Before Judges Kleiner, P.G. Levy and Carchman.
The opinion of the court was delivered by: P.G. Levy, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: September 15, 1999
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County.
In 1991, plaintiffs purchased a waterfront restaurant in Union Beach for $250,000 ($225,000 for restaurant; $25,000 for liquor license). The restaurant was built partly on land and partly on pilings. During a severe wind and rain storm in December 1992, the back part of the restaurant and its supporting pilings collapsed, and the business was totally destroyed. Shortly before the storm, plaintiffs had purchased a special multi-peril insurance policy from defendant, Security Indemnity Insurance Company (Security), insuring the building for $150,000, business personal property for $50,000 and loss of business income up to $24,000. The policy was obtained through defendant Dining Car Agency (DCA), and although the policy specifically excluded any loss or damage caused by water, "driven by wind or not," DCA did not procure a separate flood insurance policy for plaintiffs.
Plaintiffs sued Security to compel payment for its losses under the policy and sued DCA for negligence in failing to obtain the appropriate type of coverage. Prior to trial, DCA settled with plaintiffs for $175,000. At trial, the jury found Security liable to plaintiffs for $279,000 (consisting of $172,000 for damage to the building, $83,000 for contents damages and $24,000 for business interruption). The trial Judge molded the verdict to conform to the limits of liability under the policy, yielding a total award of $224,000. Additionally, defendants' motion to setoff the amount of the settlement with DCA was denied, and the Judge awarded pre-judgment interest calculated at the rates set forth in R. 4:42-11(b).
On appeal, defendants contend the pretrial settlement with DCA should have been setoff against the judgment and also that the trial Judge erred in excluding certain evidence they offered. Plaintiffs cross-appeal, contending that the amount of interest awarded was insufficient and should not have been calculated pursuant to R. 4:42- 11(b). We affirm each decision by the trial Judge.
Security claims it is entitled to a pro tanto credit of $175,000 against the $224,000 verdict to prevent a double recovery. Its claim is that the $175,000 constitutes "other coverage" for which the policy requires a deduction, and is considered mitigation of damages inuring to Security's benefit. We reject these arguments because the DCA settlement was unrelated to the damages sustained by plaintiffs for an insured event.
Plaintiff sued DCA for "failure to properly advise", acting "contrary to the provisions of applicable statues concerning the conduct of insurance agents and brokers," "failure ... to obtain proper insurance," and violations of the Consumer Fraud Act. In particular "plaintiffs den[ied] that the loss sustained was excluded under the policy of insurance, [but] if, in fact, it is determined that the loss sustained was, in fact, excluded, then there was a failure on the part of [DCA] to properly advise the plaintiffs or properly secure insurance to cover the ... property." All of plaintiffs' claims against DCA arose out of damages completely unrelated to any loss insured by Security, and would be incurred only if Security was found not liable under the insurance contract.
Security relies on Riccio v. Prudential Prop. & Cas. Ins. Co., 108 N.J. 493 (1987) and Childs v. new Jersey Mfrs. Ins. Co. 108 N.J. 506 (1987), but those cases are factually inapplicable. Here there is no joint tortfeasor and there is no apportionment of liability between two insureds. A jury found that the damage caused to plaintiffs' property and business was the result of wind and thus was not excluded, making SSI liable under the insurance contract. The claims for which plaintiffs settled with DCA were not for the same damages or the same cause. Rather, they are based on alleged negligence, breach of contractual obligation and fraud in the procurement of an insurance policy.
For the same reasons, plaintiff did not interfere with Security's rights of subrogation by reaching a settlement with DCA. Security claims that plaintiffs are not entitled to recover because they violated the terms of the insurance contract, which stated, in part:
If any person or organization to or for whom we make payment under this coverage part has right to recover damages from another, those rights are transferred to us to the extent of our payment. That person or organization must do everything necessary to secure our rights and must do nothing to impair them.
The right to subrogation is a derivative one and inures "only the rights of the insured against the tortfeasor subject to defenses of the wrongdoer against the insured." State Farm Mutual Auto. Ins. Co. v. Licensed Beverage Ins. Exchange, 146 N.J. 1, 8 (1996) (quoting Aetna Ins. Co. v. Gilchrist Bros., Inc., 85 N.J. 550, 560-61 (1981)). Here, any right given away by plaintiffs to DCA was either completely ...