Defendant, Rider Insurance Company, moves for summary judgment. The plaintiff and the defendant, Prudential Commercial
Insurance Company, cross move for summary judgment.
The issue in this case is whether an insured may compel her insurer to arbitrate a claim for damages under an uninsured/underinsured motorist provision when the insured has already obtained a jury verdict on liability and damages.
This issue has not been decided by any court in New Jersey.
The facts are these: Plaintiff sustained injuries when a motorcycle in which she was a passenger and which was owned and operated by one Kenneth Licwenko, collided with an automobile owned by one Elizabeth Netherland. Netherland was uninsured. Licwenko was insured by the defendant Rider for $15,000 third party liability coverage, and $15,000 for both uninsured and underinsured motorist coverage.
Plaintiff, who was the owner of a passenger vehicle, was insured by defendant Prudential in the amount of $50,000 for both uninsured and underinsured motorist coverage, a total of $100,000.
Because of the extent of her injuries, plaintiff made a claim against Prudential under the uninsured and underinsured provisions of her policy.
At the same time, she instituted a civil action for her injuries against Licwenko and Netherland. Rider Insurance Co., as the insurer for Licwenko, tendered its $15,000.00 liability policy into court. Prudential then offered plaintiff a settlement in the sum of $90,000, $10,000 less than the $100,000 available to her under the combined uninsured and underinsured coverages. Plaintiff rejected this offer.
She then proceeded to trial against Licwenko and Netherland. The jury rendered a verdict in favor of the plaintiff in the sum of $55,000, assessing 50% liability against Licwenko and 50% liability against the uninsured, Netherland.
Several days after the verdict, plaintiff received a letter from Prudential, which was dated prior to the trial date, in which
Prudential memorialized the $90,000 settlement offer it had previously made. Plaintiff attempted to accept this offer, but Prudential being aware of the jury verdict, withdrew its offer to settle. It then made a new offer of $55,000.00, based on the jury verdict.
Plaintiff rejected Prudential's new offer and made a demand for arbitration as provided by the uninsured and underinsured provisions of her policy. Prudential refused to arbitrate.
Plaintiff now brings this action for a declaratory judgment in order to determine whether the parties are required to participate in arbitration proceedings so as to determine the questions of Licwenko's and Netherland's liability and plaintiff's damages.
The Prudential policy provides for arbitration. It states:
If we and a covered person do not agree:
1. Whether that person is legally entitled to recover damages under this endorsement; or
2. As to the amount of damages; either party may make a written demand for arbitration.
Plaintiff contends that she is entitled to arbitration under the terms of her insurance contract with Prudential, regardless of the fact that a jury has already determined the question of liability and damages. Defendant Rider supports plaintiff's contention.
Defendant Prudential's response is simply that the issues of liability and damages have been decided by a jury and there is, therefore, no need for arbitration in order to determine those very same questions.
The issue presented in this case is succinctly set forth in the treatise entitled, A Guide to Uninsured Motorist Coverage, A. Windiss (1969). Unfortunately, it only presents the question, not the answer. But the author does offer a clear and concise explanation of the problems both the insured and insurer encounter when the insured prosecutes his claim to judgment without the insurer's consent. The author states:
The prosecution of an action against the uninsured motorist by the insured creates the possibility that the insurance company, if it likes the judgment, will be able to use this judgment -- even without having intervened in the case -- to foreclose the insured's right to an arbitration with the company. In the insured's action against the uninsured motorist, by necessity the issues of whether the insured is ...