Handler, Meanor and Kole. Meanor, J.A.D. (concurring).
This is an appeal from a judgment holding defendant liable for the difference between its policy limit and the amount of an excess judgment against its insured. The trial court's opinion is reported. Yeomans v. All State Ins. Co., 121 N.J. Super. 96 (Cty. Ct. 1972). We withheld our decision to await the guidance of Rova Farms Resort, Inc. v. Investors Ins. Co. of America, 65 N.J. 474 (1974). We affirm subject to the following.
The thesis of the trial court's opinion was that Allstate breached its fiduciary duty to keep its insured, Mrs. Yeomans, informed of the seriousness of the injuries and the virtual certainty of a judgment against her in excess of the policy limit. Allstate also never informed Mrs. Yeomans, until trial was imminent, of its decision to commit its policy limit toward settlement, and of the impossibility of a contribution from the codefendant who was also insured by Allstate and with respect to whom the quite valid decision had been made that there was no liability.
The net result of this was that the insured was deprived of any realistic opportunity to prepare to participate in a settlement above policy limits since it was not until the eve of trial that the nature of her position was made known to her.
We agree with the finding of the trial court that the claim against her could not have been settled within Mrs. Yeomans' policy limit. Under Rova Farms, supra, an insurer has an affirmative duty to negotiate in an attempt to bring the demand within policy limits or within an amount that can be realized by a combination of the policy limit and what the insured is willing and able to contribute. Rova Farms, supra at pp. 493-496. Here Allstate did no more than offer its limit; it did not negotiate for a reduction in demand. In fact, negotiation would have been fruitless because a contribution from the insured was essential to settlement, and the previous breach of duty by Allstate had frustrated whatever contribution the insured could have made.
Allstate assails the trial court's finding that its breach of duty was a proximate cause of the insured's loss of the difference between the policy limit of $25,000 and the judgment of $77,000. In response to this argument, we quote from Rova Farms :
We, too, hold that an insurer, having contractually restricted the independent negotiating power of its insured, has a positive fiduciary duty to take the initiative and attempt to negotiate a settlement within the policy coverage. Any doubt as to the existence of an opportunity to settle within the face amount of the coverage or as to the ability and willingness of the insured to pay any excess required for settlement must be resolved in favor of the insured unless the insurer, by some affirmative evidence, demonstrates there was not only no realistic possibility of settlement within policy limits, but also that the insured would not have contributed to whatever settlement figure above that sum might have been available. [at 496]
For these propositions the Supreme Court cited Young v. American Cas. Co., 416 F. 2d 906 (2 Cir. 1969), cert. dism. 396 U.S. 997, 90 S. Ct. 580, 24 L. Ed. 2d 490 (1970). Young was quoted extensively and relied upon by the trial court. 121 N.J. Super. at 102-103. We interpret the above passage from Rova Farms in light of the citation of Young to mean that where an insured establishes bad faith on the part of the insurer, a prima facie case of damages for the difference between the policy limit and the excess verdict has also been shown. It is then up to the insurer to demonstrate that settlement could not have been achieved within the policy limit or for the policy limit plus any amount the insured would have been able and willing to contribute. This is the rationale of Young and the passage from Young expressing it is quoted in the trial court opinion. 121 N.J. Super. at 103.
There was proof that during the trial of the negligence case the trial judge in that matter directed an inquiry to Mr. and Mrs. Yeomans seeking to determine if they were willing to contribute $10,000 toward settlement. Their response was negative. There was also testimony adduced below from Mr. Jacovino, trial counsel selected by Allstate
for the Yeomans, that when he broached with them the subject of a settlement contribution their response was to the effect that they had no appreciable assets. From the fact that there were no assets from which to realize a settlement contribution at the time of Mr. Jacovino's inquiry just prior to trial, it by no means follows that the insured could not have made a significant contribution had she had the advance notice of her precarious legal position to which she was entitled.
We read the trial court's opinion, in light of its reliance on Young, supra, as holding that the insurer brought forth no proofs sufficient to overcome the prima facie case of proximate cause and damages made out by the establishment of Allstate's bad faith. Under State v. Johnson, 42 N.J. 146, 162 (1964), we are powerless to ...