This written decision supplements and amplifies the oral opinion which I have recently rendered. The resolution of this case requires the court to determine whether an injured motorist is barred from seeking underinsured motorist (UIM) benefits when a tortfeasor has liability limits greater than the claimants UIM limits but the tortfeasor's carrier disclaims coverage asserting the failure of the tortfeasor to cooperate. If such a claimant is not barred from pursuing UIM benefits the court must then determine whether he must first secure a judicial determination as to the validity of the disclaimer by the tortfeasor's carrier before pursuing his UIM claim.
The underlying facts are not in dispute. On June 29, 1988, the plaintiff William Dickenson, sustained personal injuries when an intoxicated driver, Donna Wagner (Wagner) drove her vehicle into the plaintiff's residence. Prior to the collision, Wagner had become
intoxicated at Paul's Tavern (Paul's), owned by the defendant Wahway, Inc. (Wahway). Wagner had automobile insurance through the Hanover Insurance Company.
In February 1989, the plaintiff accepted Hanover's tender of its policy limits of $15,000.00. Prior to his acceptance of Hanover's policy limits, the plaintiff had notified his own automobile insurance carrier, Indemnity Insurance Company of North America, as servicing agent for the New Jersey Automobile Full Insurance Underwriting Association (INA), of Hanover's offer and his intention to pursue UIM benefits. The plaintiff has UIM limits of $100,000.00. INA interposed no objection to the plaintiff's accepting Hanover's policy limits.
In October 1989, the plaintiff filed a complaint for personal injuries naming as defendants Thomas Wakley, Wahway, Inc. and Paul's Tavern. At the time of the collision Thomas Wakley (Wakley), Wahway and Paul's were covered by a policy of liability insurance issued by License Beverage Insurance Exchange (Beverage) in the amount of $300,000.00. Default was entered against Wakley, Wahway, and Paul's on August 16, 1990. After a proof hearing held on September 18, 1990 judgment was entered against the defendants Wakley, Wahway, and Paul's in the amount of $185,000.00 for the plaintiff's personal injuries.
Thereafter Wakley, Wahway, and Paul's were provided counsel by Beverage. Counsel moved to vacate the default judgment entered against the defendants. That application was unsuccessful. Thereafter, Beverage denied coverage to Wakley, Wahway and Paul's on the ground that the tavern failed to advise the carrier of the summons and complaint filed by the plaintiff thereby allowing for the entry of default. The carrier did however pursue an appeal on behalf of Wakley, Wahway and Paul's to reverse the trial court's decision denying their motion to vacate the default judgment.
The Appellate Division, in May 1992, confirmed the trial court's denial of the motion to vacate the default entered against Wahway and Paul's, but reversed and remanded for a new proof hearing
allowing Wahway and Paul's limited participation. The Appellate Division also dismissed all claims against Wakley individually.
A second proof hearing was heard on March 23, 1993. As a result of that hearing, the court made the following determinations: Wahway and Paul's were jointly liable with Wagner for the plaintiff's injuries. It was determined that Wahway and Paul's were 50% at fault. The court found the plaintiff's medical expenses attributable for treatment of the injuries sustained in the accident were $40,000.00 and that his pain and suffering was $70,000.00. The court also determined that the plaintiff had property damage in the amount of $14,900.00. Beverage refused to pay any amount of the judgment assessed against Wahway or Paul's because of the alleged failure of Wahway and Paul's to notify the carrier promptly of the service of the summons and complaint.
After the second proof hearing, the plaintiff demanded arbitration pursuant to the UIM endorsement with INA. INA resisted arbitration. It stated that it would not entertain plaintiff's request for arbitration until the issue of whether Beverage's declination of coverage for Wahway and Paul's was proper had been determined. INA suggested that the plaintiff obtain an assignment from the defendants and pursue a declaratory judgment action against Beverage.
While plaintiff offered to cooperate in any action that INA might institute against Beverage, he insisted that he was entitled to UIM benefits under his policy of insurance. When INA continued to decline to participate in arbitration he instituted this action. INA has filed a third party complaint against Beverage. The plaintiff now moves for Summary Judgment.
The defendant contends that the plaintiff cannot recover UIM benefits if the limits of liability under the policies insuring the tortfeasors exceed the limits of liability under UIM endorsements. In this case, INA asserts that the liability limits of
Hanover ($15,000.00) and Beverage ($300,000.00) exceed the UIM benefits available under its policy with Dickenson, i.e. $100,000.00. The defendant asserts that N.J.S.A. 17:28-1.1e mandates that the comparison of all bodily injury liability insurance policies with the available UIM benefit be made at the time of the collision and sometime thereafter. Therefore, because at the time of the collision $315,000.00 in liability benefits were potentially available to the plaintiff and that sum exceeds his UIM limits of $100,000.00, he is barred from making a claim under his UIM endorsement. Alternatively, the defendant INA argues that even if the plaintiff is entitled to UIM benefits, he is not ...