On appeal from Superior Court of New Jersey, Law Division, Sussex County.
Petrella, Ashbey and A.m. Stein. The opinion of the court was delivered by Petrella, P.J.A.D.
Lloyds, an underwriting syndicate, and Peerless Insurance Agency, Inc. (Peerless) appeal from a jury award of $70,000 in compensatory damages to plaintiff Burton Pickett. The jury found those defendants failed to exercise good faith and fair dealing. Peerless was held 60% negligent and Lloyds 40% negligent in the handling of Pickett's physical property damage claim. The judge denied post-judgment alternative motions for judgment notwithstanding the verdict, a new trial, and remittitur.
On their appeal, Lloyds and Peerless argue that (1) Pickett's claim for extra-contractual damages cannot be maintained under the physical damage policy; (2) his damages occurred prior
to any breach of the insurance contract; (3) his signing of the release as a precondition to payment effectively released any claims against Lloyds; and (4) the jury determination was a result of passion or prejudice.
Pickett obtained a $30,000 policy, with a $1,000 deductible, on his 1983 Mack tractor from Lloyds through Robert K. Kast Associates (Kast Associates).*fn1 Notification of claims under the policy were to be directed to Peerless, a surplus lines agent.
Pickett and his tractor were involved in a January 13, 1987 accident on Interstate 70 in Columbus, Ohio in which his vehicle was "totalled." Pickett had been hauling freight for Superior Carriers for 37 years. He was an owner-operator whose arrangement with Superior Carriers allowed him to build up seniority status which gave him more desirable and lucrative work assignments. In the event of an accident Superior Carriers gave an owner-operator 60 days to replace the damaged vehicle and resume working in order to maintain seniority status. In Pickett's case, Superior Carriers extended the 60-day period for an additional 30 days.
At the time of the accident, Pickett's vehicle was insured under Lloyds' physical damage policy which provided in part:
5. PROOF OF LOSS. Within sixty (60) days after loss or damage, unless such time is extended in writing by the Underwriters, the Assured shall forward to the Underwriters a statement, signed and sworn to by the Assured, stating the place, time and cause of the loss or damage, the interest of the Assured and of all others in the property, the sound value thereof and the amount of loss or damage thereto, all encumbrances thereon and all other insurance, whether valid and collectible or not, covering said property. . . .
6. PAYMENT OF LOSS. The loss shall in no event become payable until sixty (60) days after the verified proof of loss herein required shall have been received by the Underwriters and, if appraisal is demanded, then not until sixty (60) days after an award has been made by the appraisers.
On January 14, 1987 Pickett reported the accident to Superior Carriers. It in turn reported it to Kast Associates. Pickett then phoned Kast Associates and spoke to Susan Lopes. Lopes reported the claim to Diane Pavlik of Peerless on the same day. In her transmittal letter to Pavlik Lopes wrote: "Please process this claim as soon as possible." On January 19, Pavlik faxed the claim information to Lloyds in London.
On January 21, 1987, Lopes sent additional information to Pavlik and also advised her that Pickett was out of work until his vehicle could be repaired.*fn2 At Lloyds' direction Pavlik mailed the claims information on January 23 to John Easterman, purportedly a claims adjuster in Ohio. The envelope was returned to Pavlik on February 4 for lack of a forwarding address.
Pickett also attempted to contact Easterman. Upon learning that Easterman's claims adjustment agency did not exist at that location, Pickett contacted Pavlik at Peerless. Pickett testified that Pavlik was "very bitter" about speaking to him and did not give him any information. He said "she was very bitter to the fact that I called her personally and she wanted to know where I got her telephone number from." That was the only time Pickett had direct contact with anyone at Peerless.
Lloyds supplied Peerless with new telephone numbers on February 6, 1987. Pavlik used one of the numbers to reach Michigan Claims Service and provided it with the claim information. She received an adjuster's report from Michigan Claims on March 9 and said she forwarded it to Lloyds so that a proof of loss form could be issued to the adjuster.
On March 12, 1987 Pavlik received a telex from Lloyds inquiring about Michigan Claims' involvement instead of Easterman. It also developed that Michigan Claims never received a copy of the Lloyds policy from Pavlik and was not informed
that the policy was limited to physical damage. Apparently, it unnecessarily investigated liability as well as physical damage.
Lloyds approved issuance of the proof of loss statement on March 25, 1987 and requested a copy of Michigan Claims' final report. On April 13, 1987, three months after the accident, Pickett lost his seniority status at Superior Carriers. Six days later Pickett received the proof of loss form from Michigan Claims. The following day, April 20, in order to obtain payment, Pickett signed and returned a form entitled "PROOF OF LOSS, SUBROGATION AGREEMENT, AND AUTHORIZATION TO PAY ACCOUNTS" which contained the following paragraph:
In consideration of such payments the said insurance company is hereby discharged and forever released from any and all further claim, demand and liability whatsoever for said loss or damage, under and/or by reason of said Policy.
Pickett testified that when he signed the document he did not read it in its entirety.
Michigan Claims received the signed proof of loss statement on April 23 and forwarded it to Peerless, which subsequently sent it to Lloyds in London. Lloyds apparently received it by May 14. A check to satisfy Pickett's claim was supposedly mailed to Michigan Claims on June 19, but was not received until July 2. However, the check was mistakenly made payable to Michigan Claims rather than to Pickett and the lienholder on the vehicle.*fn3 Pickett testified that during this time period both Peerless and Michigan Claims had stopped taking his phone calls.
It was not until August 1987 that the bank received its share of the proceeds. Pickett received the balance in September 1987.
In May 1987 Pickett accepted re-employment as a "company driver" for Superior Carriers, at a substantially lower income
than he made as an owner-operator. He was 61 years old at the time of the accident and had intended to work for four more years. The parties stipulated to Pickett's earning for the four years preceding ...