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Wilton v. Cycle Trucking Inc.

Decided: November 17, 1987.

FRANK E. WILTON AND GERALDINE L. WILTON, PLAINTIFFS,
v.
CYCLE TRUCKING, INC., ATLANTIC COAST EXPRESS, WILFRED A. FLEMING, HARLEYSVILLE INSURANCE CO., HARLEYSVILLE MUTUAL INSURANCE CO., AND JOHN DOE I THROUGH JOHN DOE X, DEFENDANTS. FRANK E. WILTON AND GERALDINE L. WILTON, PLAINTIFFS, V. NEW JERSEY PROPERTY-LIABILITY GUARANTY ASSOCIATION AND JOHN DOE I THROUGH JOHN DOE X, DEFENDANTS



Sachar, J.s.c.

Sachar

This matter is on remand from the Appellate Division with respect to whether the Guaranty Association is liable for prejudgment interest in a tort action, or whether the defendant insured is liable for said prejudgment interest.

On April 3, 1986, Midland Insurance Company was declared insolvent, resulting in a 180-day court-ordered stay of the litigation being entered on or about April 3, 1986. As a result of Midland's insolvency, the mechanism for payment of "covered claims" by the New Jersey Property-Liability Insurance Guaranty Association Act was triggered. N.J.S.A. 17:30A-1 et seq.

After numerous adjournments, the trial began on October 8, 1986. Although the plaintiffs' initial settlement demand was $300,000, at the time of trial it was reduced to $150,000. Defense Counsel conveyed that final demand to General Adjustment Bureau (GAB), acting as agent for the Guaranty Association,

and told GAB that "there was no defense on liability," and that the defendant's medical expert witness would not be called at trial "because his testimony would be damaging."*fn1 No offer of settlement was made. At noon on October 14, 1986, while the trial was ongoing, defense counsel again attempted to settle the matter by obtaining an offer from GAB's representative, but was advised that it would be a two-week process to get $75,000 or more, and that the maximum that was available was $25,000, which was of no interest to plaintiff. On October 15, 1986, a jury verdict was returned which, after being molded by deducting lost earnings PIP benefits, resulted in a net verdict for the plaintiff in the sum of $164,800, and a verdict for his wife of $12,000. On that same day, the Court entered judgment on the verdicts and on prejudgment interest in the amount of $51,912 for plaintiff, Frank Wilton, and $3,780 for his wife, Geraldine Wilton. Defense counsel was of the opinion that, considering the more than $130,000 wage claim and the exposure for pain and suffering, the verdict would be unassailable." Relying on N.J.S.A. 17:30A-5(d), the Guaranty Association paid the judgment without prejudgment interest.

On December 1, 1986, defendants Atlantic and Cycle filed Notices of Appeal from that part of the judgment which included prejudgment interest. On December 11, 1986, the appellants filed Amended Notices of Appeal, which simply amended the title of the action to set forth the names of all defendants in the action below. On December 18, 1986, on its own motion, the Appellate Division entered an order consolidating the two appeals for all purposes.

On February 26, 1987, the Appellate Division granted a motion to stay the appellate proceedings and granted a temporary remand to the trial court to conduct a hearing, stating in its Order:

The appeal of the above entitled matter is stayed pending the hearing and consideration by and decision of the trial judge, and, if necessary the modification of the judgment appealed from based upon the outcome of such hearing. The trial judge is empowered:

a. to entertain plaintiffs' motion partially joined in by defendants, Atlantic Coast Express and Cycle Trucking, Inc., which seeks a determination as to whether the Guaranty Association or the defendants directly are responsible for payment of prejudgment interest; and/or

b. to determine whether exceptional circumstances exist which justify R. 4:50-1(f) relief from the operation of that portion of the judgment which assessed prejudgment interest pursuant to R. 4:42-11(b).

On May 14, 1987, plaintiffs filed a First Amended Complaint for declaratory judgment, joining, for the first time, New Jersey Property-Liability Insurance Guaranty Association, asking that the Court construe which of the defendants, Cycle Trucking, Inc., Atlantic Coast, or New Jersey Property-Liability Insurance Guaranty Association, should pay prejudgment interest.

At a hearing held before this Court, the corporate defendants stipulated that they were not impecunious and were financially able to pay any prejudgment interest that might be assessed against them. They further stipulated that the individual driver would be held harmless and indemnified by the corporate defendants for any prejudgment interest that may be awarded.

In 1974, the Legislature adopted the New Jersey Property-Liability Guaranty Association Act, hereinafter referred to as "Association:"

(b) Tort Actions. Except where provided by statute with respect to a public entity or employee, and except as otherwise provided by law, the court shall, in tort actions, including products liability actions, include in the judgment simple interest at 12% per annum on the amount of the award from the date of the institution of the action or from a date 6 months after the date the cause of action arises, whichever is later, provided that in exceptional cases the court may suspend the running of such prejudgment interest. The contingent fee of an attorney shall not be computed on the interest so included in the judgment.

The statute as originally enacted in 1974, was based on an emergency situation involving the impending insolvency of the Professional Insurance Company of New York. Some years thereafter, N.J.S.A. 17:30A-5(d) was amended as part of a series of amendments (L.1979, c. 448) to specifically exclude payment of prejudgment interest. N.J.S.A. 17:30A-5(d) states, inter alia, "A 'covered claim' shall not include amounts for interest on unliquidated claims."

In an explanatory Memorandum issued by the Members of the Assembly Banking and Insurance Committee dated February 20, 1979, the provisions of the Assembly Bill 1114 (L.1979, c. 448), which amended N.J.S.A. 17:30A-5(d), the following statement appears:

Provision of Bill

This legislation amends the law which establishes the New Jersey Property-Liability Guaranty Association which was established to deal with administering the affairs of insolvent insurers. The amendments exclude from the purview of the act several lines of insurance, including credit insurance, mortgage guaranty insurance, mutual fund guaranty insurance, and ocean marine insurance. With the elimination of ocean marine insurance, the separate account established for that line in inland marine insurance is eliminated. The amendments provide that even though amounts due reinsurers, insurance pools, or underwriting associations are not covered claims, such claims may be filed directly with the receiver of the insolvent insurer. Specifically excluded from the definition of "covered claims" are claims for interest on ...


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