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Houten v. New Jersey Manufacturers Insurance Co.

April 10, 1978

CORNELIUS VAN HOUTEN, PLAINTIFF,
v.
NEW JERSEY MANUFACTURERS INSURANCE COMPANY, DEFENDANT



Reiss, P.J.D.C.

Reiss

The issue before this court is whether a party to a settlement may be awarded counsel fees under R. 4:42-9(a) (6).

This case arose when plaintiff sued his wife's insurance carrier for failure to provide personal injury protection coverage for his medical expenses and loss of income after an auto accident occurring on February 28, 1977. On October 24, 1977 the parties settled the matter before proceeding to trial.*fn1 Now plaintiff moves for counsel fees incurred in litigating the suit. Defendant in turn moves for costs, expenses and counsel fees in investigating the matter.*fn2

I

Plaintiff's motion is based upon allegations that the defendant insurance company acted in bad faith, breached its fiduciary obligations to plaintiff and continually obstructed the resolution of the claim. This in turn required the services of an attorney to intervene in every phase of the negotiation and suit.

It appears that the plaintiff's primary objections concern (1) the allegedly obstructive and dilatory tactics employed by defendant's adjuster which (2) necessitated the intervention of plaintiff's counsel and the institution of an action at law, to which (3) defendant's attorney later raised the defense of workman's compensation.

II

R. 4:42-9(a) (6) (the rule) provides that counsel fees shall be allowed "in an action upon a liability or indemnity policy of insurance, in favor of a successful claimant." Therefore, the problem turns upon the question of whether plaintiff here was a "Successful claimant."

Unfortunately, upon a careful review of the applicable case law and statutes there is no definition or interpretation of the term "successful claimant." It could be said that plaintiff was "successful" in that he settled for essentially the amount of loss of income he sought from his insurer. Defendant argues, however, that neither party to a settlement wins nor loses; that a settlement is a product of negotiation where both parties may be partially right or partially at fault but the question is never resolved.

In nearly every reported case where counsel fees were awarded under the rule there was an adjudication upon the merits of trial, summary judgment or declaratory judgment. It is to be noted, however, that a party need not prevail on every claim in order to be successful. See Hagains v. GEICO , 150 N.J. Super. 576 (Law Div. 1977).

Counsel for plaintiff takes the position that it would be contrary to the spirit of the rule and the No-Fault Act*fn3 to require the insured to ignore a settlement offer and insist upon a full hearing. An insured is already a weak party to an insurance contract, and to make him hire an attorney throughout the trial or motion would put him to an even greater disadvantage.

Plaintiff's argument is persuasive. It is incongruous to require plaintiff to bypass a settlement offer and proceed to trial in order to "earn" counsel fees, especially when a settlement and trial would have substantially achieved the same result. Also compelling plaintiff to try the case under these circumstances would be contrary to the strong public policy and judicial commitment that justice be served by encouraging the settlement of claims thereby avoiding or terminating litigation. See Dodd v. Copeland , 99 N.J. Super. 481, 485 (App. Div.), aff'd 52 ...


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