LIBERTY MUTUAL INSURANCE COMPANY v. GOODFELLAS, LLC, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0561-04T1

LIBERTY MUTUAL INSURANCE

COMPANY,

Plaintiff-Appellant,

v.

GOODFELLAS, LLC, HI POINT PUB,

UNDEWRITERS AT LLOYDS, FIRE AND

CASUALTY COMPANY OF CONNECTICUT,

Defendants-Respondents.

________________________________________________

 

Argued January 25, 2006 - Decided February 8, 2006

Before Judges Conley, Weissbard and Winkelstein.

On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, L-1526-03.

Robert P. Clark argued the cause for appellant (Clark & DiStefano, attorneys; Mr. Clark, on the brief).

Terry J. Bolan argued the cause for respondents Goodfellas, LLC (Bolan Jahnsen Reardon, attorneys; Elizabeth A. Wilson, on the brief).

Dean T. Bennett argued the cause for respondent Hi Point Pub (Kulick, Brennan & Krochta, attorneys; Timothy M. Crammer, on the brief).

PER CURIAM

This appeal arises from consolidated actions brought by plaintiff insurer, who paid PIP and UIM coverages to its insureds, against the alleged tavern tortfeasors and their insurers. Insurer seeks reversal of a summary judgment order entered on behalf of defendants and a denial of its subsequent motion for reconsideration. We affirm, although for different reasons than expressed by the motion judge.

As focused upon the issues involved in this appeal, the facts are easily stated. On December 19, 2001, at approximately 3:00 a.m., a vehicle driven by Juan Jimenes Sanchez struck a vehicle driven by insured Rachael Bousquet in which insured Sam Gut was a passenger. Sanchez had just left defendant Hi Point Pub, where he had been drinking. Earlier in the evening, he had been drinking at defendant Goodfellas. At the time of the accident, his blood alcohol content was .108 and he had been "flagged" at the Hi Point Pub.

Insureds each had separate policies with insurer. The policies included underinsured motorist (UIM) coverage of $100,000/$300,000. The liability limits on the vehicle Sanchez operated had limits of $15,000/$30,000. Defendants were insured in amounts in excess of those coverages.

Insureds did not file personal injury actions against the motor vehicle tortfeasor or the defendant taverns. They did, though, file UIM claims with their insurer. Prior to institution of any litigation, insurer settled insureds' claims and obtained releases. The Bousquet release, in pertinent part, provides:

By this, I mean and intend hereby to release and discharge Liberty Mutual Insurance Company from only such contractual liability as it may have under the aforesaid protection against uninsured/underinsured motorist coverage. I agree that Liberty Mutual Insurance Company shall be entitled to the extent of such payment hereunder to the proceeds of any settlement or judgment that may result from the exercise of any rights or recovery by me against the owner or operator of the uninsured/underinsured automobile involved in the accident causing the injury on account of which such payment is made. . . .

I also agree in accordance with the terms of the uninsured/underinsured motorist coverage contained within my policy to take through an attorney designated by the insurance company, and at the sole expense of the insurance company, such action or actions as may be necessary or appropriate to recover from the uninsured/underinsured motorists described above. . . .

The Gut release provides in pertinent part:

The undersigned further agrees to do whatever is proper to secure any rights he/she may have against any party who may be legally liable for the damages sustained by the undersigned in said accident, including taking in his/her own name any action necessary or appropriate to recover such damages. In the event of such recovery by judgment or settlement the undersigned shall reimburse LIBERTY, to the extent of its payments hereunder, less a pro rata share of the cost of securing such judgment or settlement, out of the proceeds of such recovery. The undersigned shall notify LIBERTY of all significant developments in any action undertaken to secure the undersigned's rights and shall execute and deliver to LIBERTY such instruments and papers as may be appropriate to secure the rights and obligations of the undersigned and LIBERTY established by the provisions of this agreement.

As discerned by the motion judge, these releases do not contractually endow insurer with the rights insureds may have had against defendant taverns for personal injury recoveries, from which insurer's UIM payment could be recouped. The Bousquet release conveys only subrogation rights against the tortfeasor motorist and the Gut release is limited to the insured's taking direct action against the tortfeasors. As the judge concluded:

The bottom line is that while Liberty asserts a subrogation right, a right that a statute, in my view, would have afforded it, it did not acquire those rights in either document upon which it must rely and I, therefore, will grant the motions by both Defendants for judgment.

That, however, does not end the analysis. On motion for reconsideration, insurer contended that its right to pursue defendants did not arise from the releases, but rather, was premised upon subrogation provisions in each of the insured's policies. In this respect, it relied upon the following provision contained in those policies:

OUR RIGHT TO RECOVER PAYMENT

A. If we make a payment under this policy and the person to or for whom payment was made has a right to recover damages from another we shall be subrogated to that right. That person shall do:

1. Whatever is necessary to enable us to exercise our rights; and

2. Nothing after loss to prejudice them.

This contractual language, of course, would allow insurer to pursue viable subrogation claims against responsible third parties. Zirger v. Gen. Accident Ins. Co., 144 N.J. 327, 333 (1996); Rutgers Cas. Ins. Co. v. Vassas, 139 N.J. 163, 169 (1995).

The difficulty is that both policies covering insureds had a subsequent change to the subrogation provision. That change reads:

IV. Part F - General Provisions

A. The Our Right To Recover Payment Provision is replaced by the following:

OUR RIGHT TO RECOVER PAYMENT

If we make a payment under this coverage and the person to or for whom payment was made recovers damages from another:

1. That person shall:

a. Hold in trust for us the proceeds of the recovery;

b. Reimburse us to the extent of our payment;

c. Execute and deliver such instruments and papers as may be appropriate to secure the rights and obligations of that person and us; and

d. Do nothing after loss to prejudice these rights.

2. We shall have a lien to the extent of such payment. We may give notice of lien to:

a. The person or organization causing the "bodily injury";

b. His agent;

c. His insurer; or

d. A court having jurisdiction.

This provision establishes a right of recovery on the part of the insurer where it has made a payment to the insured "and the person to or for whom payment was made recovers damages from another . . . ."

Here, insureds did not file an action against the alleged tortfeasors and did not recover damages from them. Insurer's contractual subrogation rights, therefore, were not triggered. In light of this, we need not address defendants' primary contention, i.e., that at the time of the accident insureds had available coverage in excess of the tortfeasor motorist's coverage in light of the taverns' coverage and that, therefore insurer was not obligated to pay UIM benefits as, statutorily, these benefits are triggered only when:

the sum of the limits of liability under all bodily injury and property damage liability bonds and insurance policies available to a person against whom recovery is sought for bodily injury or property damage is, at the time of the accident, less than the applicable limits for underinsured motorist coverage afforded under the motor vehicle insurance policy held by the person seeking that recovery.

[N.J.S.A. 17:28-1.1(e).]

As to insurer's contention that it has a common-law right of subrogation in derogation of its contractual rights, we do no more than repeat what our Supreme Court has said:

[i]t is important to understand that subrogation rights do not arise spontaneously nor are they free-floating or open-ended. Subrogation rights are created in one of three ways: "(1) an agreement between the insurer and the insured, 44 Am. Jur. 2d Insurance 1820 at 746, (2) a right created by statute, 16 Couch on Insurance 2d 61:6 at 240 (1966), or (3) a judicial 'device of equity to compel the ultimate discharge of an obligation by the one who in good conscience ought to pay it.'" Aetna Ins. Co. v. Gilchrist Brothers, Inc., 85 N.J. 550, 560 (1981) [citations omitted]. While the doctrine has an equitable foundation, the attitude of courts toward subrogation has been described as "one of allowing complete freedom of contract and trying to determine and enforce the expressed intention of contracting parties." R. Keeton, Insurance Law 3.10 at 153. Indeed, subrogation "is not applicable where its enforcement would be inconsistent with the terms of a contract or when the contract, either expressly or by implication, forbids its application." Ganger v. Maffett, 8 N.J. 73, 80 (1951).

[Culver v. Ins. Co. of N. Am., 115 N.J. 451, 456 (1989).]

 
Here, simply put, insurer's policies do not provide for the subrogation it seeks to pursue.

Affirmed.

(continued)

(continued)

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A-0561-04T1

February 8, 2006