On appeal from Superior Court, Law Division, Bergen County.
Shebell, Long and Landau. The opinion of the court was delivered by Landau, J.A.D.
[271 NJSuper Page 461] This is an appeal by defendants Homestead Insurance Company (Homestead) and Walter Kolody (Kolody) from a February 25, 1993 Law Division order granting summary judgment to plaintiff, Emily Venetsanos, and granting summary judgment for indemnification
against appellants in favor of defendants Zucker, Facher & Zucker (Zucker) and Roger Wilson, a Zucker attorney. Venetsanos brought the present action against the appealing defendants and against defendants-respondents both directly and as assignee of the rights of Manuel Dominguez.
After she was injured in a boat explosion, Venetsanos instituted a prior action against Manuel Dominguez and other defendants, alleging negligent operation and product defects. Zucker was retained by the insurer to represent Dominguez, who was insured under a $100,000 liability policy, nominally issued by The Mutual Fire, Marine and Inland Insurance Company (Mutual), a Pennsylvania company which later filed for bankruptcy protection. Mutual was authorized to do business in New Jersey. Homestead was not.
In 1987 Mutual entered rehabilitation proceedings pursuant to an order of the Pennsylvania Commonwealth Court. Homestead was a 100 percent reinsurer of Dominguez' policy with Mutual, pursuant to a reinsurance agreement which has not been found and cannot, therefore, be examined as to its terms. Homestead and the Pennsylvania rehabilitator have disagreed as to obligations under that agreement. A suit against Homestead has also been instituted in the Commonwealth Court of Pennsylvania by the Insurance Commissioner of Pennsylvania as rehabilitator of Mutual, which alleges that Homestead has failed to honor its reinsurance agreements with Mutual, including obligations under a "Boat and Property Program Agreement" which cannot be located in the files of Mutual. For reasons discussed below, we do not view those disputes to be pertinent in this case against Homestead, nor do we concede that exclusive jurisdiction in this particular dispute with Homestead and Kolody must lie in the Mutual liquidation proceedings in Pennsylvania under principles of comity, and the Uniform Insured Liquidation Act, N.J.S.A. 17:30C-1 to 31, as urged by appellants.
Following jury trial of the prior Venetsanos' action, judgment was entered jointly and severally against all defendants in the
amount of $960,000, plus prejudgment interest of $323,425. Dominguez' percentage of fault was fixed at 19 percent, making his share, inclusive of pre- and post-judgment interest as of June 16, 1993, approximately $315,000.
In 1988, Dominguez assigned his rights against Mutual and others to Venetsanos, whose subsequent action against Mutual was dismissed without prejudice because of its bankruptcy petition. The present action, as amended, was brought against Zucker, Wilson, Kolody and Homestead asserting prejudicial failure fully to inform Dominguez of Mutual's financial problems and its affect upon resolution of the case. The action also made a " Rova Farms "*fn1 claim against Homestead and Kolody, the independent claims agent used by Homestead, alleging failure to negotiate settlement of the underlying case in good faith within policy limits and failure to advise the insured of the extent of risk in excess of those limits. Although Zucker attempted to implead Mutual, that effort was unsuccessful because of the Pennsylvania rehabilitation proceedings.
Zucker and Venetsanos joined in a motion which sought summary judgment on the theory that Mutual had merely been "fronting" for Homestead in New Jersey and that, in consequence, Homestead should be regarded as the direct insurer rather than the reinsurer of Dominguez' boat policy. On October 28, 1992, the Law Division Judge entered orders for summary judgment against both Homestead and Kolody, awarding damages to Venetsanos in the principal amount of $182,400 plus substantial pre- and post-judgment interest, and awarding to Zucker and Wilson summary judgment for indemnification against Homestead on Venetsanos' complaint. We affirm.
The practice of reinsurance of risks by insurance companies with other companies is lawful and recognized in our statutes.
See, e.g., N.J.S.A. 17:18-5, and 17:18-9. For purposes of statutory adequacy of capital to cover exposure, however, risks are still considered part of the exposure of a New Jersey admitted insurer, unless reinsured with a company authorized to do business in New Jersey. N.J.S.A. 17:18-9.
In his oral opinion rendered on October 28, 1992, the motion Judge found, upon review of the supporting and opposing summary judgment materials, that,
This insurance policy was underwritten by . . . "Homestead". The policy, however, bore the name of . . . "Mutual". This was due to the fact that Homestead was not licensed to conduct business in New Jersey. Mutual's performance consisted of issuing and mailing checks at Homestead's request. Thereafter, Homestead would reimburse Mutual for funds disbursed plus expenses.
The Judge also recited as part of the facts that Zucker and Wilson communicated on several occasions directly with Kolody, as an independent contractor hired by Homestead to adjust Dominguez' claim, strongly recommending settlement because it was likely that Dominguez' share of liability would exceed the $100,000 policy limit. Kolody, he found, had limited authority, and final decision-making power was retained by Martin Beitler, the president and C.E.O. of Homestead. Despite these recommendations and awareness of "potential Rova Farms liability", Homestead made no attempt to settle the claim.
The Judge then determined that "Homestead was in control of the policy obtained by Manuel Dominguez[.] [A]lthough the policies bore the name of Mutual, Homestead actually did the insurance investigation, reimbursed Mutual for claims and had final authority on all settlements."
We note that Martin Beitler, president of Homestead at all times material hereto, testified at depositions on June 1, 1992 that when Kolody, who he said represented Mutual as a lawyer and as the adjuster, would get a demand to settle a case, "[h]e would go to us, Homestead." The following deposition extract is instructive:
Q. He didn't go to Mutual Fire because they weren't going to pay the claim, is that correct?
Q. Who would make the determination as to whether or not the claim should be paid?
Although Beitler disclaimed specific recollection of whether Kolody consulted with him on Venetsanos' suit against Dominguez, he acknowledged that Kolody did not have authority to settle the claim without his approval, and that he (Beitler) would evaluate such claims and make the ...