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CNA Insurance Companies v. Cave

June 20, 2000


Before Judges Baime, Eichen and Wecker.

The opinion of the court was delivered by: Wecker, J.A.D.


Argued April 5, 2000

On appeal from the Superior Court, Law Division, Middlesex County.

This appeal raises once again the question of the effect of a Longworth *fn1 violation on a carrier's obligation to provide underinsured motorist (UIM) coverage to its insured.

Plaintiff, CNA Insurance Companies, contends that because defendant, Peter Cave, settled his case against two defendants on the trial date, without giving notice to CNA of one defendant's last-minute offer, that settlement bars any UIM recovery by Cave and excuses CNA from participating in UIM arbitration. The Law Division Judge granted plaintiff's summary judgment motion without explaining the reasons for his decision, merely saying "I think the law is with CNA. Clearly, this is one for the Appellate Division." The question presented is whether the carrier nevertheless is obligated to participate in UIM arbitration to allow the claimant to establish that the settling defendant in the auto accident case was not a tortfeasor, thereby proving that the carrier was not prejudiced by claimant's acceptance of the offer and the carrier's resulting loss of subrogation rights. We conclude that on these facts, the carrier must participate in UIM arbitration.

The motion judge's failure to explain the reasons for his decision is contrary to court rules. See R. 1:7-4; R. 2:5-1(b). The failure is particularly troubling when the unexplained decision grants summary judgment disposing of a party's claim. Indeed, the motion judge's apparent recognition that his decision was likely to be appealed was all the more reason to clearly enunciate both the findings of fact and the legal reasoning that supported the decision. Leaving it to the Appellate Division to sort out the record and the issues is a disservice to the parties and the court. Curtis v. Finneran, 83 N.J. 563, 569-70 (1980).

The relevant facts are these. Defendant, Peter Cave, was a passenger in a car driven by Joshua Brandt, who died as a result of the 1994 accident. It appears that Brandt went through a blinking red light and collided with a car driven by William Giles. Cave was seriously injured in the accident. The UIM endorsement under the CNA policy covering Cave provided $100,000 maximum UIM coverage. *fn2 Brandt carried a minimum $15,000/$30,000 policy issued by Allstate Insurance Company. Giles was covered by a $500,000 single limit policy issued by Hanover Insurance Company.

Cave filed a complaint against both Brandt's estate and Giles in February 1996. On February 27, 1997, Cave's attorney wrote to CNA to advise that he had received a $10,000 offer from Brandt's carrier. That offer reflected payment of equal sums to three injured parties, thereby exhausting Brandt's $30,000 policy limit. Cave's letter notice to CNA was consistent with the procedures outlined in Longworth v. Van Houten, 223 N.J. Super. 174 (App. Div. 1988). The letter asked CNA to decide within thirty days whether it wished to preserve its right to subrogate against Brandt. On March 5, 1997, in a phone call between Cave's attorney and a CNA representative, the attorney advised that Brandt was dead, that Giles' carrier had taken a "no-pay" position, and that a trial date was scheduled for April 1. *fn3 By letter confirming that conversation, CNA requested additional information from Cave's attorney and indicated that after receipt of the information sought, CNA would advise him of its decision. Although Cave's attorney apparently did not provide CNA with all of the requested information, CNA determined that Brandt had no assets and decided not to seek subrogation as to Brandt.

Cave's liability expert as well as Giles's liability expert provided pretrial reports opining that Brandt's negligence was the sole cause of the accident, that Giles was not negligent, and that Giles's conduct was not a proximate cause of the accident. Thus at a time when Cave had every motivation to establish Giles's responsibility for the accident, he himself offered evidence that Giles was not a tortfeasor.

As of April 1, the day trial was to begin, Brown had not heard from CNA regarding its decision on the $10,000 settlement offer from Brandt's insurer, Allstate. On that date, in the courthouse, Hanover, Giles's insurer, for the first time offered Cave $5,000 in settlement of his claim against Giles. Cave promptly accepted $10,000 from Brandt and $5,000 from Giles and provided both defendants with general releases, without notifying CNA of the Giles offer. The case was dismissed with prejudice.

On April 16, a CNA representative called plaintiff's attorney seeking to learn Giles's policy limit and learned about the settlements for the first time. CNA informed Cave's attorney that CNA disputed his contention that Giles had no liability. When Cave sought CNA's participation in arbitration on his UIM claim, CNA brought this declaratory judgment action seeking a determination that it was not obligated to participate in UIM arbitration on account of Cave's violation of Longworth with respect to his settlement with Giles. *fn4

At oral argument in the Law Division, the motion judge asked Cave's counsel why he did not immediately notify CNA about the day-of-trial offer. The following colloquy ensued:

THE COURT: So are you saying the judge didn't give you enough time to make a phone call to CNA and say, look, we were offered $5,000; do you want to pay it or do ...

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