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New Jersey Guaranty Association v. Ciani

Decided: June 8, 1990.

NEW JERSEY GUARANTY ASSOCIATION ON BEHALF OF THE MIDLAND INSURANCE COMPANY IN LIQUIDATION, PLAINTIFF-APPELLANT,
v.
CHRISTINE CIANI, INDIVIDUALLY, AS ADMINISTRATRIX AD PROSEQUENDUM OF THE ESTATE OF DEBRA CIANI, DECEASED, AND AS ADMINISTRATRIX OF THE ESTATE OF DEBRA CIANI, DECEASED, CHARLES CIANI, JR., CHARLES CIANI, SR., INDIVIDUALLY, AS ADMINISTRATOR AD PROSEQUENDUM OF THE ESTATE OF MARY CIANI, DECEASED AND ADMINISTRATOR OF THE ESTATE OF MARY CIANI, DECEASED; JOHN M. MALINAK, CITY OF EAST RUTHERFORD, CITY OF WALLINGTON, BOARD OF FREEHOLDERS COUNTY OF BERGEN, WALSH TRUCKING CO., OLD LANE BRYANT CLOTHING SHOP AND MAX'S BAR, INC. TRADING AS PLANKBOARD INN, DEFENDANTS, AND MAX'S BAR & GRILL, INC., T/A THE PLANKBOARD INN, DEFENDANT-RESPONDENT, THIRD-PARTY PLAINTIFF, V. GEORGE REINER, WARREN G. REINER & WILLIAM J. ERLICH, THIRD-PARTY DEFENDANTS



On appeal from the Superior Court, Law Division, Bergen County.

Deighan, R.s. Cohen and Brochin. The opinion of the court was delivered by R.s. Cohen, J.A.D.

Cohen

Plaintiff New Jersey Property-Liability Insurance Guaranty Association (pleaded as New Jersey Guaranty Association) is a non-profit unincorporated entity created by the Legislature, N.J.S.A. 17:30A-1 et seq., to provide a measure of protection for claimants and policy holders in the event of the insolvency of an insurance company. It is financed by assessments against member companies which are ultimately passed on to policy holders. N.J.S.A. 17:30A-8a(3); Sussman v. Ostroff, 232 N.J. Super. 306, 556 A.2d 1301 (App.Div.), certif. den. 117 N.J. 143, 564 A.2d 865 (1989). It manages and administers claims asserted against the insolvent insurer, N.J.S.A. 17:30A-6, -8, and is obligated to the extent of "covered claims." It is deemed the insurer

to the extent of its obligation on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent . . . . [ N.J.S.A. 17:30A-8a(2)].

Midland Insurance Company was liquor liability insurer for Max's Bar & Grill, Inc., t/a The Plankboard Inn. Midland became insolvent and the Association succeeded to its liabilities to the extent of covered claims. Max's Bar sought coverage for a liquor law liability claim asserted against it. The Association resisted on the thesis that Max's Bar's policy covered only

serving liquor on its licensed premises on Kennedy Boulevard, Jersey City, and not serving liquor at a party it catered elsewhere. It was at the party that a guest allegedly overdrank before causing a fatal accident.

The Association filed this action for a declaratory judgment that the claim asserted against Max's Bar was not covered by the Midland policy and thus not by the Association. After a jury trial, judgment was entered for coverage. That judgment was not appealed. After the trial, however, Max's Bar moved for counsel fees for defending and winning the declaratory judgment coverage suit. Over plaintiff's opposition, the judge ruled that Max's Bar would have been entitled to coverage suit fees from Midland under R. 4:42-9(a)(6), and that the obligation for counsel fees descended to the Association as a "covered claim." As a result, he awarded counsel fees to Max's Bar. The Association appealed; we reverse.

R. 4:42-9(a)(6) permits the court to make an award of counsel fees in "an action upon a liability or indemnity policy of insurance, in favor of a successful claimant." The rule does not require the court to make an award, but rather permits it to do so in its discretion. Felicetta v. Commercial Union Ins. Co., 117 N.J. Super. 524, 285 A.2d 242 (App.Div.1971), certif. den. 60 N.J. 141, 286 A.2d 514 (1972). A party that successfully establishes the right to coverage in an insurer's declaratory judgment action may be entitled to fees. N.J. Manu. Ins. Co. v. Consolidated Mut. Ins. Co., 124 N.J. Super. 598, 308 A.2d 76 (Law Div.1973). The reason is that the insurer's declaratory judgment action is an action on a policy, and the prevailing insured need not be a plaintiff to be a successful claimant.

The Association relies on a 1979 amendment to the list of statutory exclusions to the definition of covered claims. The amendment excludes "counsel fees for prosecuting suits for claims against the association." L. 1979, c. 448; N.J.S.A. 17:30A-5d. The Law Division judge held that the excluded fees were not those for making claims for coverage but rather those

for prosecuting covered tort suits against defendants insured by the insolvent carrier and now covered by plaintiff.

We disagree for two reasons. First is that such suits are not prosecuted against the Association, but rather against alleged tortfeasors. The second reason is that attorneys' fees are not ordinarily awarded to a successful tort claimant. There ...


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