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Miglicio v. HCM Claim Management Corp.

September 12, 1995


Winkelstein, J.s.c.

The opinion of the court was delivered by: Winkelstein


This matter comes before the court on a motion by defendant Hertz Claim Management Corporation (HCM) for summary judgment. The primary issue to be addressed, not heretofore decided in this jurisdiction, is whether HCM as the servicing carrier for the New Jersey Full Insurance Underwriting Association (the Association), is immunized pursuant to N.J.S.A. 17:30E-7b, & e, from claims of bad faith by its insured.

Plaintiff was injured when her vehicle was rear ended on June 16, 1990. She sustained disc injuries which required anterior fusion and a discectomy at C5-6 and C-6-7 on April 24, 1991. The negligent driver's insurance company offered its policy limits of $15,000 in settlement of the claim. On June 6, 1991, plaintiff requested permission from HCM, the servicing carrier for the Association as plaintiff's underinsured motorist (UIM) carrier, to settle the claim with the negligent driver for the $15,000 policy limits. See Longworth v. Van Houten, 223 N.J. Super. 174, 538 A.2d 414 (App.Div. 1988); Rutgers Cas. Ins. Co. v Vassas, 139 N.J. 163, 652 A.2d 162 (1995). Plaintiff's UIM policy limits were $50,000. Defendant failed to respond to plaintiff's request.

On January 3, 1992, plaintiff filed a complaint against defendant demanding, inter alia, that she be permitted to accept payment of the $15,000 policy. After defendant was served, it consented to settle the third party claim for $15,000 but only under the condition that it receive a dismissal as to all counts in the complaint, which included claims for counsel fees, costs and punitive damages based on HCM's alleged acts of bad faith. On September 21, 1992 plaintiff wrote defendant naming an arbitrator and requested that defendant choose an arbitrator so the matter could be resolved through arbitration. Defendant failed to respond to plaintiff's request.

Thereafter, plaintiff's complaint was dismissed by the court for lack of prosecution. On motion to reinstate, the motion Judge, by order of December 4, 1992, reinstated the complaint and required defendant to file an answer. No answer was filed and default was entered. Subsequent thereto, at the request of counsel for HCM, plaintiff's counsel agreed to vacate the default. Medical records of plaintiff's injuries were then supplied to defendant's counsel. An effort to obtain the difference between the $15,000 received on behalf of the third-party tortfeasor and the $50,000 UIM policy limits was made but no agreement was reached.

After various delays in scheduling, arbitration was eventually held on May 23, 1994. The arbitrators valued plaintiff's injuries at $135,000. Defendant declined to tender the balance of $35,000 ($50,000 less the tortfeasor's $15,000 policy limits). Plaintiff moved to confirm the award. The motion Judge initially denied the motion and plaintiff requested reconsideration. While the latter motion was pending, defendant agreed to pay the $35,000 claim. Payment, however, was only offered in settlement of all claims, including the allegations of bad faith and claims for fees and costs.

On April 5, 1995, judgment was entered reflecting an award of $35,000 as to plaintiff's UIM claim pursuant to the first count of the complaint. On May 5, 1995, plaintiff forwarded a docketed judgment for UIM benefits and a warrant to satisfy to counsel for defendants so the claim could be placed in line for payment. N.J.A.C. 11:3-2A.2. Defendant's motion for summary judgment seeks dismissal of all of the remaining claims in the complaint.

The complaint has been amended three times. The third amended complaint is before the court. The first count seeks payments of $35,000, plus interest, costs and fees. In the second count plaintiff claims third-party beneficiary status as to the contract between HCM and the Association and seeks compensatory and punitive damages. In the third count plaintiff requests compensatory damages as to HCM's alleged negligence in providing services to plaintiff. In the fourth count plaintiff demands compensatory and punitive damages based on defendant's alleged bad faith.

R. 4:46-2 provides that summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." All inferences of doubt are drawn against the movant in favor of the opponent of the motion. Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 75, 110 A.2d 24 (1954). The papers supporting the motion are closely scrutinized and the opposing papers indulgently treated. Id. at 75.

As to the first count, the $35,000 has been put in line for payment. As to that portion of the count the issue is moot. Plaintiff's remaining demand for interest, counsel fees and costs will be addressed later in this opinion.

In the second count HCM seeks summary judgment on the grounds that plaintiff is not a third-party beneficiary of the serving contract between the Association and HCM. A person for whose benefit a contract is made is a third-party beneficiary and ... may sue thereon in any court.... N.J.S.A. 2A:15-2; Atlantic City v. American Cas. Ins. Co., 254 F. Supp. 396 (D.N.J. 1966). For plaintiff to have third-party beneficiary status it must be concluded that the reasonable expectations of the parties to the agreement between HCM and the Association were that plaintiff, as the insured, would derive a benefit from the agreement. Eschle v. Eastern Freight Weiss Inc. 128 N.J. Super. 299, 302, 319 A.2d 786 (Law Div. 1974).

Motorists are insured both for their own benefit and for the benefit of providing victims of automobile accidents with financially responsible persons to look to for damages. Selected Risks Insurance Co. v. Zullo, 48 N.J. 362, 371, 225 A.2d 570 (1966). One of the purposes of the legislation creating the Association was to assure the New Jersey insurance consumer full access to automobile insurance through normal market outlets. N.J.S.A. 17:30E-2. It was designed to provide private passenger automobile insurance coverage at voluntary market rates for drivers who were unable to secure coverage at a voluntary market. Senate Labor, Industry & Professions Committee Statement, Senate, No. 2790-L.1986, c. 211. The servicing carriers contract with the Association to service the individual accounts and must meet certain criteria. They are required to have at least $10,000,000 in assets; to have been in the insurance related business for at least five years; and to have the capacity to issue and service at least 100,000 private passenger automobile insurance policies. Id. A reasonable Conclusion is that the servicing contract between the carrier and the Association is to benefit both those who will be afforded coverage as well as those who are injured by the actions of the insured. Thus plaintiff, having purchased insurance coverage, is therefore a third-party beneficiary of the servicing contract between HCM and the Association and has the requisite interest to enforce the contract. Should HCM be found to have breached the contract damaging plaintiff, plaintiff would be entitled to seek damages as a third-party beneficiary under the second count of the complaint.

The primary focus of the second, as well as the fourth count, is that HCM acted in bad faith. Plaintiff argues that HCM's bad faith is demonstrated by: its failure to choose an arbitrator causing plaintiff to file suit to compel arbitration; its failure to answer the complaint; its failure to make an offer of settlement until the bad faith action was asserted; its failure to comply with a demand for production of documents and notice to take depositions; and its failure to settle the claim after the arbitrators valued the claim at $135,000, substantially above the $50,000 policy limits. Plaintiff alleges bureaucratic ...

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