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Molyneaux v. Molyneaux

Decided: February 2, 1989.


On appeal from Superior Court, Law Division, Union County.

Deighan, Baime and D'Annunzio. The opinion of the court was delivered by Deighan, J.A.D.


Mutual Fire, Marine and Inland Insurance Company (Mutual) appeals from three orders entered: (1) October 30, 1987 requiring it to defend and indemnify defendant George Molyneaux in an action instituted against him by Dorothy Molyneaux; (2) December 8, 1987 denying Mutual's motion for a new trial on a judgment entered in favor of Dorothy Molyneaux for personal injuries arising out of a boat accident, and (3) January 22, 1988 awarding $16,800.03 counsel fees and costs to George Molyneaux in defending the declaratory judgment brought by Mutual against him.

This matter arises out of a boating accident which occurred on September 9, 1984, in the East River near Manhattan Island in New York City. The boat, which was berthed in Beach Haven, New Jersey, was owned and operated by George Molyneaux.

On the date of the accident, George, his wife and two children and his mother, Dorothy Molyneaux, were boating in the New York Harbor and neighboring waterways. George was operating the boat at a high rate of speed when he failed to steer clear of a wake from a Circle Line Cruise Ship. When it hit the wake, the boat went up into the air, landed on its left side, but did not capsize. As a result, Dorothy sustained a broken leg. George then took Dorothy to a pier restaurant where an ambulance, operated by Emergency Medical Service, was summoned.

On August 12, 1985, Dorothy instituted an action against George for personal injuries arising out of the boat accident. Mutual had issued a boat and yacht insurance policy wherein it agreed to indemnify George for claims arising out of the operation of the boat. Mutual was first notified of the claim when suit papers were forwarded to it by the insurance agent. On December 6, 1985, Dorothy amended the complaint to include the boat manufacturer, Cobalt Boats, as an additional defendant.

On December 16, 1985, Mutual filed a declaratory judgment action joining both George and Dorothy Molyneaux and seeking a determination that it was not liable to defend or pay any claims against George under the policy. Mutual contended, and George conceded, that notice of the claim was filed late in violation of the terms and conditions of the liability policy. However, George contended that there was no appreciable prejudice to Mutual. In her answer, Dorothy counter-claimed against Mutual, asserting that she was "an intended and/or contemplated third-party beneficiary of said contract of insurance." In its answer to the counter-claim, Mutual asserted separate defenses of laches, equitable estoppel and waiver. The two actions were subsequently consolidated.

In the declaratory judgment action, Mutual contended that George's late notice was not made in good faith and that as a result, it was appreciably prejudiced and therefore not obligated to defend or indemnify George. The trial judge denied Mutual's

motion for summary judgment and determined that since George conceded that the notice of the claim was filed late, the only remaining issue was that of appreciable prejudice to Mutual. The trial court precluded Mutual from presenting evidence on the issue of fraud and collusion to prove appreciable prejudice in the declaratory judgment action.

At the hearing on the declaratory judgment action, Walter Kolody and John Higgins, who were hired by Mutual to investigate the claim, testified to the extent of their investigation. The investigation by Kolody, who had been hired by Higgins, was less than thorough. No reports were obtained from the hospitals where Dorothy was treated, no police report was obtained and no inspection was made of the boat. In addition, the investigators never obtained a copy of the Emergency Medical Service report made by the ambulance personnel.

Michael Rice, an insurance agent and friend of George's who sold him the insurance policy, also testified. George had ultimately filed his late notice with Rice. Both George and his mother, Dorothy, testified on their own behalf. The only other proofs consisted of the depositions of George which were read into the record.

As noted earlier, following the hearing, the trial judge determined that Mutual was obligated to defend and indemnify George in the action instituted against him by Dorothy. Mutual's subsequent motion for a new trial was denied.

Subsequently, George and Dorothy applied for the attorney's fees which they had incurred in defending the declaratory judgment action. Judge Barisonek denied Dorothy's application for counsel fees but awarded fees in part to George in the amount of $8,556.68. Thereafter, George applied for a reconsideration of the order granting counsel fees. Judge Barisonek granted a motion for reconsideration and awarded counsel fees for a combined total of $16,800.03. The basis for this increase was that "through inadvertence of counsel and the court an error was made in calculating the total amount of fees payable to defendant, George Molyneaux."

In December 1987, the action by Dorothy against George was tried. The result was a $75,000 verdict in her favor of which 40% was assessed against George and 60% against Cobalt Boats, the boat manufacturer.

On this appeal, Mutual raises three issues. Mutual argues that the trial court erred (1) in requiring Mutual to prove "appreciable prejudice," (2) in applying New Jersey instead of New York law on the issue of compliance with the notice provision as a condition precedent in the insurance policy, and (3) in awarding counsel fees to George Molyneaux.

We ...

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