nevertheless argues that an insurer may be held liable for damages in excess of its policy limits when it violates its duty of good faith and fair dealing, and points to new-founded allegations of unfair settlement practices. Notably, however, the only bad faith claims asserted in a formal complaint were dismissed with prejudice and thereafter plaintiff never presented a case or controversy as to her new allegations by filing another complaint with the court. As even the trial judge recognized, the issue of bad faith was simply not before the court. In light of this clear and correct acknowledgement, we are at a loss to understand the trial court's felt need to preserve the status quo for further proceedings. The record fails to disclose exactly what was contemplated by way of future proceedings and we perceive no legal basis for such under the circumstances. Indeed, if further proceedings were actually anticipated, the denial of defendant's amendment motion should then have been considered interlocutory, not final; yet plaintiff has never suggested that defendant's appeal is not properly before us. Nor does plaintiff now argue that the Agway policy was in any way ambiguous or otherwise unenforceable as violative of statute or public policy. On the contrary, the only issue before the trial court, and ripe for determination, once the jury determined the uninsured's liability and plaintiff's damages, was defendant's contractual obligation to plaintiff, which indisputably is limited to $100,000. Accordingly, the judgment should have been molded to reflect that amount.

The only remaining issue concerns the court's award of prejudgment interest to plaintiff, pursuant to Rule 4:42-11(b), in the amount of $3,348.44, based on the $200,000 award and calculated from the date of the filing of plaintiff's complaint. Defendant complains that plaintiff is not entitled to prejudgment interest because the matter arises out of contract and not tort. We do not agree.

While Rule 4:42-11(b) addresses only tort judgments, it is clear that prejudgment interest may run on contract claims, "not as a matter of right but rather in accordance with equitable principles." Pressler, Current N.J. Court Rules, comment 3.1 on R. 4:42-11(b) (2007); accord Bak-A-Lum Corp. of Am. v. Alcoa Bldg. Prods., Inc., 69 N.J. 123, 131 (1976); see also County of Essex v. First Union Nat'l Bank, 186 N.J. 46, 61-62 (2006); N. Bergen Rex Transp., Inc. v. Trailer Leasing Co.., 158 N.J. 561, 574-75 (1999); Meshinsky v. Nichols Yacht Sales, Inc., 110 N.J. 464, 478-79 (1988). Although an insurance carrier has been held not to be under obligation to pay prejudgment interest beyond its maximum contractual obligation under the policy, Kotzian v. Barr, 81 N.J. 360, 363-67 (1979), we distinguished Kotzian in Jones v. Bennett, 306 N.J. Super. 476, 486-88 (App. Div. 1998), and held that prejudgment interest may be allowable on the policy limits depending upon when the policy limits are offered and the merits of the defense. And specifically with respect to UM and UIM claims, we have consistently held that prejudgment interest is allowable, not under Rule 4:42-11(b), but on contract principles. See Martellio v. Burbank, 341 N.J. Super. 520, 526-27 (App. Div.), certif. denied, 170 N.J. 387 (2001) (award of prejudgment interest by UM arbitrators was within their authority even though not demanded where that issue was clearly considered during the proceedings); LoBianco v. Harleysville Ins. Co., 368 N.J. Super. 515, 526 (Law Div. 2003) (interest on the arbitration award payable only from the date on which the award was entered); see also Childs v. N.J. Mfrs. Ins. Co., 199 N.J. Super. 441, 451 (App. Div. 1985), rev'd on other grounds, 108 N.J. 506 (1987); Rivers v. Gen. Accident Group, 192 N.J. Super. 355, 359-61 (App. Div. 1983).

Aside from the base amount on which it was calculated, we are satisfied that the award of prejudgment interest in this case was well within the court's discretion. In light of plaintiff's representations at time of argument, although not memorialized in a formal complaint, the trial judge obviously weighed the equities involved and we cannot say the balance he struck constituted a manifest denial of justice. In re Estate of Lash, 169 N.J. 20, 34 (2001); P.F.I., Inc. v. Kulis, 363 N.J. Super. 292, 301 (App. Div. 2003), certif. denied, 178 N.J. 453 (2004). We only modify the award of prejudgment interest to reflect that the amount should be recalculated based on the $100,000 UM policy limit.

 
Reversed and remanded.

(continued)

(continued)

11

A-3331-05T5

December 11, 2006