Ferrante v. New Jersey Manufacturers Insurance Group

SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interest of brevity, portions of any opinion may not have been summarized.)

              Robert Ferrante v. New Jersey Manufacturers Insurance Group (A-87-16) (078496)

Argued January 3, 2018 -- Decided April 11, 2018

FERNANDEZ-VINA, J., writing for the Court.

          In this appeal, the Court considers what impact a driver’s failure to inform his auto insurance carrier about
litigation against an underinsured tortfeasor has on the driver’s later ability to collect on his underinsured motorist
(“UIM”) policy. Specifically, the Court addresses to what extent a carrier is required to pay a UIM claim when its
subrogation rights are totally nullified.

         Plaintiff Robert Ferrante was involved in an automobile accident in 2006 where the other motorist (“the
tortfeasor”) caused the collision. Without informing his auto insurance carrier, defendant New Jersey Manufacturers
Insurance Group (“NJM”), Ferrante initiated a negligence lawsuit against the tortfeasor, who had a liability limit of
$100,000 on his insurance policy. The parties participated in mandatory arbitration, which set Ferrante’s damages at
$90,000. Again, without informing NJM and allowing it to exercise its subrogation rights, Ferrante rejected the
award, and sought a trial de novo. He also refused a $50,000 settlement offer without notifying NJM.

        Prior to the trial, Ferrante entered into a high-low agreement with the tortfeasor, which set the range of
damages between $25,000 and $100,000, notwithstanding a jury verdict. Ferrante did not communicate this
agreement or the trial itself to NJM, either. Following the trial, a jury awarded plaintiff $200,000 in damages, but
the Law Division entered a judgment of $100,000 based on the high-low agreement.

         For the first time in 2011, Ferrante sent NJM a letter required by Longworth v. Van Houten, 
223 N.J.
Super. 174 (App. Div. 1988), stating that he was seeking UIM benefits. In the letter, Ferrante wrote that the
tortfeasor was willing to settle for $100,000. However, Ferrante failed to mention the arbitration, high-low
agreement, completed trial, or jury verdict. Based on this information, NJM told Ferrante to accept the offer.

         NJM and Ferrante proceeded to litigation over UIM coverage in the Law Division. Only during a pretrial
discovery exchange did Ferrante finally disclose his past dealings with the tortfeasor. NJM moved to dismiss the
complaint, and the Law Division granted the motion, finding that Ferrante violated Longworth by not notifying NJM
of any of the proceedings with the tortfeasor. On appeal, a split panel of the Appellate Division reversed. The
majority held that because the trial court did not consider if NJM was actually prejudiced by the lack of notice, a
remand was needed to determine if NJM sustained any prejudice.

           In a dissent, Judge Accurso disagreed that NJM must demonstrate prejudice in order to void the UIM claim.
Rather, she found that Ferrante’s failure to provide any notice to NJM during the initial suit and his later omission of
the trial proceedings and high-low agreement caused NJM’s subrogation rights to be “irretrievably lost.”

        NJM filed its appeal as of right under Rule 2:2-1(a)(2). The Court’s review is limited to the issue raised by
Judge Accurso.

HELD: Due to the complete absence of notice by Ferrante to NJM at any point over years of litigation, including the
lack of notice about the high-low agreement or completed jury trial during the UIM process, NJM may refuse to pay the
UIM benefits.

1. New Jersey case law has routinely emphasized the importance of candor by insureds and the obligation to act in a
forthright, open, and honest manner with their carriers throughout the entire process of their claim. The relationship
between an insurer and the insured is contractual, but the obligation to offer UIM coverage is derived from statute.
In Zirger v. General Accident Insurance Co., 
144 N.J. 327 (1996), the Court outlined the right of UIM carriers to
                                                           1
intervene in trials against tortfeasors as a way to avoid relitigating a plaintiff’s claim and as a method of binding them to
the issues at trial. Id. at 340-42. Thus, plaintiffs are affirmatively obligated to provide their carriers with notice “of the
institution of suit against the tortfeasor.” Id. at 340-41. This duty to notify in the UIM context is intended to protect a
carrier’s right of subrogation. (pp. 10-13)

2. In Longworth, the Appellate Division grappled with an insured’s initial obligation to attempt to recover from a
tortfeasor prior to pursuing UIM benefits from his carrier. 
223 N.J. Super. at 177-78. The court recognized that the
carrier’s pursuit of subrogation against the wrongdoer has an “adverse effect . . . on the statutorily-accorded competing
and paramount right of the insured victim to seek as full a recovery as possible from the combined resources of the
tortfeasor’s liability carrier and his own UIM carrier.” Id. at 183. Longworth noted the tension in this process, as the
insurer would inevitably seek to keep the damages low, thus providing the insured with minimal recovery for his
injuries. Ibid. Regardless of those conflicts, the court determined that when the insured received “an acceptable
settlement offer” from the tortfeasor, he must notify the UIM carrier. Id. at 194. Then, the carrier may decide either to
allow the insured to accept the offer or provide the insured with the same amount in exchange for the assignment of the
subrogation right against the tortfeasor. Ibid. (pp. 13-14)

3. The Court sought to balance the tensions of UIM subrogation cases in Rutgers Casualty Insurance Co. v. Vassas,

139 N.J. 163, 171-72 (1995), in which it identified the occasions when the insured must notify the carrier: (1) when he
or she takes legal action against the tortfeasor; (2) “[i]f, during the pendency of the claim, the tortfeasor’s insurance
coverage proves insufficient to satisfy the insured’s damages”; and (3) if the insured is seeking UIM benefits because
he or she “receive[d] a settlement offer or arbitration award that does not completely satisfy the claim, because the
tortfeasor is underinsured,” id. at 174. The Court ratified the Longworth holding. Id. at 174-75. In Vassas, the insured
filed a suit against the tortfeasor without informing the carrier, and, after later receiving an award from an arbitrator, he
again failed to notify the carrier. Id. at 175. The Court held that his failure “to comply with the provisions of his
insurance contract and the dictates of Longworth” barred him from recovering UIM benefits. Id. at 176. (pp. 14-16)

4. Unlike in Green v. Selective Insurance Co. of America, 
144 N.J. 344, 346 (1996), where the carrier had the
opportunity to exercise its subrogation rights after the initial settlement offer and chose not to, NJM here was never
told about the arbitration, high-low agreement, jury verdict, or judgment until after the events occurred. A prejudice
determination here is not needed unlike in Green, where the carrier waived its subrogation rights, because NJM
never had the opportunity to exercise its rights. Due to the numerous landmarks where Ferrante could have, and
should have, but did not notify NJM, the Court does not address his state of mind or weigh any potential prejudice to
the carrier. By delaying notice to NJM, Ferrante violated the terms of his policy, Longworth, Vassas, and Zirger,
which required him to inform NJM as soon as the lawsuit was brought—not after arbitration, a high-low agreement,
or a jury trial. Those requirements seek to protect NJM’s right to subrogation, which was clearly extinguished by
Ferrante’s actions, irrespective of his state of mind. (pp. 16-19)

         The judgment of the Appellate Division is REVERSED and the trial court’s order is REINSTATED.

       CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, PATTERSON, SOLOMON,
and TIMPONE join in JUSTICE FERNANDEZ-VINA’s opinion.




                                                            2
                                      SUPREME COURT OF NEW JERSEY
                                        A-
87 September Term 2016
                                                 078496

ROBERT FERRANTE,

    Plaintiff-Respondent,

          v.

NEW JERSEY MANUFACTURERS
INSURANCE GROUP,

    Defendant-Appellant.


          Argued January 3, 2018 – Decided April 11, 2018

          On appeal from the Superior Court, Appellate
          Division.

          Daniel J. Pomeroy argued the cause for
          appellant (Pomeroy Heller & Ley, attorneys;
          Daniel J. Pomeroy and Karen E. Heller on the
          briefs).

          Joseph P. Grimes argued the cause for
          respondent (Joseph P. Grimes, Esq.,
          attorney; Joseph P. Grimes on the brief).


    JUSTICE FERNANDEZ-VINA delivered the opinion of the Court.

    In this appeal, we consider what impact a driver’s failure

to inform his auto insurance carrier about litigation against an

underinsured tortfeasor has on the driver’s later ability to

collect on his underinsured motorist (“UIM”) policy.

Specifically, we address to what extent a carrier is required to

pay a UIM claim when its subrogation rights are totally

nullified.

                                1
    Plaintiff Robert Ferrante was involved in an automobile

accident in 2006 where the other motorist (“the tortfeasor”)

indisputably caused the collision.     Without informing his auto

insurance carrier, defendant New Jersey Manufacturers Insurance

Group (“NJM”), Ferrante initiated a negligence lawsuit against

the tortfeasor, who had a liability limit of $100,000 on his

insurance policy.    The parties participated in mandatory

arbitration, which set Ferrante’s damages at $90,000.      Again,

without informing NJM and allowing it to exercise its

subrogation rights, Ferrante rejected the award, and sought a

trial de novo.    He also refused a $50,000 settlement offer

without notifying NJM.

    Prior to the trial, Ferrante entered into a high-low

agreement with the tortfeasor, which set the range of damages

between $25,000 and $100,000, notwithstanding a jury verdict.

Ferrante did not communicate this agreement or the trial itself

to NJM, either.     Following the trial, a jury awarded plaintiff

$200,000 in damages, but the Law Division entered a judgment of

$100,000 based on the high-low agreement.

    For the first time in 2011, Ferrante sent NJM a letter

required by Longworth v. Van Houten, 
223 N.J. Super. 174 (App.

Div. 1988), stating that he was seeking UIM benefits.      In the

letter, Ferrante wrote that the tortfeasor was willing to settle

for $100,000.    However, Ferrante failed to mention the

                                   2
arbitration, high-low agreement, completed trial, or jury

verdict.   Based on this information, NJM told Ferrante to accept

the offer.   NJM and Ferrante proceeded to litigation over UIM

coverage in the Law Division.   Only during a pretrial discovery

exchange did Ferrante finally disclose his past dealings with

the tortfeasor.

    NJM moved to dismiss the complaint, and the Law Division

granted the motion, finding that Ferrante violated Longworth by

not notifying NJM of any of the proceedings with the tortfeasor.

On appeal, a split panel of the Appellate Division reversed.

The majority held that because the trial court did not consider

if NJM was actually prejudiced by the lack of notice, a remand

was needed to determine if NJM sustained any prejudice.

    We disagree.     In Zirger v. General Accident Insurance Co.,


144 N.J. 327 (1996), we imposed a duty on insureds to notify

their carriers at the initiation of litigation with tortfeasors;

Longworth and our later opinion in Rutgers Casualty Insurance

Co. v. Vassas, 
139 N.J. 163 (1995), mandated that insureds

inform their carriers of settlement offers.   Our precedent was

not followed here.   Due to the complete absence of notice by

Ferrante to NJM at any point over years of litigation, including

the lack of notice about the high-low agreement or completed

jury trial during the UIM process, NJM may refuse to pay the UIM



                                 3
benefits.   Therefore, we reverse the Appellate Division

judgment.

                                  I.

                                  A.

    Ferrante was in a motor vehicle collision with the

tortfeasor on October 2, 2006.     The parties do not dispute that

the tortfeasor was at fault for the collision and that his

policy’s limit was $100,000.     Aside from the tortfeasor’s

insurance coverage, he is essentially without assets to pay

damages that exceed $100,000.

    At the time of the accident, Ferrante’s policy with NJM

provided for $300,000 in UIM coverage.    The policy required

Ferrante to “promptly” send NJM any legal papers regarding

litigation and to “notify [NJM] in writing of a tentative

settlement” with the underinsured motorist’s insurance carrier.

This process gave NJM thirty days to pay the insured the

tortfeasor’s insurance carrier’s offer in order to preserve its

subrogation rights.   The policy also required Ferrante to do

“whatever is necessary to enable NJM to exercise” its

subrogation rights and do “[n]othing after loss to prejudice”

those rights.

    Instead of contacting NJM, Ferrante and his wife initiated

a lawsuit against the tortfeasor in 2008, asserting negligence

claims and the wife’s per quod claims.     Ferrante did not notify

                                   4
NJM of the suit.    The parties proceeded to arbitration.   In May

2010, the arbitrator awarded Ferrante $90,000 for his injuries

and $10,000 in lost wages, but he rejected that offer without

noticing NJM.   He moved for a trial de novo in the Law Division

in June 2010.

    The tortfeasor offered to settle with Ferrante for $50,000.

He alternately proposed a high-low agreement that would limit

damages notwithstanding the exact amount of the verdict.    The

agreement set the floor of damages at $25,000 and the ceiling at

$100,000.   Ferrante rejected the settlement offer, but accepted

the high-low agreement.   He did not notify NJM of either

proposal, or of his acceptance of the high-low agreement.

    At the ensuing trial de novo in January 2011, in which NJM

did not participate, a jury found the tortfeasor one hundred

percent liable.    The jury awarded Ferrante $200,000 in damages,

and his wife $50,000 on her claim.    However, due to the high-low

agreement, the trial court molded the entire award to $100,000,

and entered judgment.

    On January 12, 2011, the day after the judgment, Ferrante’s

counsel sent NJM a letter.    He told NJM that “the tortfeasor’s

carrier has tendered the policy limits of $100,000 in exchange

for execution of a Release in favor of the tortfeasor,” and

requested NJM’s consent to settle.    Additionally, he informed

NJM that Ferrante would pursue UIM arbitration for his injuries

                                  5
beyond the $100,000.   The letter failed to mention any of the

prior offers, the high-low agreement, the arbitration, the

completed trial with a molded award or the judgment.

    Two weeks later, NJM responded and indicated it had

performed an asset investigation regarding the tortfeasor.        NJM

authorized Ferrante to settle, and waived its subrogation

rights.   It then began to seek information about the UIM claim.

                                  B.

    In October 2012, Ferrante filed the instant UIM claim in

the Law Division, and the parties engaged in discovery.     Not

until 2014 did Ferrante inform NJM about the $250,000 judgment

in the prior litigation.     NJM filed a motion in limine seeking

to limit Ferrante’s recovery to $50,000 -- what NJM considered

to be the difference between the tortfeasor judgment and the

$300,000 UIM policy limit.

    Shortly thereafter, Ferrante’s attorney disclosed to NJM

that his client had entered into the high-low agreement with the

tortfeasor that capped damages at $100,000.     NJM then amended

its motion in limine to instead move for a dismissal, claiming

that Ferrante had improperly waived NJM’s subrogation rights.

NJM argued that Ferrante had violated Zirger, 
144 N.J. at 340,

which obligated insureds to inform their UIM carriers of suits

against tortfeasors.



                                   6
     The Law Division dismissed the complaint in an oral

decision on February 28, 2014.1    The court found that Ferrante

failed to provide any notice of settlement offers, as required

by Longworth, 
223 N.J. Super. at 194-95, and the eventual notice

to NJM was “grossly incomplete” and “woefully deficient.”       The

court ruled that by entering into a high-low agreement, Ferrante

had waived future UIM claims against NJM.

     Ferrante appealed, arguing that NJM had waived its

subrogation rights by authorizing him to accept the tortfeasor’s

settlement offer.     Further, he alleged that NJM waived its

Longworth defense by not raising it during discovery.

     In a two-to-one decision, with Judge Accurso dissenting,

the Appellate Division reversed the trial court.     The majority

first found that Ferrante did not waive his UIM coverage by

entering into the high-low agreement.     The court noted that the

agreement did not reflect the value of the case, but rather was

a contractual protection that Ferrante entered into to mitigate

the inherent risk of a jury trial.     The $100,000 range, the

court wrote, was a logical cap because it was the limit of the

tortfeasor’s policy, as Ferrante had determined his adversary

was without assets.




1  After oral argument, the trial court granted summary judgment
in favor of NJM in an oral decision. The granted order noted it
as a motion in limine.
                                   7
       The majority next determined that NJM needed to demonstrate

prejudice from the deficient Longworth notice in order to void

the UIM policy.   The court distinguished Ferrante’s situation

from the setting of this Court’s opinion in Vassas, 
139 N.J. at
 175-76, in which we released the carrier from its UIM

obligation.    The court found that because Ferrante contended

that NJM was not prejudiced by his actions, the case was

different from Vassas, in which prejudice was assumed.       The

court determined that even though NJM was not in a position to

exercise its right to subrogation because of Ferrante’s conduct,

it was not necessarily excused from paying UIM benefits.

       Because the trial judge did not address the issue of

prejudice, the court remanded the matter to analyze whether

Ferrante’s failure to provide a timely Longworth notice actually

prejudiced NJM.   In that deliberation, the court placed the

burden on Ferrante.

       In a dissent, Judge Accurso disagreed that NJM must

demonstrate prejudice in order to void the UIM claim.    Rather,

she found that Ferrante’s failure to provide any notice to NJM

during the initial suit and his later omission of the trial

proceedings and high-low agreement caused NJM’s subrogation

rights to be “irretrievably lost.”    She concluded the case fit

squarely within Vassas and thus would have ruled in favor of

NJM.

                                  8
    NJM filed its appeal as of right under Rule 2:2-1(a)(2).

Our review is limited to the issue raised by Judge Accurso.

                                 II.

    NJM argues that this Court should adopt Judge Accurso’s

reasoning in her dissenting opinion and reverse the Appellate

Division’s judgment.     It advocates that delaying disclosure and

omitting information were intentional acts that robbed NJM of

its rights to subrogation or participation in the trial with the

tortfeasor.   NJM argues that Ferrante cannot be entitled to UIM

benefits because he sent the required Longworth letter two years

after the initial settlement offer.    Although NJM concedes that

an insured who negligently did not send a Longworth notice may

be entitled to UIM benefits, in Ferrante’s situation, where he

strategically opted against sending the notice, the right to UIM

coverage is destroyed.

    Ferrante, on the other hand, denies deceiving NJM and urges

this Court to affirm the Appellate Division’s opinion and allow

the trial court to determine if NJM was prejudiced.     Ferrante

admits that his Longworth notice was defective, but faults NJM

for failing to raise this deficiency until after discovery and

only on the eve of trial.

    Additionally, Ferrante asserts that he was not required to

notify NJM at all prior to an offer from the tortfeasor, which

he says did not occur until immediately prior to the tortfeasor

                                  9
trial.   He also argues that Vassas only requires the insured to

notify a carrier when there is an offer for the policy limits of

the tortfeasor.   Further, he argues the notice requirement in

Zirger gives him the option of informing NJM of a settlement

offer, and is not a mandate.    Prior to the judgment, he argues,

he had no reason to believe that the claim would be worth the

tortfeasor’s $100,000 policy limit.

                                III.

                                 A.

    When reviewing a grant of summary judgment, an appellate

court employs the same standards used by the motion judge.

Bhagat v. Bhagat, 
217 N.J. 22, 38 (2014) (citing W.J.A. v. D.A.,


210 N.J. 229, 237-38 (2012)).   The reviewing court must first

determine whether the moving party has demonstrated there were

no genuine issues of material fact.     Ibid.   If not, then the

Court must decide “whether the moving party is entitled to

summary judgment as a matter of law.”    Ibid.   Absent factual

questions, this Court reviews legal determinations de novo.

Templo Fuente De Vida Corp. v. Nat’l Union Fire Ins. Co. of

Pittsburgh, 
224 N.J. 189, 199 (2016) (citing Manalapan Realty,

L.P. v. Twp. Comm. of Manalapan, 
140 N.J. 366, 378 (1995)).

                                 B.

    Our case law has routinely emphasized the importance of

candor by insureds and the obligation to act in a forthright,

                                 10
open, and honest manner with their carriers throughout the

entire process of their claim.   See Longobardi v. Chubb Ins. Co.

of N.J., 
121 N.J. 530, 539 (1990) (“[A]n insured’s commitment

not to misrepresent material facts extends beyond the inception

of the policy to a post-loss investigation.”)    We have provided

insureds “an incentive to tell the truth.   It would dilute that

incentive to allow an insured to gamble that a lie will turn out

to be unimportant.”   Id. at 541-42.   Although this case arises

in a different context, we seek to avoid rewarding insureds for

omitting key details in a UIM claim.

    The relationship between an insurer and the insured is

contractual, but the obligation to offer UIM coverage is derived

from statute.   See Zirger, 
144 N.J. at 333; 
N.J.S.A. 17:28-

1.1(b).   An individual against whom recovery is sought after an

accident is considered “underinsured” when his or her liability

limits are, “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)(1).

    The Legislature requires carriers “to offer each insured

the option of purchasing coverage up to the limits of liability

coverage, but not exceeding $250,000 per person and $500,000 per

accident against the risk of injury caused by underinsured

tortfeasors or a single limit of $500,000.”    Zirger, 144 N.J. at

                                 11
333 (citing 
N.J.S.A. 17:28-1.1(b)).      The availability of UIM

coverage “reflects a strong public-policy interest in providing

. . . adequate compensation to New Jersey Motorists for injuries

sustained in accidents with underinsured motorists.”      Id. at

334.

       In Zirger, we outlined the right of UIM carriers to

intervene in trials against tortfeasors as a way to avoid

relitigating a plaintiff’s claim and as a method of binding them

to the issues at trial.    Id. at 340-42.    Thus, plaintiffs are

affirmatively obligated to provide their carriers with notice

“of the institution of suit against the tortfeasor.”      Id. at

340-41 (citing Vassas, 
139 N.J. at 174).      To what extent the

carrier will participate in the underlying trial is determined

by the trial court, see Rule 4:33-2, but there is no flexibility

in an insured’s obligation to communicate the lawsuit to the

carrier.   Zirger, 
144 N.J. at 340-41.

       This duty to notify in the UIM context is intended to

protect a carrier’s right of subrogation.      Ferrante’s policy

with NJM specifically provided for a subrogation right, which

allows the “subrogee in effect [to] step into the shoes of the

insured and . . . recover only if the insured likewise could

have recovered.”    Standard Accident Ins. Co. v. Pellecchia, 
15 N.J. 162, 172 (1954) (citations omitted).     The law “highly

favors” subrogation as “a device of equity to compel the

                                 12
ultimate discharge of an obligation by the one who in good

conscience ought to pay it.”   Holloway v. State, 
125 N.J. 386,

394 (1991) (quoting Pellecchia, 
15 N.J. at 171).    In practice,

the insurer may choose to pay out the insured for the loss and

retain a cause of action against the tortfeasor.    Ibid.

    In Longworth, the Appellate Division grappled with an

insured’s initial obligation to attempt to recover from a

tortfeasor prior to pursuing UIM benefits from his carrier.     
223 N.J. Super. at 177-78.   To protect itself from paying out a full

claim, an insurance carrier could seek reimbursement from the

tortfeasor who caused the loss.    Id. at 183.   However, the court

recognized that the carrier’s pursuit of subrogation against the

wrongdoer has an “adverse effect . . . on the statutorily-

accorded competing and paramount right of the insured victim to

seek as full a recovery as possible from the combined resources

of the tortfeasor’s liability carrier and his own UIM carrier.”

Ibid.   This issue arises because the insured must seek “recovery

from the tortfeasor’s insurer as a prerequisite to recourse to

the UIM coverage.”   Ibid.

    Longworth noted the tension in this process, as the insurer

would inevitably seek to keep the damages low, thus providing

the insured with minimal recovery for his injuries.    Ibid.

Regardless of those conflicts, the court determined that when

the insured received “an acceptable settlement offer” from the

                                  13
tortfeasor, he must notify the UIM carrier.     Id. at 194.   Then,

the carrier may decide either to allow the insured to accept the

offer or provide the insured with the same amount in exchange

for the assignment of the subrogation right against the

tortfeasor.    Ibid.

    We sought to balance the tensions of UIM subrogation cases

in Vassas.    
139 N.J. at 171-72.    Importantly, the issue there

was protecting the insured’s ability to recover from the

tortfeasor in addition to his own UIM coverage, while allowing

the carrier the opportunity to evaluate the merits of the UIM

claim while “maintaining a subrogation action against the

tortfeasor.”   Id. at 175.

    To protect those interests, we identified the occasions

when the insured must notify the carrier:      (1) when he or she

takes legal action against the tortfeasor; (2) “[i]f, during the

pendency of the claim, the tortfeasor’s insurance coverage

proves insufficient to satisfy the insured’s damages”; and (3)

if the insured is seeking UIM benefits because he or she

“receive[d] a settlement offer or arbitration award that does

not completely satisfy the claim, because the tortfeasor is

underinsured.”   Id. at 174.

    In explicitly ratifying the Longworth holding, we held that

after receiving notice in the third scenario, the carrier either

can “offer to pay the insured the amount of the tortfeasor’s

                                    14
settlement offer or the arbitration award, usually the

tortfeasor’s policy limit, in exchange for subrogation of the

insured’s rights against the tortfeasor; or, allow the insured

to settle.”   Id. at 174-75.

    Based on the facts presented in Vassas, we found in favor

of the carrier.   Id. at 175-76.    The insured filed a suit

against the tortfeasor without informing the carrier, and, after

later receiving an award from an arbitrator, he again failed to

notify the carrier.   Id. at 175.       We held that his failure “to

comply with the provisions of his insurance contract and the

dictates of Longworth” barred him from recovering UIM benefits.

Id. at 176.

    Following Vassas, the Appellate Division analyzed several

cases involving disputed UIM benefits.       The Appellate Division

has found that an insured who accepted a settlement offer after

informing his carrier of the offer, but before he received

permission, did not necessarily violate Longworth.        Breitenbach

v. Motor Club of Am. Ins. Co., 
295 N.J. Super. 328, 332-34 (App.

Div. 1996).   There, the court remanded for a determination of

prejudice, which it reasoned, the Vassas court did not prohibit.

Id. at 335.

    In Rivers, the Appellate Division found for the carrier

when the insured sent two letters informing the carrier of

litigation but failed to detail that he had already settled the

                                   15
case.    Rivers v. Allstate Ins. Co., 
312 N.J. Super. 379, 381

(App. Div. 1998).      Because the insured did not show why the

carrier was not prejudiced by losing its subrogation rights, the

court denied him UIM benefits.     Id. at 386.

    And in Cave, the insured initiated a lawsuit against two

tortfeasors and properly informed the carrier.        CNA Ins. Cos. v.

Cave, 
332 N.J. Super. 185, 186-88 (App. Div. 2000).        The carrier

waived its subrogation rights against one tortfeasor but never

made a decision as to the other tortfeasor, so the matter

proceeded to trial.     Id. at 188.     Before trial, the insured

accepted a settlement offer without consulting the carrier, and

later sought UIM benefits.     Id. at 189.    Although the court

found the insured violated Longworth, it held that unlike in

Vassas where the carrier was unfairly prejudiced by the loss of

its subrogation rights, it was less clear there who was at

fault.   Id. at 193.    UIM arbitration was appropriate, the court

held, because if only one tortfeasor was found to be at fault,

the carrier could not be prejudiced.        Ibid.

                                  IV.

    With those principles in mind, we turn to whether

Ferrante’s actions violated Longworth and Vassas to the extent

that they vitiated his ability to seek UIM benefits from NJM.

    Despite Ferrante’s efforts to distinguish his case from

Vassas, we find Vassas precludes him from recovering UIM

                                   16
benefits.     Like in Vassas, where the insured initiated a lawsuit

and received an arbitration award without informing the carrier,

Ferrante did the same.     He further violated his duty to inform

NJM by entering into a high-low agreement and taking the matter

through a full jury trial without informing NJM.

    In addition, Ferrante improperly extinguished NJM’s right

under Zirger to participate in the trial and mitigate damages in

some way.    Zirger is not premised on the idea that the insured

has to give notice to the carrier only if he thinks the UIM

claim will exceed the policy limit.     The purpose of this notice

is to give a carrier the opportunity to pay the insured the

settlement proceeds and then try the case itself as if in the

insured’s shoes.     At minimum, the notice allows the carrier to

participate in the trial to whatever extent the trial court

allows.   By virtue of Ferrante’s actions in this case, NJM lost

that subrogation option.

    Ferrante has also attempted to rely on our precedent in

Green v. Selective Insurance Co. of America, 
144 N.J. 344, 346

(1996).     However, those facts are inapposite to the facts here.

    A plaintiff’s duty to notify the UIM carrier is not

mitigated by plaintiff’s earlier notice of a PIP claim.     An

insurer’s handling of an earlier PIP claim does not create a

presumption that the insurer has received notice of the later

claim against the tortfeasors.

                                  17
    Unlike in Green, where the carrier had the opportunity to

exercise its subrogation rights after the initial settlement

offer and chose not to, NJM here was never told about the

arbitration, high-low agreement, jury verdict, or judgment until

after the events occurred.   A prejudice determination here is

not needed unlike in Green, where the carrier waived its

subrogation rights, because NJM never had the opportunity to

exercise its rights.

    Further, the cited Appellate Division cases are

distinguishable due to the numerous times Ferrante failed to

inform NJM.   In Breitenbach and Rivers, the insured informed the

carrier during litigation, and both cases dealt more with at

which point, if any, it was appropriate for the insured to

accept the settlement offer without the carrier’s consent.

Here, we never reach that point because Ferrante did not inform

NJM of the litigation until more than two years after it was

initiated and actually completed.    Similarly, this case did not

involve a day-of-trial settlement or include multiple

tortfeasors, as in Cave; here, the single tortfeasor was well

known, and NJM was still kept in the dark throughout.

    As a defense to his actions, Ferrante has argued that if he

negligently, rather than intentionally, violated Longworth, the

trial court should conduct a prejudice analysis.   We conclude

that due to the numerous landmarks where Ferrante could have,

                                18
and should have, but did not notify NJM, we need not address his

state of mind or weigh any potential prejudice to the carrier.2

     Our decision here is not rooted in Ferrante’s state of

mind, but rather in his actions.    We ratify the following

approach suggested by the dissenting judge:

          If . . . the insured, regardless of his state
          of mind, fails to give the UIM carrier any
          notice of the UIM claim until after the final
          resolution of the underlying tort action,
          thereby causing the irretrievable loss of the
          carrier’s   rights    to   subrogation    and
          intervention before the carrier has ever
          learned of the existence of the claim,
          coverage is forfeited.

     By delaying notice to NJM, Ferrante violated the terms of

his policy, Longworth, Vassas, and Zirger, which required him to

inform NJM as soon as the lawsuit was brought -- not after

arbitration, a high-low agreement, or a jury trial.   Those

requirements seek to protect NJM’s right to subrogation, which

was clearly extinguished by Ferrante’s actions, irrespective of

his state of mind.

                               V.

     Accordingly, we reverse the judgment of the Appellate

Division and reinstate the trial court’s order.


2  Counsel for NJM suggests that if the insured’s failure to
provide notice was the result of pure negligence, and there was
no misleading conduct, it may be appropriate to impose a
rebuttable presumption of prejudice and place the burden on the
insured to show the absence of prejudice. We need not resolve
that issue in this case.
                               19
     CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN,
PATTERSON, SOLOMON, and TIMPONE join in JUSTICE FERNANDEZ-VINA’s
opinion.




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