SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2058-99T5
DALE HALLION and JEROME HALLION,
her husband,
Plaintiffs/Respondents,
vs.
LIBERTY MUTUAL INSURANCE COMPANY,
Defendant/Appellant,
and
CNA INSURANCE COMPANY,
Defendant/Respondent.
Argued: January 10, 2001 - Decided: March 1, 2001
Before Judges Wallace, Jr., Carchman and
Lintner.
On appeal from the Superior Court of New
Jersey, Law Division, Bergen County,
L-8476-99E7.
Kenneth J. Slomienski argued the cause for
appellant.
Charles P. Ingenito argued the cause for
respondents Dale and Jerome Hallion
(Mr. Ingenito, of counsel; Jeffrey Zajac,
on the brief.)
Andrea L. Strack argued the cause for
respondent CNA Insurance Company (Hardin,
Kundla, McKeon, Porletto & Polifroni,
attorneys; Ms. Strack, on the brief).
The opinion of the court was delivered by
WALLACE, JR., J.A.D.
Defendant Liberty Mutual Insurance Company (Liberty Mutual)
appeals from the entry of a judgment compelling it to arbitrate
plaintiff's underinsurance motorist claim (UIM). The judgment also
provided that CNA Insurance Company (CNA) was not required to
participate in the arbitration. On appeal Liberty Mutual contends
that its insurance policy affords excess coverage to CNA's primary
coverage policy, that it was not obligated to provide LongworthSee footnote 11
notice to CNA, and that, in any event CNA was not prejudiced by the
failure to receive Longworth notice. Further, Liberty Mutual
raises for the first time on appeal plaintiffs failure to provide
it with Longworth notice and therefore plaintiffs' claim should be
denied. We affirm.
We are hampered somewhat by the sparse record on appeal. We
glean the following facts from the record submitted. Plaintiff
Dale HallionSee footnote 22 was involved in an automobile accident on November 7,
1995, while operating a vehicle owned by her daughter. There were
two other vehicles involved in a chain collision accident, both
insured by Allstate Insurance Company. The vehicle that struck
plaintiff's vehicle was operated by Paula R. Scott who was struck
from behind by a vehicle owned by Kessart Morrison. The liability
coverage on the Scott vehicle was $15,000. Plaintiff was insured
by Liberty Mutual and the vehicle she was driving was insured by
CNA. The Scott and Henry vehicles were each insured by Allstate
Insurance Company.
The Liberty Mutual policy provided UIM coverage in the amount
of $500,000, while the CNA policy provided UIM coverage in the
amount of $300,000.
Plaintiffs filed a complaint against Scott in 1996.See footnote 33 We are
informed by plaintiffs' counsel that Scott failed to answer, and a
default was entered. Although the case was not settled, plaintiffs
executed a release on September 25, 1997. A proof hearing on the
default was scheduled for November 20, 1997. Settlement
discussions led to Scott's insurer offering to pay the full policy
limit of $15,000 in settlement of the case. Plaintiffs' counsel
accepted the offer. The next day, November 21, 1997, plaintiffs'
attorney forwarded a Longworth letter to Liberty Mutual seeking
consent to accept the settlement offer. However, unbeknown to
plaintiffs' attorney, the motion judge prepared and entered an
order on November 20, 1997, dismissing plaintiffs' complaint.
After receipt of the Longworth notice, Liberty Mutual retained
Commercial Litigation to conduct an asset search of Scott. On
December 22, 1999, Commercial Litigation reported that Scott did
not appear to have any assets. Neither plaintiffs' attorney nor
Liberty Mutual informed CNA of the settlement offer.
On December 2, 1997, plaintiffs forwarded to Liberty Mutual
documentation containing all pertinent medicals and authorizations
and requested that Liberty Mutual evaluate the records for a
possible settlement of their UIM claim. Liberty Mutual set up a
claim file.
On June 10, 1998, plaintiffs wrote to Liberty Mutual demanding
arbitration within thirty days and giving notice to their
arbitrator. Liberty Mutual failed to respond to this notice within
the allotted time, but eventually appointed an arbitrator.
In April 1999, plaintiffs' attorney sent a letter to CNA
advising it of plaintiffs' UIM claim and demanding arbitration.
CNA set up a claim file. However, on July 19, 1999, CNA wrote to
plaintiffs rejecting their UIM claim because neither plaintiffs nor
Liberty Mutual informed it of the offer from the tortfeasor, and
therefore, CNA was unable to protect its subrogation rights.
On September 9, 1999, plaintiffs filed a complaint and an
order to show cause against Liberty Mutual and CNA seeking an order
compelling defendants to be responsible for plaintiff's Dale
Hallion's UIM claim and ordering arbitration. Thereafter,
defendants submitted letter briefs in opposition to plaintiffs'
request. The motion judge ordered all parties to appear on October
20, 1999, to show cause why the relief sought by plaintiffs should
not be granted. On the return date of the order to show cause,
plaintiffs' attorney failed to appear, and the motion judge decided
to determine the matter on the papers.
CNA and Liberty Mutual each submitted letter briefs. Liberty
Mutual essentially argued that CNA should provide the primary
coverage with regard to plaintiffs' UIM claim and that Liberty
Mutual was only responsible for any amount above the UIM policy
limits of the host vehicle insured by CNA. Liberty Mutual's
attorney acknowledged that he had conducted discovery from
plaintiffs during the past ten months, obtained all necessary
medical records, had scheduled a medical examination of Dale
Hallion, and that the results of the asset search of the tortfeasor
revealed no assets. Liberty Mutual argued that the failure to
comply with the Longworth notice procedures did not prejudice CNA
because any subrogation claim was worthless. Further, Liberty
Mutual argued that if the motion judge decided in favor of CNA, the
judge should find that Liberty Mutual is the excess carrier and
dismiss the complaint as to Liberty Mutual.
CNA argued in its brief that consistent with case law, the
failure of plaintiffs or Liberty Mutual to notify CNA of the
settlement offer barred the UIM claim against CNA. In addition,
CNA argued that its subrogation rights against the tortfeasor had
been prejudiced.
The motion judge entered an order on November 10, 1999,
partially granting plaintiffs' request. The judge ordered Liberty
Mutual to arbitrate the matter and "be solely responsible for the
entire award by virtue of their failure to place CNA on notice of
the claim as required by law." The only reason given was a
handwritten note at the bottom of the order that "CNA Insurance is
not required to arbitrate this matter pursuant to the holding in
Rivers v. Allstate Insurance Co.,
312 N.J. Super. 379 (App. Div.
1998)." This appeal followed. Liberty Mutual's motion to stay the
arbitration pending appeal was denied.
The motion judge did not explain why he ordered arbitration of plaintiffs' UIM claim solely against Liberty Mutual. The cryptic statement that CNA was not required to arbitrate this matter pursuant to Rivers v. Allstate Insurance Co., 312 N.J. Super. 379 (App. Div. 1998) failed to address the issue of whether CNA was prejudiced by the lack of proper Longworth notice. In Rivers, similar to the facts here, the insured reached a settlement with the tortfeasor before notifying the insurance carrier of her intent to accept the settlement. We held that plaintiff failed to advance any facts demonstrating a lack of prejudice to the insurer and therefore plaintiff was barred from claiming UIM benefits. Id. at 386.
However, we also noted:
We do not read the Supreme Court's opinion in [Rutgers Casualty Insurance Company v. Vassas, 139 N.J. 163 (1995)] to create a bright-line rule that the insured's failure to protect the insurer's right of subrogation amounts to prejudice per se, sufficient under all circumstances to deny the insured UIM benefits and excuse the insurer from its coverage obligation.
[Ibid.]
Consequently, the motion judge's reference to Rivers provides little guidance to his decision.
We turn now to Liberty Mutual's argument, raised for the first time on appeal that plaintiffs failed to give proper Longworth notice and therefore their UIM claim should be barred. We reject this contention.
Ordinarily we will decline to consider questions or issues not properly presented to the trial court when an opportunity for such a presentation is available "'unless the questions so raised on appeal go to the jurisdiction of the trial court or concern matters of great public interest.'" Brown v. Township of Old Bridge, 319 N.J. Super. 476, 501 (App. Div.), certif. denied, 162 N.J. 131 (1999) (citing Skripek v. Bergamo, 200 N.J. Super. 620, 629 (App. Div.), certif. denied, 102 N.J. 303 (1985)). An appellate court will consider matters not properly raised below only if the issue is one "of sufficient public concern." Alan J. Cornblatt P.A. v. Barow, 153 N.J. 218, 230 (1988). Even if the matter satisfies that test, an appellate court should not consider the issue if the record before the court is not complete as to the newly-presented issue.
In light of the limited record below and the failure to provide oral argument to the litigants, we elect to consider Liberty Mutual's argument addressed to Longworth notice.
Judge Pressler, in Longworth, set forth the procedure to be followed to perfect a claim for UIM benefits when a settlement has been advanced by the tortfeasor in the underlying personal injury matter. Longworth v. Van Houten, supra, 223 N.J. Super. at 104. Our Supreme Court endorsed the Longworth procedure in Rutgers Cas. Ins. v. Vassas, 139 N.J. 163 (1995). The Court directed that when an insured under an insurance policy providing UIM benefits is involved in an accident, the insured must notify the insurer when suit is filed. Id. at 174. Then while the claim is pending if it appears that the tortfeasor's insurance coverage will not satisfy the insured's damages, notice again should be given to the insurer. Ibid. Thereafter, if the insured receives a settlement offer or an arbitration award that does not satisfy the insured's damages, then the insured should again notify the insurer of that fact. Ibid.
The Court further explained:
if the insured receives a settlement offer or arbitration award that does not completely satisfy the claim, because the tortfeasor is underinsured, the UIM insurer then has two options: offer to pay the insured the amount of the tortfeasor's 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. In either case, the UIM insurer must further allow the insured the benefit of the UIM coverage. If the insurer does not respond within the time allotted for rejection of the award or settlement offer, the insured victim may, consistent with Longworth, supra, move for a declaratory ruling on order to show cause concerning the parties' rights and responsibilities. In this manner, the insured victim is afforded the protection and benefits of the tortfeasor's insurance coverage in addition to the insured's own UIM coverage. As well, the UIM carrier is able to weigh the relative merits of allowing its insured to settle and paying the difference in UIM benefits compared with paying its insured the settlement offer plus UIM benefits and itself maintaining a subrogation action against the tortfeasor.
[Ibid.]
Recently, we relied on Breitenbach v. Motor Club of America
Insur. Co.,
295 N.J. Super. 328, 334 (App. Div. 1996) and Rivers,
supra, 312 N.J. Super. at 385-86, to hold that the UIM insurer is
"entitled to protection against any prejudice it reasonably may
have suffered" as a result of the unauthorized settlement by the
insured with the tortfeasor, but absent prejudice, the insured "is
not, however, entitled to a windfall." CNA Insurance Company,
supra, 332 N.J. Super. at 191. We concluded that under the factual
circumstances, the record showed a lack of prejudice to the UIM
insurer. Id. at 193.
In Breitenbach the plaintiff gave her UIM insurer notice of
intent to settle for the tortfeasor's policy limits and that unless
the insurer objected within thirty (30) days, he would accept the
settlement and submit the UIM claim to the insurer. Breitenbach,
supra, 295 N.J. Super. at 330. Prior to the expiration of the
thirty (30) day period, plaintiff completed the settlement with the
tortfeasor. Thereafter, the insurer refused to pay UIM benefits.
Ibid. In the subsequent action by the insured against the UIM
insurer, the motion judge dismissed the complaint, finding that
plaintiff's failure to wait thirty days before settling with the
tortfeasor irreparably prejudiced the UIM insurer's subrogation
rights. We reversed because we found no prejudice to the UIM
insurer. We explained:
While plaintiff settled with the tortfeasor
within the thirty days, defendant never
delivered a response within that period,
either objecting to the settlement or offering
to pay the settlement proceeds. Having not
responded in writing within thirty days of
receipt of plaintiff's notice, the carrier's
right of subrogation cannot be deemed to have
been compromised.
[Id. at 335.]
We reach the same result in the present case. Plaintiffs
accepted the tortfeasor's settlement offer on November 20, 1999,
and the judge dismissed the case the same day. Not realizing the
judge would enter an order dismissing the action, plaintiffs'
attorney gave the Longworth notice to Liberty Mutual the next day
on November 21, 1999. This was a technical violation of the
Longworth procedure. Liberty Mutual then conducted an
investigation of the tortfeasor's assets and concluded that the
tortfeasor had no assets worth litigating against. Further, at no
time did Liberty Mutual claim the right of subrogation. More
importantly, Liberty Mutual conducted discovery on plaintiffs'
claim for UIM benefits and prepared for arbitration. Plaintiffs
had clearly established that Liberty Mutual was not prejudiced by
their failure to follow the Longworth procedure.
We add the following observation. In cases such as this where
the insured receives an acceptable settlement offer from the
tortfeasor at trial, the insured should ask the Law Division judge
to withhold entering an order dismissing the complaint for thirty
days or to include appropriate language in the order to protect the
insured's UIM claim. This would permit the insured to comply with
the Longworth procedure, and at the same time, permit the UIM
carrier to determine within thirty days whether to offer the
insured the settlement in exchange for subrogation of the
insured's right against the tortfeasor, or permit the insured to
accept the settlement.
Liberty Mutual next argues that its insurance policy only
affords excess UIM coverage to plaintiffs. Specifically, Liberty
Mutual contends that since Dale Hallion was the operator of a
vehicle she did not own, the UIM coverage available with Liberty
Mutual provides only excess coverage over the CNA's primary UIM
coverage. We agree.
In Magnifico v. Rutgers Cas. Ins. Co.,
153 N.J. 406 (1998),
the Court addressed the issue of UIM coverage under multiple
insurance policies. In Magnifico, supra, plaintiff and her husband
were passengers in a car owned and driven by Grace DeNichilo. 153
N.J. at 409. The DeNichilo vehicle collided with a vehicle driven
by Frank Cameron and owned by Beverly Manning. The Manning vehicle
was insured by State Farm Policy with a liability limit of
$25,000.00. CSC Insurance Company insured the DeNichilo's car and
provided UIM coverage of $250,000.00. Ibid. Plaintiff's own
automobile policy was with Rutgers Casualty Insurance Company which
provided UIM coverage of $100,000.00. Plaintiff's insurance policy
provided a standard "other insurance" clause which stated "any
insurance we provide with respect to a vehicle you do not own shall
be excess over any other collectible insurance." Id. at 414.
Applying the clear and unambiguous language of the insurance
contract, the Court held that the CSC policy provided primary
coverage and the Rutgers policy provided excess coverage. Ibid.
Similarly, Liberty Mutual's policy provided to plaintiffs
contained the standard "other insurance" clause similar to the
policy in Magnifico, and the CSC policy of the host vehicle
provided UIM coverage to Dale Hallion as a person "occupying" the
covered vehicle. Applying the clear policy language, we conclude
that CNA provided primary coverage and Liberty Mutual provided
excess UIM coverage to plaintiffs.
Liberty Mutual also argues that it did not have the duty or
the obligation to give Longworth notice to CNA. Liberty Mutual
contends that the party seeking UIM coverage should have the
obligation of notifying the primary provider of UIM benefits. In
any event, Liberty Mutual argues that CNA was not prejudiced by the
failure to receive timely Longworth notice.
Plaintiffs disagree and argue their only responsibility was to
provide Longworth notice to their own insurer, Liberty Mutual. CNA
argues that Liberty Mutual failed to give CNA Longworth notice and
its lack of notice prejudiced its subrogation rights. Thus, CNA
contends that it has no responsibility to provide UIM coverage.
It is obvious that plaintiff and Liberty Mutual failed to give
Longworth notice to CNA. We must decide whether the injured party
or the injured party's insurer has the responsibility of providing
Longworth notice to the insurer of the host vehicle.
We have not found an appellate court decision on this issue.
However, in a related area of uninsured motorist coverage, we
determined that the duty to give notice is on the injured party's
insurance company. Brown v. Selective Insurance Co.,
311 N.J.
Super. 210 (App. Div. 1998).
In Brown, the plaintiff was injured when he was struck by an
uninsured vehicle in June 1989. Plaintiff's personal vehicles were
insured by Selective Insurance Company (Selective) while Atlantic
Employers Insurance Company (Atlantic) insured the vehicle
plaintiff was operating, which was owned by Edison Township.
Plaintiff made a demand for uninsured motorist coverage against
Atlantic, which was denied. Neither plaintiff nor Atlantic
notified Selective at that time. Approximately four years after
the accident, plaintiff notified Selective of the uninsured
motorist claim. Selective denied coverage due to improper notice
and prejudice to its subrogation rights. Id. at 211-12. Plaintiff
instituted suit against both insurers. On cross-motions for
summary judgment, the trial judge held that Atlantic must provide
coverage. The judge also granted summary judgment in favor of
Selective for lack of timely notice. Atlantic appealed, claiming
that Selective should have to contribute any sum it may be required
to pay to plaintiff. We held that because Atlantic was aware of
the UIM claim from its inception and failed to place Selective on
notice of the claim, Selective was barred from seeking
contribution. We reasoned that if Atlantic had notified Selective
of the claim, Selective would have had an opportunity to protect
its subrogation rights against the uninsured motorist. Id. at 215.
The notice issue has been addressed in the UIM context by the
Law Division in Prudential Prop. & Cas. v. Keystone Ins.,
286 N.J.
Super. 73 (Law Div. 1995). In Prudential, the injured passenger's
primary insurer brought a declaratory judgment action, seeking
determination that it was an excess carrier as to liability for
passenger's UIM benefits and that, Keystone Insurance, the insurer
of the host vehicle involved in the accident, was the primary
carrier. Id. at 74-76. Prudential had previously paid the UIM
claim and sought reimbursement from Keystone. Keystone
acknowledged that it provided primary UIM coverage to the injured
passenger, but claimed that the failure to receive Longworth notice
should bar any recovery under its policy. The trial court
reasoned:
[I]n the normal situation, recovery of UIM
benefits under Longworth depends upon notice
to one's own UIM carrier that the tortfeasor
has offered a settlement. In turn, if the
noticed carrier takes the position that its
policy is excess or "co-primary" it, not the
insured, has the duty to relay that notice to
the alleged primary carrier promptly, and
provide that carrier reasonable time to
consent or to tender the settlement amount to
protect its subrogation rights. In that
fashion the excess carrier takes both the
responsibility and the risk attendant to the
protection of its own interest. I recognize
that sorting out the primary-excess issue may
well require more time than the presumptive 30
day notice period set forth in Longworth.
Therefore, the carrier claiming coverage as
excess should also promptly alert its insured
of its position and of the potential delay
necessary to resolve this additional issue.
An unreasonable delay, however, would allow
the excess carrier either to consent or to
tender a matching offer without prejudice to
its rights over against the primary carrier.
Failure on the part of the injured claimant's
own carrier to relay notice to the alleged
primary carrier would, in most cases, be fatal
to its right to recover UIM benefits paid to
its insured.
[Id. at 77-78.]
We are in complete accord with the analysis and conclusion in
Prudential. We hold that as between the insured and the insured's
carrier, the insured's carrier has the responsibility to provide
Longworth notice to the primary carrier. Therefore, when an
insured under a policy providing UIM benefits is involved in an
accident and has undertaken legal action against the tortfeasor,
the insured must provide Longworth notice to his or her insurance
carrier. In turn, the insured's carrier is responsible for
providing Longworth notice to any asserted primary carrier. To be
sure, the better practice is for the insured to provide Longworth
notice to all potential UIM providers. However, the ultimate
responsibility is upon the UIM insurer to give Longworth notice to
the primary carrier.
Lastly, we turn to Liberty Mutual's argument that despite the
failure to give timely Longworth notice to CNA, CNA suffered no
prejudice. Specifically, Liberty Mutual asserts that the
investigation performed by Commercial Investigations indicated that
the tortfeasor Scott owned no property and had no employment
history is evidence that CNA was not prejudiced. CNA disputes this
contention and points to other evidence in the report which
appeared to demonstrate that Scott was employed. CNA argues that
it was foreclosed from its right to investigate Scott's employment
statute and pursue subrogation.
We are satisfied that Liberty Mutual failed to establish that
CNA was not prejudiced. CNA has advanced sufficient reason to
counter Liberty Mutual's attempt to demonstrate lack of prejudice.
Moreover, the substantial period that elapsed between the date that
the underlying matter was settled on November 20, 1997, until
notice of the settlement was provided to CNA in April 1999, weighs
heavily in favor of rejecting Liberty Mutual's claim of no
prejudice. See generally, Rivers v. Allstate Ins. Co.,
312 N.J.
Super. 379 (App. Div. 1998) and Rutgers Cas. Ins. v. Vassas,
139 N.J. 163 (1995).
Affirmed.
Footnote: 1 1Longworth v. Van Houten, 223 N.J. Super. 174 (App. Div. 1988). Footnote: 2 2Plaintiff in the singular applies to the injured plaintiff Dale Hallion. Footnote: 3 3The record does not reflect whether Georgia M. Henry, the operator of a third vehicle, was included in the action.