On appeal from Superior Court, Law Division, Passaic County.
Petrella, Long and D'Annunzio. The opinion of the court was delivered by Long, J.A.D.
On February 16, 1988, Edward Duerlein was injured in an automobile accident. The accident was caused by a tire from Charles Onyegbule's car (driven by Fabian Kelechi Ekean Van Wu) which came loose, jumped the divider and struck Duerlein's windshield. At the time of the accident, Duerlein and his wife, Alice, were insured by the Selective Insurance Company, as Servicing Carrier of the New Jersey Automobile Full Insurance Underwriting Association. Onyegbule was not insured. The Selective policy issued to the Duerleins provided $35,000 in uninsured motorist coverage. Selective was given notice of the accident and of Onyegbule's lack of insurance.
As a result of the injuries and property damage the Duerleins sustained, they filed suit against Onyegbule and Van Wu. On January 11, 1990, the Duerleins made a formal demand for arbitration under the Selective policy which contains a standard arbitration clause. The Duerleins designated Barry Siegel, Esq. as their member of the arbitration panel. On April 4, 1990, Selective chose Edward Cillick, Esq. According to the terms of the policy, the third arbitration panel member was to be selected and agreed upon by the two party-selected members.
Meanwhile, on June 29, 1990, default was entered against Ongyebule and Van Wu in the law suit for failure to answer. The Duerleins' attorney informed Selective of the default by letter dated August 17, 1990 and inquired as to whether Selective "would like to take over the handling of the Superior Court litigation" in light of the uninsured motorist benefits provision
of the policy. Selective chose not to become a party to the lawsuit.
A proof hearing was scheduled for January 2, 1991. Selective had been given notice of the proof hearing by counsel for the Duerleins, but chose not to participate. After hearing the proofs, Judge Mandak determined that the Duerleins' damages (including prejudgment interest) amounted to $34,078.21 plus $120.50 for costs of suit. Judgment in that amount was entered against Onyegbule and Van Wu on January 11, 1991. Selective was given notice of the judgment.
In the interim, on January 2, 1991, the third arbitrator, Steven Lichon, was finally agreed upon. During the period in which the parties were struggling over the naming of the third arbitrator, the Duerleins declined to answer Selective's arbitration interrogatories. On November 2, 1990, the answers were provided.
With the selection of the panel completed, arbitration was scheduled for March 8, 1991. That arbitration was canceled due to the illness of Selective's arbitrator. The matter was rescheduled for April 17, 1991. On the second scheduled date, the Duerleins travelled from their home in Pennsylvania to attend the arbitration, only to find it had been canceled because Selective had not been notified that the matter was scheduled and was not ready to proceed.
Frustrated by the delay in arbitration, on July 21, 1991, the Duerleins filed a new complaint accompanied by an order to show cause seeking to compel Selective to arbitrate or, in the alternative, seeking summary judgment in the amount determined at the proof hearing in the suit against Onyegbule and Van Wu. In August, 1991, counsel for Selective wrote to the Duerleins' counsel suggesting that the arbitration take place in late September or early October. In its papers opposing the Duerleins' complaint, Selective indicated its desire to arbitrate because it "disputes that the insured is entitled to recover benefits from the subject contract of insurance because he has
failed to prove that his injuries were caused as a result of the negligence of an uninsured operator." Furthermore, Selective disagreed with the ...