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The
N.J. Supreme Court recently held that the bad-faith
claims of an insured are to be decided by a jury. The
case, Wood vs. New Jersey Manufacturers Insurance
Company, arose from a
fairly common fact pattern. In 2001, the plaintiff,
Karen Wood, was attacked by a dog at a condominium
complex while she was delivering mail. She was
seriously injured, underwent several surgical
procedures, and according to the written opinion, had
likely incurred a worker's compensation lien in excess
of $400,000.00. The insurer of the owner of the dog,
New Jersey Manufacturers ("NJM"), had issued
a $500,000.00 liability policy. The personal injury
claim was placed into suit. Apparently disregarding
recommendations by its defense counsel and primary
adjuster, a claims review committee at NJM authorized
settlement of only $300,000.00. Despite plaintiff's
representations that she would accept $450,000.00 in
settlement, NJM never wavered from that figure. The
matter then proceeded to trial against the dog owner,
as well as the condominium association where the
attack occurred. The jury found the dog owner 51%
responsible for the event and entered a gross award of
$2,422,000.00, resulting in, ultimately, a net
judgment against the dog owner in the amount of
$1,408,000.00. New Jersey Manufacturers tendered its
$500,000.00 policy but refused to pay the excess. The
plaintiff then obtained an assignment of the rights of
the dog owner and filed a declaratory judgment action
as against NJM for the balance. Some limited discovery
was conducted, and ultimately, plaintiff filed a
motion for summary judgment as against NJM. The
application was granted. The motion was heard by the
same judge who had conducted the underlying trial. It
is clear by some of the comments attributed to her in
the Supreme Court decision that the trial judge was
not sympathetic to NJM's argument that they had acted
reasonably and appropriately with their approaches to
settlement of the underlying claim. In fact, the trial
court characterized their actions with words such as
"cavalier," further indicating that NJM's
settlement posture was based on assumptions that it
never even attempted to prove at trial, and that it
had essentially gambled in a fashion that was contrary
to the interests of its insured.
NJM appealed this judgment against it, and the
Appellate Division, while not seemingly passing
judgment on the merits, concluded that factual issues
regarding NJM's behavior had been left unresolved and
that the matter should be the subject of a full
evidentiary hearing. However, the Appellate Division
left to the discretion of the trial court as to
whether or not such a fact review should be conducted
by a jury or by the bench. The matter was then
certified to the Supreme Court to address that limited
issue.
It is interesting to note that, in a twist, plaintiff
had actually requested a jury when filing her
declaratory judgment Complaint, while NJM had not made
such a request in its Answer. Yet, at the Supreme
Court, they reversed those positions, with plaintiff
arguing that the matter was appropriately decided by a
judge alone. The carrier, frankly, waffled in its
position seeming to be unwilling to completely commit
to the idea of a jury trial and arguing that either
may be appropriate depending on the underlying
specific factual circumstances.
The
Supreme Court began its analysis by immediately
emphasizing that a carrier's failure to settle a claim
within policy limits may expose it to liability but
that the courts had never adopted "a rule making
the insurer automatically liable to the insured for
the over-the-limit judgments." It then went on to
conclude that despite the fact that plaintiff had
characterized their action as one sounding in
declaratory judgment, it was, in fact, essentially
only a "garden variety" contract claim.
Since such claims are historically bound to jury
determination, the Supreme Court concluded that there
was no reason to deviate from that rule for claims
between an insured and its insurer arising out of bad
faith. The court did note, however, that parties may
waive such a right, and although not stated expressly,
does not seem to foreclose the option of such an
application being determined by a judge on a motion
for summary judgment if there are no unresolved
disputed material facts.
Going
forward, therefore, any assigned bad-faith claims
against an insured for failing to resolve a liability
matter within applicable policy limits will be subject
to a jury trial. The Insurance Council of New Jersey
and the Property Casualty Insurers Association of
America had joined the litigation, filing "friend
of the court" briefs and had argued simply and
unequivocally that jury trials were the appropriate
procedural remedy. It remains to be seen whether that
position will be one that is the subject of regret as
these claims now proceed to trial.
Click
Here For A Copy Of The Court's Opinion
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