On appeal from the Superior Court, Law Division, Union County.
Morton I. Greenberg, J. H. Coleman and R. S. Cohen. The opinion of the court was delivered by Cohen, R.s., J.A.D.
The issue presented here is whether a settlement of a UMI claim made by parents on behalf of a minor child bars a later claim independently made by the child who did not receive the benefits of the settlement. We hold that the child's claim is not barred in the absence of court approval of the parents' settlement.
This is what happened. In 1976, plaintiff Barbara Colfer was struck and injured by an automobile while she was riding her bicycle. Her parents started suit against the motorist, and then, when they discovered he was uninsured, made a demand for UMI arbitration under their Royal Globe Insurance Company policy. Before arbitration, a settlement was reached in the amount of $12,200. A "Parents' Release and Indemnification Agreement" was prepared and a check made to the parents was sent by Royal Globe to the family's attorney. The net proceeds were ultimately deposited into a savings account in plaintiff's name. Her father took the account from her while she was still a minor, promising to repay her some day. He used all of the money to pay his own unrelated obligations and living expenses. There is nothing to indicate plaintiff benefited from the use of any of the proceeds.
After reaching majority, plaintiff unsuccessfully pursued her father for the money. Ultimately she started this suit and
renewed the demand for arbitration of her UMI claim. The complaint alleged breach by Royal Globe of a duty to the injured minor not to pay out benefits without judicial approval, and asserted that the demand for arbitration was not barred by the parents' release. The Law Division granted Royal Globe's motion for summary judgment, dismissed the suit and barred the arbitration, holding that the settlement precluded further claims.*fn1 We disagree and therefore reverse.
It is long out of doubt that a parent or appointed guardian cannot dispose of a child's cause of action without statutory authority or judicial approval. Wilkins v. Smith, 181 N.J. Super. 121, 126 (App.Div.1981); Bauer v. Griffin, 104 N.J. Super. 530, 546 (Law Div.1969), aff'd 108 N.J. Super. 414 (App.Div.), certif. den. 56 N.J. 245 (1970); Mack v. Berry, 205 N.J. Super. 600 (Law Div.1985); Whitcomb v. Dancer, 140 Vt. 580, 443 A.2d 458, 460-461 (1982); Doyle v. Bowdoin College, 403 A.2d 1206, 1208 n. 3 (Me.1979); Dacanay v. Mendoza, 573 F.2d 1075, 1078-1079 (9 Cir.1978); Centala v. Navrude, 30 Mich.App. 30, 186 N.W. 2d 35 (1971).
The purpose of the rule is not only to guard a minor against an improvident compromise but also to secure the minor against dissipation of the proceeds. See R. 4:48A; N.J.S.A. 3B:12-6; 3B:15-16, 17, all governing the disposition of the proceeds of infant's judgments and settlements.
It makes no difference whether the claim is in suit. There is no sensible reason why parents who may not settle their child's suit without judicial approval should be able to bind the child by settling a claim not yet in court. The dangers are identical of disadvantageous compromises and improper disposition
of proceeds. Our rules clearly provide for the institution of suit on behalf of a minor solely to seek approval of a proposed settlement of a claim not in suit. R. 4:44-1. A guardian ad litem wishing to accept an award arising out of statutory arbitration of auto negligence actions, N.J.S.A. 39:6A-24 et. seq., must submit it for approval. R. 4:21A-7. A defendant in any case wishing to secure a final disposition of a child's claim for its own protection must see that a judgment is entered with court approval.
It is not only personal injury claims sounding in tort whose settlement requires judicial approval. It is of no consequence, therefore, that the present claim against Royal Globe arises out of the provisions of an ...