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Jefferson Insurance Co. v. Health Care Insurance Exchange

Decided: April 4, 1991.

JEFFERSON INSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
HEALTH CARE INSURANCE EXCHANGE, DEFENDANT-RESPONDENT



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

Gaulkin, Shebell and Skillman. The opinion of the court was delivered by Gaulkin, P.J.A.D.

Gaulkin

Plaintiff Jefferson Insurance Company (Jefferson) brought this action to recover from defendant Health Care Insurance Exchange (HCIE) one-half of a settlement paid by Jefferson on behalf of the parties' common insured.

The settlement had been reached in a personal injury action brought by Mary Geist against Valley Hospital and certain of

its employees, including Carin B. Myers, R.N.; Geist alleged that she had fallen and broken her hip because she had not been properly restrained in her bed. Valley Hospital and its employees, including Myers, were covered by a professional liability policy issued by HCIE. Myers also had a private malpractice policy issued by Jefferson. Each policy provided $1 million excess coverage over any "other insurance available to the insured." The parties accordingly agree that the two policies afforded primary, equal and concurrent coverage to Myers. See Cosmopolitan Mut. Ins. Co. v. Continental Cas. Co., 28 N.J. 554, 147 A.2d 529 (1959).

Upon being served with the Geist complaint in November 1986, Valley Hospital arranged for its own representation through HCIE; it instructed Myers to give Jefferson notice of the claim against her. Peter R. Feehan, of Feehan & Feehan, was designated by HCIE to represent the hospital and Patrick F.X. Fitzpatrick, of De Gonge, Garrity & Fitzpatrick, was designated by Jefferson to represent Myers. Following discovery proceedings, the matter was listed for trial on January 4, 1988. During settlement discussions conducted that day, Fitzpatrick demanded HCIE's commitment to pay one-half of the contemplated settlement. After consulting with HCIE, Feehan told Fitzpatrick that Jefferson "would have to sue them if they don't pay it." Fitzpatrick obtained authority from Jefferson to contribute $80,000 to the settlement and reported to the court, with Geist's counsel, that the matter had been settled for $170,000. Fitzpatrick did so, he testified at deposition, believing that Jefferson and HCIE would each contribute $80,000 and that a third carrier would contribute $10,000 on behalf of another defendant. In reporting the settlement to the court, however, the attorneys did not recite the anticipated contributions of the carriers nor did they make the settlement contingent on approval of all the carriers.

When HCIE thereafter refused Jefferson's demand to contribute $80,000 to effectuate the settlement, Jefferson brought this action seeking judgment for $80,000 "as per the agreement

entered into between the carriers." Geist then moved in the underlying action to enforce the settlement; an order was entered declaring that the settlement "was fair and reasonable" and directing that Jefferson pay the entire settlement sum, with HCIE's obligation to "abide the outcome of the pending litigation."

On cross-motions for summary judgment filed after discovery was completed, the motion judge held that Jefferson "unilaterally sought and obtained the settlement of the case with [Geist]" and that Jefferson thus "is solely responsible for the settlement amount." Jefferson appeals from the judgment thereupon entered. We reverse.

In concluding that HCIE was not obligated to contribute to the settlement, the motion judge relied principally on this language in American Home v. St. Paul Fire & Marine, 233 ...


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