DONNA RIEHS v. RUTGERS CASUALTY INSURANCE COMPANY

Annotate this Case
NOT FOR PUBLICATION WITHOUT THE
                 APPROVAL OF THE APPELLATE DIVISION

                                         SUPERIOR COURT OF NEW JERSEY
                                         APPELLATE DIVISION
                                         DOCKET NO. A-1171-08T3



DONNA RIEHS and JOSEPH RIEHS,
as Assignee of the rights of
SHAR WILLIAMS and GLEN WILLIAMS,

       Plaintiffs-Respondents,

V.

RUTGERS CASUALTY INSURANCE COMPANY,

     Defendant-Appellant.
___________________________________

            Submitted December 7, 2009 - Decided January 5, 2010

            Before Judges Reisner and Yannotti.

            On appeal from the Superior Court of New
            Jersey, Law  Division, Middlesex  County,
            L-6530-06.

            Margolis Edelstein, attorneys for appellant
            (Michael J. McDonald, on the brief).

            Schiffman, Abraham, Kaufman & Ritter, P.C.,
            attorneys for respondents (Evan L. Goldman
            and Kristen M. Welsh, on the brief).

PER CURIAM

       Defendant Rutgers Casualty Insurance Company (RCIC) appeals

from   a   September   29,   2008   judgment   entered   by   Judge   Paley,

finding Rutgers guilty of bad faith refusal to settle a claim

and awarding $134,167 in damages and attorneys fees.           We affirm.

                                      I

      RCIC,   which   insured    defendants         Shar   and   Glen   Williams,

refused to offer its $100,000 policy to settle an automobile

negligence lawsuit filed by plaintiffs Donna and Joseph Riehs.

Despite receiving a steady stream of Rova Farms1 letters from

plaintiffs' attorney, as well as multiple letters from defense

counsel before and during the auto suit advising of potential

weaknesses, RCIC never offered more than $30,000 to settle the

case.    Furthermore, RCIC did not put its insureds on notice of

the possibility of an excess verdict or give them an opportunity

to contribute to a settlement.

      Although the jury found that Donna's injuries did not meet

the verbal threshold, they awarded approximately $186,000 on her

claim for lost wages.      That verdict was affirmed on appeal.                Mr.

and   Mrs.    Williams   then   assigned       to    plaintiffs    their     claim

against RCIC for alleged bad faith refusal to settle the auto

accident case.

      The bad faith claim was tried without a jury, on the basis

of stipulated facts and documents including the deposition of

RCIC's   claims   adjuster,     and   the     in-court     testimony    of   Barry

Goldstein, RCIC's senior vice-president in charge of claims.


1
  Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 
65 N.J. 474 (1974).



                                                                         A-1171-08T3
                                          2

      Goldstein admitted that when RCIC opened its file on the

auto lawsuit, the assigned adjuster set a $75,000 reserve on the

case.     Setting a reserve results in that amount being accounted

for as a potential liability on the company's balance sheet.

According to Goldstein, the assigned adjuster Adrienne Archie

would    normally     evaluate     the   settlement    value    of   the    case.

Goldstein admitted that there was no documentation in RCIC's

claims    file   to    indicate     that     Archie    ever    determined     the

settlement value of the case, or that she ever consulted with

RCIC's     in-house     settlement       committee     about    a    settlement

proposal.     However, at the 2008 bench trial, Goldstein testified

that he remembered personally evaluating the case in 2003 and

concluding that a verdict was not likely to exceed the policy

limits.

      Goldstein additionally admitted that there was no evidence

in   RCIC's   file    that   the    insureds    were    notified     about   the

possibility of an excess verdict.              He also conceded that the

insureds were never notified that plaintiffs had made a demand

in excess of the policy.

      In a comprehensive written opinion dated April 16, 2008,

Judge Paley concluded that RCIC had not made a good faith effort

to evaluate the risk of an excess verdict and acted in bad faith

in failing to settle the claim within the policy limits.                     The




                                                                       A-1171-08T3
                                         3

court noted that there was ample evidence that a verdict could

exceed the limits of the policy.           RCIC placed a $75,000 reserve

on the case, a non-binding arbitration resulted in an award of

$96,000, and RCIC's counsel advised the company that the Riehs'

expert's testimony could result in a "higher verdict."

    Despite this evidence, RCIC rejected numerous opportunities

to settle within the $100,000 limit.            The plaintiff initially

proposed a settlement of $200,000 and later demanded $100,000;

subsequently, the plaintiff was willing to accept $35,000, but

RCIC still refused to offer more than $30,000.             The judge did

not believe Goldstein's testimony concerning his alleged efforts

to evaluate the case.      Judge Paley also considered the fact that

Rutgers failed to notify its insureds of the potential for an

excess   verdict   and   failed   to   keep   them   informed   as   to    the

settlement negotiations.

    Following his determination that RCIC acted in bad faith,

Judge Paley held a second plenary hearing to determine the issue

of counsel fees.     In an opinion dated September 10, 2008, Judge

Paley awarded $27,500 in counsel fees and $650 in costs.

                                  II

    Our review of the trial judge's determination is limited:

           Findings by the trial judge are considered
           binding   on   appeal  when   supported   by
           adequate, substantial and credible evidence.
           It has otherwise been stated that "our


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           appellate function is a limited one: we do
           not disturb the factual findings and legal
           conclusions of the trial judge unless we are
           convinced   that  they  are   so  manifestly
           unsupported by or inconsistent with the
           competent, relevant and reasonably credible
           evidence as to offend the interests of
           justice."

           [Rova   Farms,   supra,           
65 N.J.      at     484
           (citations omitted).]

We owe particular deference to the trial judge's credibility

determinations.    Ibid.; State v. Locurto, 
157 N.J. 463, 470-74

(1999).

    On    this   appeal,   RCIC    argues      that    plaintiffs        failed   to

produce expert testimony to establish their bad faith claim.

RCIC also contends that its decision to offer considerably less

than its policy limit was based on a realistic assessment of the

case.     Having    reviewed      the       record,    we   find    that      these

contentions are without merit and do not warrant discussion in a

                     R. 2:11-3(e)(1)(E).              We affirm substantially
written opinion.

for the reasons stated in Judge Paley's April 16, 2008 opinion.

We add the following comments.

   In addressing the insurer's duty of good faith, the Court in

Rova Farms stated:

           "[A] decision not to settle must be a
           thoroughly honest, intelligent and objective
           one.     It must be a realistic one when
           tested by the necessarily assumed expertise
           of the company."    This expertise must be
           applied, in a given case, to a consideration


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                                        5

              of   all  the   factors   bearing   upon  the
              advisability   of   a   settlement   for  the
              protection of the insured.     While the view
              of the carrier or its attorney as to
              liability is one important factor, a good
              faith evaluation requires more. It includes
              consideration of the anticipated range of a
              verdict, should it be adverse; the strengths
              and weaknesses of all of the evidence to be
              presented on either side so far as known;
              the history of the particular geographic
              area in cases of similar nature; and the
              relative   appearance,   persuasiveness,  and
              likely appeal of the claimant, the insured,
              and the witnesses at trial.

              [Rova Farms, supra,               
65 N.J.     at    489-90
              (citations omitted).]

When an insurer is found to have acted in bad faith by failing

to   settle    a    claim   within    the       policy     limits,    the   insurer     is

responsible for any judgment in excess of the insured's policy.

Id. at 496--97.

      While    an     insurer   is    required        to    use     its   expertise     in

evaluating         claims   against     its          insureds,       this     does     not

necessarily mean that a bad faith claim must be established by

expert   witness      testimony.     None       of   the     cases    defendant      cites

support that proposition.            Nothing in this record suggests that

the evaluation of plaintiffs' personal injury lawsuit was an

esoteric issue, see Scully v. Fitzgerald, 
179 N.J. 114, 127

(2004), or that a judge would be unable to decide the issue

without expert testimony.




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                                            6

       RCIC's reliance on Kelly v. Berlin, 
300 N.J. Super. 256

(App. Div. 1997), is misplaced.             Kelly was a medical malpractice

case, in which the plaintiff claimed that he settled his auto

accident case for too small an amount because his doctors failed

to diagnose an additional injury that he allegedly sustained in

the accident.       Id. at 262.       There was no empirical evidence of

the augmented settlement value of the auto case, because Kelly

had never asserted a claim based on the additional injury and

therefore had never tried to settle such a claim.               Ibid.

       In that context, we held that plaintiff needed an expert to

testify that the doctors deviated from the standard of care in

their diagnoses, and he needed an expert on the issue of valuing

his auto accident claim with and without the additional injury.

Id. at 270-71.       However, the latter holding was based on our

conclusion    that a lay jury could not evaluate the settlement

value    of   plaintiff's      auto    accident     claim   without      expert

              Kelly does not apply here, where the trier of fact
testimony.

was a judge, and there was ample evidence of the settlement

value of the case.

       Moreover,    we   are   bound     by   the   trial   judge's     factual

findings, which are supported by substantial credible evidence.

Most    important   is   the   judge's      conclusion   that   RCIC    did   not

engage in any meaningful analysis of its potential liability.




                                                                        A-1171-08T3
                                        7

Not only did the judge disbelieve Goldstein's testimony that he

evaluated         this     claim,       but    RCIC's           claims   adjuster         had    no

documentation to support her evaluation.                           Further, she could not

have properly evaluated the claim for lost wages, because she

erroneously believed that Donna could not recover lost wages

unless      her    pain       and     suffering           claim    satisfied        the    verbal

threshold.

         Furthermore,         in     violation        of    its       fiduciary     duty,       the

insurer did not give its insureds an opportunity to contribute

to   a    settlement          or    otherwise        protect      themselves        against      an

excess verdict.            See Rova Farms, supra, 
65 N.J. at 496; Yeomans

v. Allstate Ins. Co., 
130 N.J. Super. 48, 52 (App. Div. 1974).

RCIC never advised the insureds of plaintiffs' initial $200,000

settlement demand or any of their later pre-trial settlement

demands. Apparently, it was not until the middle of the trial

that the insureds even became aware of the risk that they might

be liable for an excess verdict.                      Immediately after the verdict,

defense     counsel       noted       in   a   November         19,    2003    letter     to    the

adjuster     that        during      the   trial,         the    insureds     had    "expressed

their     concern        to   me     regarding       the     potential        for   any    excess

exposure."

         Despite    these          expressions       of    concern,      and    letters         from

defense counsel sent during the trial pointing out potential




                                                                                          A-1171-08T3
                                                 8

weaknesses in the case, the RCIC adjuster refused to offer more

than $30,000 to settle the case.           We find no basis to disturb

Judge Paley's well-reasoned conclusion that RCIC did not engage

in good-faith settlement negotiations.

       Finally, Rutgers contends that plaintiff is not entitled to

counsel    fees,   because     her   attorney     backdated     a    retainer

agreement.      We find no abuse of discretion or other error in

Judge Paley's decision to award counsel fees.                  See   Packard-

Bamberger & Co. v. Collier, 
167 N.J. 427, 444 (2001).                 Even if

the retainer letter was backdated, plaintiffs' counsel submitted

other   documentation     substantiating   that   he   was    retained,     and

specifying his hourly rate.          Further, he provided a detailed

certification of services plus billing records documenting the

work he performed and the time he spent.           See Starkey v. Estate

of Nicolaysen, 
172 N.J. 60, 62-63 (2002).          RCIC's contentions on

                                                                          2:11-
this    issue   warrant   no   further   discussion    here.         R.

3(e)(1)(E). We affirm for the reasons stated in Judge Paley's

September 10, 2008 opinion.

       Affirmed.




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