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Brewster v. Keystone Insurance Co.

Decided: February 16, 1990.

ALAN BREWSTER, PLAINTIFF-APPELLANT AND CROSS-RESPONDENT,
v.
KEYSTONE INSURANCE CO., DEFENDANT-RESPONDENT AND CROSS-APPELLANT



On appeal from the Superior Court of New Jersey, Law Division, Hunterdon County.

Dreier, Scalera and Wefing. The opinion of the court was delivered by Dreier, J.A.D.

Dreier

[238 NJSuper Page 581] Plaintiff, Alan Brewster, appeals from the denial of his motion to have statutory interest added to overdue Personal Injury Protection (PIP) payments. For three and one-half years, Keystone Insurance Company (Keystone) contested plaintiff's right to the insurance coverage that included the PIP provisions, and then by way of settlement agreed to pay all of plaintiff's past and future medical expenses. Plaintiff also

seeks to increase the counsel fee award. Defendant cross-appeals from the award of any counsel fees, claiming it to be an abuse of discretion.

On December 17, 1984 plaintiff, Alan Brewster, applied for insurance coverage from Keystone. He issued a $235 check for the initial premium but the check was later dishonored. Under the terms of the application Keystone would have had grounds to void the policy ab initio. However, Keystone thereafter took several actions indicating that it considered the policy still to be in force. These even included a March 5, 1985 billing for the initial premium, which informed plaintiff that he should pay the bill "to avoid cancellation of coverage."

On February 16, 1985 Brewster was involved in a car accident as a passenger, suffering serious permanent and temporary injuries requiring over $200,000 in medical bills. A proof of loss was timely filed with Keystone. Notwithstanding its clear acknowledgment that coverage was in effect as late as March 5, 1985, on March 14, 1985, before the $235 had been paid, Keystone initially advised Brewster that as his check had been dishonored his "coverage never was in effect."

Following extensive litigation, Keystone and Brewster arrived at a settlement whereby Keystone agreed to pay all of Brewster's past and future medical expenses, yet reserved the issues of statutory interest on the settlement payments and counsel fees.*fn1 The trial judge denied plaintiff's later motion for statutory interest, stating that Keystone "certainly had a legitimate right to contend in this case that they were not responsible." A subsequent hearing in front of another judge to determine attorneys' fees resulted in an award of $28,600 to plaintiff's counsel, although they requested $59,797.50. As noted at the outset, plaintiff appeals the failure to grant statutory

interest and the reduction of counsel fees; defendant appeals from any award of counsel fees.

Plaintiff claims that under N.J.S.A. 39:6A-5b he was entitled to statutory interest on the medical expenses acknowledged by the defendant in the settlement to be due. According to plaintiff, interest accrued immediately on each bill, totaling $52,899.05 as of October 28, 1988. Although at oral argument counsel agreed that the amount of interest is not in dispute, defendant asserts that the statute does not mandate an award of interest. The trial judge ruled in defendant's favor, applying a standard for statutory interest awards that clearly existed under the pre-1983 version of N.J.S.A. 39:6A-5b, but which we find not to be the proper standard under the current statute.

The version of N.J.S.A. 39:6A-5b currently in effect, and in effect at the time of the accident, provides that personal injury protection payments are "overdue"

if not paid within 30 days after the insurer is furnished written notice of the fact of a covered loss and of the amount of same. . . . [P]rovided, however, that any payment shall not be deemed overdue where within 30 days of receipt of notice of the claim, the insurer notifies the claimant or his representative in writing of the denial of the claim or the need for additional time, not to exceed 45 days, to investigate the claim, and states the reasons therefor. . . . For the purpose of determining interest charges in the event the injured party prevails in a subsequent proceeding where an insurer has elected a 45 day extension pursuant to this subsection, payment shall be considered overdue at the expiration of the 45 day period or, if the ...


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