Third-party plaintiff, a defendant in an automobile accident case, seeks judgment against third-party defendant State Farm Mutual Insurance Company (hereafter referred to as State Farm) for damages. He requests that State Farm be ordered to pay all counsel fees and costs incurred by him, allegedly because State Farm withdrew from the defense of the automobile negligence suit. Balter also asks that State Farm be required to pay the judgment rendered against him in favor of the original plaintiff Ebert. Although the facts developed at the hearing were substantially the same as those recited in the Appellate Division opinion at 74 N.J. Super. 466 (1962), it is necessary, in view of the circumstances and my disposition of this case, to repeat and elaborate upon them somewhat.
Balter had an automobile liability insurance policy with Allstate Insurance Company (hereafter referred to as Allstate) that expired at midnight on January 16, 1957. On
January 14, 1957, he contracted for such a policy from State Farm to be effective at 12:01 a.m. on January 17, 1957 -- that is, upon the expiration of the Allstate policy.
At approximately 4 p.m. on January 16, 1957 he was involved in a minor automobile accident with an automobile operated by Mrs. Ebert. Only slight property damage and no personal injuries were noted at the time. Both parties left the scene without exchanging any credentials or making any report. A week or less after the accident Balter received a telephone call from Mr. Ebert advising that Mrs. Ebert had been injured in the accident. Immediately thereafter Balter, erroneously believing the date of the occurrence to have been January 17, went to the State Farm office and reported the details of the accident to its agent. In truth, since the accident occurred on January 16, Balter's coverage was with Allstate.
After receiving Balter's report of the accident State Farm assigned the matter to one of its claim adjusters, Donald Julian. He examined the accident report and on February 26, 1957 interviewed Balter and obtained a signed statement from him concerning the details of the accident. This statement again fixed the accident on January 17. The investigating claims adjuster also obtained a non-waiver agreement from Balter which reads (hand-written matter is enclosed in parentheses -- remainder is printed form):
"AUTHORIZATION FOR CLAIM SERVICE AND NONWAIVER OF RIGHTS
The undersigned requests and authorizes STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY to investigate, negotiate, settle, deny or defend any claim arising out of an accident occurring on or about (1/17/57) 19 .
It is agreed that such actions shall not waive any of the rights of the undersigned or of the Company under any contract of insurance. Dated at (4:00 P.M.) this (27) day of (Feb.) 19(57).
Julian stated that upon taking this non-waiver agreement he told Balter "that the reason for this [non-waiver], of course, was that the home office hadn't notified me that the policy was in force and because of that fact I would take the non-waiver." The reason Julian had not received notice of coverage from State Farm's home office was that Balter had only recently taken out his policy and the application had probably not been processed by the home office.
Meanwhile, State Farm received a letter dated February 6, 1957, from Eberts' attorney. This letter, directed to the attention of Julian, fixed the accident as occurring "on or about January 16, 1956." The year 1956 was in error but the 16th day of January was correct. Julian saw this letter and contacted the attorney. However, although he investigated the case until he was relieved by another State Farm investigator in March or April 1957, Julian did not do anything with reference to verifying the date of the accident, other than the taking of the statement of the details of the accident from Balter.
When Balter received his formal policy from State Farm, the agent sent a covering note that stated: "Don't worry about that small claim. Nothing will come of it." A few months after making the initial report of the accident to State Farm, Balter inquired on two separate occasions as to the status of the claim. The agent told him that he was "an old worry wart, that nothing will come of it, to go home and forget it," and assured him that "everything was O.K. Leave it to us."
Approximately 23 months after the accident the Eberts instituted suit against Balter seeking damages. The complaint alleged that the accident occurred on or about January 16, 1956. Balter was served on December 29, 1958, and on the next day delivered the papers to Frank Rutkosky, the State Farm claim adjuster who relieved Julian in investigating this claim. Rutkosky told Balter that such things happen every day and that he ...