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DOCKET NO. A-2086-04T52086-04T5









Argued November 7, 2005 - Decided

Before Judges Alley and Yannotti.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. MID-L-5191-03.

Lane M. Ferdinand argued the cause for appellant.

Michael F. Lombardi argued the cause for respondent (Lombardi & Lombardi, attorneys; Mr. Lombardi, on the brief).


Defendant Farm Family Casualty Insurance Company (Farm Family) appeals from an order entered September 16, 2004 granting partial summary judgment on liability in favor of plaintiff Jose C. Santos, and the final judgment entered November 29, 2004 awarding plaintiff damages of $100,000 with interest. We affirm.

This matter arises from an automobile accident that occurred in Old Bridge Township on December 7, 2001. The police report of the incident states that plaintiff's vehicle was traveling east on West Greystone Road toward Englishtown Road when plaintiff failed to negotiate a curve. Plaintiff's vehicle went into the oncoming lane, where it "clipped" a fire hydrant, "fishtailed" back toward the road, crossed the road and struck a tree. According to the police report, plaintiff said that he initially swerved to avoid a deer. Plaintiff presented to Robert Wood Johnson on the date of the accident and the hospital's records state that plaintiff was driving his vehicle and was trying to avoid hitting a deer when he struck a tree.

At the time of the accident, plaintiff was insured under an insurance policy issued by defendant. The policy provided uninsured motorist coverage in the amount of $100,000. Plaintiff's wife Grace Santos reported the accident on December 11, 2001. Defendant's report of the call states that the accident was caused when plaintiff swerved to avoid a deer, went into a ditch and hit a tree.

On December 26, 2001, plaintiff's attorney wrote to the Old Bridge Police Department and made a "formal request" to amend the police report. The attorney stated that plaintiff had informed him that "an oncoming vehicle [traveling] westerly swerved to avoid hitting a deer and encroached into the Santos lane of travel causing Santos to take the evasive action from a head on collision within his lane." There is no evidence that the Old Bridge Police ever amended the report.

Plaintiff filed an uninsured motorist claim with defendant. On December 12, 2002, an attorney for defendant took testimony under oath as part of the company's investigation of the claim. Plaintiff was asked to explain how the accident occurred. He testified:

Well, I was coming down that West Greystone Road and I saw lights in my lane of travel. I swerved over to miss the lights and what appeared to be a deer on their side of the road, and the next thing I knew I was in the woods. I hit a fire hydrant with the left tail end of my truck, threw me to the right. I almost got out of that slide, but it was a little too late.

Plaintiff was asked whether he had seen a deer. His testimony continued:

I saw a flash. I don't know - I can't be one hundred percent sure if it was a deer, but something did run across the road.

Q. Are you sure there was something that crossed the road?

A. Yeah.

Q. Do you know if that was before or after this car came at you?

A. That was after the car came at me.

Q. Do you know if that car's actions in any way were attributable to whatever this was that ran across the road?

A. Definitely.

Q. How do you know that?

A. Because it was in my lane. I mean normal reaction would be to swerve out of someone's way and that's exactly what I did and I wound up paying the price for it.

Plaintiff was asked to estimate the size of the animal. He stated that it was an "[a]verage deer, one hundred pounds maybe." Plaintiff said that he observed the animal after he saw the headlights coming towards him in his lane of travel.

Grace Santos also testified. She stated that on the evening of December 7, 2001, she received a call from Robert Eardley and he told her that her husband had been involved in a serious accident. She also received a call from a police officer who according to Grace, said he did not know how the accident occurred but it looked like "it could have been an animal or deer that crossed in front of him." Grace further said that the day after the accident, plaintiff told her that he saw "something coming at him." Plaintiff said that he thought "that a car might have swerved to miss a deer and he swerved to miss the car."

Officer Corey Lavigne of the Old Bridge Police Department testified. Lavigne responded to the scene of the accident and prepared the police report. He spoke with plaintiff and another gentlemen. Lavigne testified, "I can't recall who it was and they told me that he had swerved to avoid a deer." His testimony continued:

Q. Did you make a note of the comment by the driver on your police report?

A. Yeah, I wrote that driver advised that he initially swerved to avoid a deer. That's exactly what he told me.

Q. Was it the driver who told you that or the other gentlemen at the scene?

A. I believe it was both.

Eardley was "the other gentlemen" at the scene of the accident. Eardley testified that he works for plaintiff from time to time when plaintiff needs help in his cleaning business. He has known plaintiff for about eight years. On December 7, 2001, Eardley assisted plaintiff clean a doctor's office. They left around 12:30 a.m. traveling in separate cars. Plaintiff and Eardley stopped at a 7-Eleven for coffee before proceeding to another location to clean a restaurant and kitchen. Eardley was asked to state what happened. He testified:

A. I'm following Mr. Santos, following Joe. We were coming up to the curves. I seen him move over to the oncoming lane and at the same time there was a truck, I'm assuming it was a black or a dark colored truck, coming towards me and I swerved to a dirt side on the road. And he just kept right on going. Next when I pulled back out, I seen Joe's truck coming across the road, I would just say - I guess sliding sideways. It looked like it was on three wheels. And the next thing I know, he hit the tree.

Q. Okay. Did you see any deer?

A. I personally did not see any deer.

In 2003, the parties agreed to arbitration of the uninsured motorist claim. The policy states in relevant part that if defendant and the insured do not agree on whether the insured is legally entitled to recover damages, or cannot agree on the amount of the damages, the matter may be submitted to arbitration before three arbitrators. The policy provides that a decision agreed to by two of the arbitrators will be binding on the issue of liability and/or damages.

The arbitration hearing took place on June 30, 2003. Grace testified that Eardley called her in the evening of December 7, 2001 and informed her that her husband had been involved in an accident. She asserted that Eardley did not tell her how the accident happened. Grace testified that later, a police officer called and he said that plaintiff was "very hurt" and was "trapped in the car." She asked the officer what happened and the officer told her that it could possibly have been a deer.

Grace testified that, in the days after the accident, she did not discuss with plaintiff how the accident had occurred. Grace told an adjuster for defendant that a deer had been involved in the accident because "that was what the police officer had told [her]." She also said that before she spoke with the adjuster, Eardley had not informed her that a deer was involved in the accident and, as of that time, the police officer was the only person with whom she had discussed the accident.

Grace was cross-examined and asked about the statement she had given under oath in the company's investigation. Grace was asked whether she had testified previously that she had spoken to her husband on the day after the accident.

Q. Did you or did you not testify under oath that on December 8th your husband mentioned that he saw lights, swerved to miss a car that might have swerved to miss a deer and hit a fire hydrant?

A. Yes, I did say that on that date.

Q. Was your recollection of the events in the hospital when your husband was taken in after the accident better in December 2001 than it is today?

A. I don't know. I was very stressed when I was with you that day. It was the first time I had been in front of a lawyer being questioned. I was crying, I was upset, This is my, you know, I mean, I am not lying to you. I just don't know what you want me to say. Yes, I did say that on that day.

Eardley testified and gave his version of the accident. He stated that he was following plaintiff on West Greystone Road going in the direction of Englishtown Road. He saw plaintiff's vehicle come into the curve. Eardley observed headlights coming towards him and he moved his vehicle to the right to avoid the approaching vehicle because it was on his side of the road. Eardley said that the vehicle was a truck. When he pulled back out into the road, he observed that the truck had not stopped. Eardley saw plaintiff's vehicle going across the road on the right.

Eardley testified that he stopped his vehicle and went to assist plaintiff. Eardley called the police but did not say anything about how the accident occurred. He testified that it took about three to five minutes before the police responded to the scene. He said that in that time plaintiff did not say anything to him about a deer or an animal.

Eardley also testified that he called Grace but he denied saying anything to her about a deer or an animal being involved in the accident. Eardley asserted that he did not say anything to the officer about how the accident occurred. He was asked whether he overheard plaintiff say anything to the officer about a deer or an animal. He replied, "No, I don't recall that, no." Eardley also denied seeing a deer on the road before the accident occurred.

On cross-examination, Eardley asserted that he could not rule out the possibility that a deer or an animal had been involved in the accident. He said that he did not know whether plaintiff mentioned a deer to the police officer at the scene. Eardley stated, however, that before the accident, he had taken evasive action to avoid the truck that was coming in his direction in his lane of travel but he could not identify the driver.

Plaintiff testified that he was traveling east on West Greystone Road when he saw lights coming in his direction. He swerved and hit a fire hydrant with the left tail end of his truck and he was propelled "right back into the road." Plaintiff asserted that the vehicle approaching him had been on his side of the road.

He was asked whether he had seen any type of deer or animal on the roadway. Plaintiff replied, "Not that I recall, no." He stated that the reason he swerved was the oncoming vehicle. He also said that he did not recall telling the police officer at the accident scene anything about a deer.

Plaintiff said that on route to the hospital he did not say anything about a deer. Plaintiff was questioned about whether he was asked at the hospital how the accident happened. Plaintiff replied, "Yeah, but I don't recall what the response was because at that time I was - I had so many drugs in me by then I don't remember much in the hospital at all." He also was asked whether he said anything to his wife about how the accident occurred before he was discharged. He replied, "I don't recall."

On cross-examination, plaintiff was questioned about his testimony in the company's investigation of his claim. He was asked whether he had previously testified that he had swerved to miss the oncoming headlights "and what appeared to be a deer there on the side of the road." Plaintiff said, "I don't remember saying that I saw a deer." Plaintiff also was questioned about his statement that he had seen what probably was a deer and he estimated that the deer was an "[a]verage deer, 100 pounds, maybe." Plaintiff said, "It is possible there could have been a deer that crossed the road, yeah."

At the conclusion of the hearing, the arbitrators by a 2-1 vote found the unidentified motorist 100% liable for the accident and awarded plaintiff the $100,000 limit for uninsured motorist coverage under plaintiff's policy. Plaintiff filed an action on July 16, 2003 in the Law Division seeking confirmation of the award. He also sought damages for the bad faith rejection of the arbitration award. Defendant filed an answer and counterclaim, in which it alleged that the award was procured by fraud and mistake and should be set aside. Defendant also alleged that coverage had been forfeited because plaintiff and others had given false testimony and perjury in the arbitration hearing and in defendant's investigation of the claim.

The parties filed cross-motions for partial summary judgment. Judge James P. Hurley heard on motions and placed his decision on the record on September 16, 2004. The judge determined that the award was binding on the parties and he rejected defendant's assertion that the award should be set aside because it had been "procured by corruption, fraud, or other undue means." N.J.S.A. 2A:23B-23(a)(1).

The judge stated that the record did not establish that the award had been procured by "undue means." He said that there was no acknowledged mistake of law or fact by the arbitrators. Moreover, the award had not been procured by "fraud" because that section of the statute

does not apply where the arbitrator bases a decision on one party's version in finding it to be credible, essentially, that the misrepresentation, as alleged by the defendant, is really an issue of credibility to be determined by the arbitrator. The arbitrators obviously heard the testimony, the defendant was represented at the hearing, had the opportunity to cross examine the plaintiff and had - and the plaintiff's wife, and had the ability to bring those issues before the arbitrators. The arbitrators would then have to make a decision as to whether or not they accept that testimony or reject the testimony. The fact that it may have been misleading or an assertion of a misrepresentation in and of itself does not constitute fraud.

The judge further determined that the record did not present evidence of a fraudulent misrepresentation sufficient to void coverage. He stated that this was a question of fact and not

a fraudulent misrepresentation. It is a version of the accident, it is the recollection of what occurred that was given by the parties, and that recollection and that version of the accident, as well as the demeanor of the witnesses was observed by the arbitrators and the arbitrators made a decision as it relates to the matters of fact.

The judge entered an order on September 16, 2004 which granted partial summary judgment on liability in favor of plaintiff and directed that the matter proceed to trial on the issue of damages only. Subsequently, the parties agreed to stipulate that plaintiff's damages exceeded the policy limits and plaintiff agreed to the dismissal of his bad faith claim. Final judgment was entered in favor of plaintiff on November 29, 2004 and this appeal followed.

Defendant raises two points for our consideration: 1) the motion judge erred in refusing to vacate the award under N.J.S.A. 2A:23B-23(a)(1) because the award was procured by fraud or undue means; and 2) the judge erred in holding that post-loss material misrepresentations do not void plaintiff's policy of insurance. We have carefully considered these contentions and conclude that they are without merit. We affirm substantially for the reasons stated by Judge Hurley in the decision placed on the record September 16, 2004. We add the following.

Defendant argues that the award should have been set aside under N.J.S.A. 2A:23B-23(a)(1), which provides that the court shall vacate an arbitration award if it was "procured by corruption, fraud, or undue means." As Judge Hurley correctly pointed out, the phrase "undue means" generally "encompasses a situation in which the arbitrator has made an acknowledged mistake of fact or law or a mistake that is apparent on the face of the record." Office of Employee Rel. v. Communication Workers, 154 N.J. 98, 111-12 (1998)(citing PBA Local 160 v. Township of North Brunswick, 272 N.J. Super. 467, 474 (App. Div.), certif. denied, 138 N.J. 262 (1994)).

The alleged misrepresentations at issue here do not constitute an "acknowledged" mistake of fact, nor do they constitute a mistake that is "apparent on the face of the record." Ibid. The differing accounts of how the accident occurred raise genuine issues of material fact that were submitted to the arbitrators for resolution, based on the arbitrators' consideration of the testimony and assessment of the credibility of the witnesses. The phrase "undue means" does not include situations where, as here, the arbitrators based their "decision on one party's version of the facts, finding that version to be credible." Local 153 v. Trust Co. of New Jersey, 105 N.J. 442, 450 n. 1 (1987).

Moreover, there is no basis to set aside the award on grounds of fraud because the record does not contain "even a hint of misconduct by the arbitrator[s]." Tretina Printing, Inc. v. Fitzpatrick & Associates, Inc., 135 N.J. 349, 358 (1994). In the arbitration proceeding both plaintiff and defendant were given the opportunity to present testimony and cross-examine witnesses as to whether the accident was caused by a driver who entered plaintiff's lane of travel because of a deer in the road, or whether the accident occurred because plaintiff swerved to avoid an animal in the road. There is no evidence that, in resolving these disputed issues of fact, the arbitrators acted improperly.

Defendant additionally argues that coverage here was voided under the terms of the policy which state that defendant does not provide coverage to any insured "who has made fraudulent statements or engaged in fraudulent conduct in connection with any accident or loss for which coverage is sought under" the policy. Defendant asserts that plaintiff and his wife made material misrepresentations during the company's investigation of the claim which came to light during the arbitration proceeding. Those misrepresentations, it is said, violate the policy and void coverage. We disagree.

The arbitrators here came to the conclusion that the accident had been caused by an unidentified vehicle. In reaching that conclusion, the arbitrators obviously found credible plaintiff's assertion that he lost control of his vehicle when he swerved to avoid an unidentified vehicle, which plaintiff said was coming towards him in his lane of travel. Eardley, who was following plaintiff's vehicle, essentially confirmed plaintiff's version of the events. There were some inconsistencies in the testimony, specifically on the question of whether or not the accident was due in part to the presence of a deer or other animal on the road. However, like Judge Hurley, we are satisfied that the differing versions of the accident provided by plaintiff and his wife do not rise to the level of a material misrepresentation that would void coverage.







November 22, 2005