GEORGE DAPPER, INC. v. NEW JERSEY PROPERTY-LIABILITY

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3960-06T13960-06T1

GEORGE DAPPER, INC.,

Plaintiff-Appellant,

v.

NEW JERSEY PROPERTY-LIABILITY

INSURANCE GUARANTY ASSOCIATION,

Defendant-Respondent.

_________________________________

 

Argued February 14, 2008 - Decided

Before Judges Wefing, R. B. Coleman, and Lyons.

On appeal from Superior Court of New Jersey,

Law Division, Middlesex County, No. L-7396-06.

Carlton T. Spiller argued the cause for appellant

(Greenbaum, Rowe, Smith & Davis, attorneys;

Mr. Spiller and Ellen A. Silver, on the brief).

Mark M. Tallmadge argued the cause for respondent

(Bressler, Amery & Ross, attorneys; Mr.

Tallmadge and Richard J. Teer, on the brief).

PER CURIAM

Plaintiff George Dapper Inc. ("Dapper") appeals from a trial court order granting summary judgment to defendant New Jersey Property-Liability Insurance Guaranty Association ("PLIGA"). After reviewing the record in light of the contentions advanced on appeal, we affirm.

Plaintiff Dapper operates a school bus company. On January 10, 2002, one of its buses, driven by one of its employees, was involved in a roll-over accident on an icy road. One of the students on the bus, James Pasch, was severely injured in the accident, and in January 2004 he began suit to recover damages for his injuries. Dapper forwarded the claim to its liability insurer, Legion Insurance Company, from which it had obtained a policy providing coverage of one million dollars. Legion, however, had been declared insolvent in July 2003, and defendant PLIGA stepped into Legion's shoes and assigned counsel to represent Dapper and defend it against the Pasch suit.

PLIGA is a non-profit, unincorporated entity created by the Legislature to provide a mechanism to deal with the consequences of an insolvent insurer, "to protect policyholders of insurance companies which become insolvent." N.J. Property-Liability Ins. Guar. Ass'n v. Hill Int'l, Inc., 395 N.J. Super. 196, 204 (App. Div. 2007) (quoting Lehmann v. O'Brien, 240 N.J. Super. 244, 246 (App. Div. 1989)); N.J.S.A. 17:30A-1 to -20. All insurers licensed to do business in New Jersey issuing policies of insurance within the statute's scope are members of PLIGA. N.J.S.A. 17:30A-5. Their continued membership in PLIGA is a condition of their continued authority to transact insurance in New Jersey. N.J.S.A. 17:30A-6. In order to preserve its assets and provide recovery for the greatest number of persons affected by an insurer's insolvency, PLIGA's liability for a covered claim is capped at three hundred thousand dollars. N.J.S.A. 17:30A-8(a)(1).

On June 1, 2006, the attorney assigned by PLIGA to represent Dapper wrote to his client, advising it that Pasch's attorney had made a settlement demand of five hundred thousand dollars to resolve that litigation. Within that letter the attorney explained that Pasch had received two hundred and fifty thousand dollars from the uninsured motorist coverage provided by his parents' automobile policy. He also explained the statutory cap of three hundred thousand dollars and that PLIGA was required to reduce its coverage by the amount of the UM benefits Pasch had received, leaving Dapper with a maximum of fifty thousand dollars available through PLIGA. That statement was in accord with an opinion from this court, Thomsen v. Mercer-Charles, 377 N.J. Super. 267 (App. Div. 2005). He also informed Dapper that Pasch's attorney had told him that the case could not be settled for fifty thousand dollars.

Upon receiving this information, Dapper retained another attorney to represent it in connection with any claim for damages above that which would be covered by PLIGA. On June 13, 2006, the trial court conducted a settlement conference, attended by Pasch's attorney, the attorney assigned by PLIGA to represent Dapper, and the attorney Dapper had retained on its own initiative. As a result of that conference, plaintiff agreed to accept four hundred and fifty thousand dollars to settle his claims in full. The trial court used a prepared form of order to reflect this settlement. The form had a space provided for appropriate comments; on this line appeared the following handwritten notation:

50,000 from Fund & 150,000 from Bus Com

The document was signed by each of the three attorneys. At the bottom of the form was the following direction:

ATTENTION ATTORNEYS:

THIS ORDER IS NOT TO BE SUBMITTED

TO THE JUDGMENT SECTION, SUPERIOR

COURT CLERK'S OFFICE, TRENTON, FOR

RECORDING.

Six days later, the Supreme Court issued its decision in Thomsen v. Mercer-Charles, 187 N.J. 197 (2006), in which it reversed the earlier opinion of this court. Under the Supreme Court's opinion in Thomsen, PLIGA would no longer be entitled to assert as a set-off against its three hundred thousand dollar cap on liability the amount Pasch had received as UM benefits. After the Court issued its opinion, the attorney that Dapper had retained on its own behalf wrote to PLIGA, demanding that it pay the remaining balance on the Pasch settlement without regard to the two hundred and fifty thousand dollars in UM coverage Pasch had already received. When PLIGA declined to do so, this attorney filed a declaratory judgment action on Dapper's behalf.

In the interim, however, prior to the filing of the declaratory judgment action, the attorney assigned by PLIGA to represent Dapper prepared a release for Pasch to execute, releasing all of his claims against PLIGA in exchange for receipt of fifty thousand dollars. The release was executed on August 19, 2006, and returned by Pasch's attorney on September 1, 2006.

Resolution of the declaratory judgment matter was presented to the trial court on cross-motions for summary judgment; the trial court granted PLIGA's motion and denied Dapper's. This appeal followed.

Dapper argues that under the Court's holding in Thomsen, PLIGA is obligated to fund the entire two hundred thousand dollars to be paid to Pasch. PLIGA contends that its obligation is to be determined by the state of the law as of the date of the settlement and that, as a result, its obligation is to contribute no more than fifty thousand dollars to this settlement.

We agree with PLIGA. A settlement is a contract, and the obligations of the parties are determined under principles of contract law. Thus, settlements are not invalidated by subsequent changes in the law. New Jersey Mfrs. v. O'Connell, 300 N.J. Super. 1, 7 (App. Div.), certif. denied, 151 N.J. 75 (1997) (citing Pascarella v. Bruck, 190 N.J. Super. 118, 124 (App. Div. 1983)). In O'Connell, an insurer had reached an agreement with its insured to arbitrate a claim. After that agreement had been reached, the Supreme Court decided a case which affected the underlying law, and the insurer moved to set that agreement aside. We rejected that attempt, concluding that the agreement to arbitrate had the essential attributes of a settlement and that "the original terms of a contract incorporate the relevant law at the time the contract is made." Id. at 7.

We reached a similar result in Zuccarelli v. State Dept. of Envtl. Prot., 326 N.J. Super. 372 (App. Div. 1999). In that case, the plaintiff had negotiated a settlement in 1992 with the Department of Environmental Protection. Following the decision of the Court of Appeals for the Third Circuit striking down New Jersey's waste flow control system, Atlantic Coast Demolition & Recycling, Inc. v. Board of Chosen Freeholders of Atlantic County, 112 F.3d 652, 673 (3d Cir. 1997), the plaintiff moved to set aside that earlier settlement. We declined to permit the plaintiff to do so, noting that "a subsequent change in the law is not a sufficient reason to rescind a settlement agreement." Id. at 381.

PLIGA's position that its responsibility to fund only fifty thousand dollars of this two hundred thousand dollar settlement was based upon a reported decision of this court. Until the Supreme Court issued its opinion reaching a contrary result, the opinion of this court represented the existing state of the law in New Jersey. We are unable to conclude that Dapper should prevail because after the parties' settlement, the Supreme Court viewed the law differently.

Dapper also argues that because there was no representative of PLIGA present on June 13, 2006, there was no settlement reached that day on the question of allocation between PLIGA and Dapper for the two hundred thousand dollars to be paid to Pasch. We perceive no basis in this record for this argument. The dismissal form signed by the three attorneys clearly sets forth how responsibility for payment was to be divided: fifty thousand dollars to be paid by PLIGA, one hundred and fifty thousand dollars to be paid by Dapper.

The chronology of this matter is clear. Two weeks before the matter was assigned to go to trial, the attorney assigned by PLIGA wrote to Dapper to advise it of its potential exposure, based upon this court's opinion in Thomsen v. Mercer-Charles, supra. Two members of the Thomsen panel concluded that a covered claim presented to PLIGA must be reduced by the amounts recoverable from a solvent insurer. Id. at 274-75. One member of the panel dissented, providing the claimant with an automatic right to appeal to the Supreme Court. R. 2:2-1(a).

In that posture, Dapper, having retained separate counsel to protect its interests, could have disputed PLIGA's position on the appropriate allocation of damages, but the record is barren of any indication that it chose to do so. It could have sought to resolve only Pasch's claim for damages, asserting a right to litigate at a later point what portion was the responsibility of PLIGA. It chose not to do that either.

In our judgment, the only inference that can be drawn from this record is that Dapper concurred with PLIGA's position that PLIGA was entitled to a set-off for the UM benefits Pasch had received and that the issue was entirely resolved on June 13, 2006.

Dapper also argues that PLIGA's actions constituted equitable fraud and a breach of the covenant of good faith and fair dealing. Again, we are unable to agree.

A party asserting a claim of fraud must establish five elements: a material misrepresentation of a presently existing or past fact, made with the knowledge or belief in its falsity, made with intent that the other party rely upon it, reasonable reliance and subsequent detriment. Banco Popular No. America v. Gandi, 184 N.J. 161, 172-73 (2005). A party seeking relief on the basis of equitable fraud need not establish knowledge of the alleged falsity. Jewish Center of Sussex Cty. v. Whale, 86 N.J. 619, 625 (1981). A party claiming equitable fraud is entitled to equitable relief, e.g., rescission instead of damages.

Dapper asserts that PLIGA's failure to disclose the fact that the Thomsen matter was pending before the Supreme Court constituted equitable fraud on its part. We have no quarrel with the proposition that silence in the face of a duty to disclose may constitute equitable fraud in certain contexts. Jewish Center, supra, is illustrative. In that case, the Court held that defendant's failure to disclose that he had a criminal record constituted equitable fraud and entitled the plaintiff to rescind his contract as rabbi for the congregation. Id. at 627.

We are satisfied, however, that the trial court correctly declined to impose such an independent duty upon PLIGA in this situation. We reach this conclusion for several reasons. The fact that the Thomsen matter was pending before the Court was a fact equally available to the attorney assigned by PLIGA and the attorney independently retained by Dapper. Almost two weeks elapsed between the time Dapper retained that attorney and the settlement conference of June 13, 2006. There is no indication in this record that the attorney took the position that he did not have sufficient time to prepare for that conference or to research the legal issues with respect to Dapper's potential exposure.

Further, there was no way of knowing when the Court would issue its opinion in Thomsen. Although the appeal had been argued in January 2006, it was by no means certain that an opinion would be issued before the term ended. It is not unheard of for appeals to be carried into the next term and, indeed, for the Court to call for re-argument. It is merely fortuitous that the Court issued its opinion so close in time to the settlement conference. If the opinion had not issued until a later time, the settlement funds would have been paid in the ordinary course in accordance with the agreement reached on June 13, 2006. Surely, for example, if the opinion had issued the following October or November, months after the settlement was consummated, Dapper would have had no basis to seek reimbursement.

In addition, Dapper made no assertion of equitable fraud or breach of the duty of good faith and fair dealing in its complaint. It merely asserted that it was entitled to benefit from the change in the law wrought by the Court's decision in Thomsen. Further, in reviewing the record in this matter, we see no indication that Dapper argued the specific issues of equitable fraud or breach of the covenant of good faith and fair dealing before the trial court. Rather, it made only generalized assertions that overall principles of fairness entitled it to relief.

We are satisfied that the trial court's order granting summary judgment to defendant should be affirmed.

Affirmed.

 

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A-3960-06T1

June 19, 2008