On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, L-7885-98.
Before Judges Keefe, Eichen, and Steinberg.
The opinion of the court was delivered by: Keefe, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted: December 13, 2000
Plaintiff, Francis Hreshko, appeals from the entry of summary judgment in favor of defendant, Harleysville Insurance Company (Harleysville). The practical effect of the summary judgment was the dismissal of plaintiff's underinsured motorist (UIM) claim against Harleysville. The Law Division judge found that plaintiff's conduct prejudiced Harleysville's subrogation rights, thereby disentitling plaintiff from recovering under the UIM endorsement of his insurance policy. We reverse and remand the matter for further proceedings in accord with this opinion.
Because the judgment under review results from a summary judgment motion, we are required to consider the facts in a light most favorable to plaintiff. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). On July 15, 1988, plaintiff was involved in a motor vehicle accident. The police report reflects that plaintiff was stopped in traffic when his vehicle was struck in the rear by a vehicle operated by Peter Pasterlak and owned by his sister Barbara. Fernando Coelho, who was operating the motor vehicle behind Peter Pasterlak, informed the investigating police officer that he saw the Pasterlak vehicle strike plaintiff's vehicle. Coelho said that he then attempted to stop his vehicle, but failed and struck the Pasterlak vehicle in the rear. Plaintiff has always maintained that he felt only one impact to the rear of his vehicle, which he attributed to Pasterlak.
On September 22, 1988, plaintiff engaged Louis Ippolito to represent him in connection with a potential claim. Ippolito instituted suit against the Pasterlaks on July 12, 1990, three days before the statute of limitations expired. The Pasterlaks were insured by N.J.A.F.I.U.A. The policy was serviced by Liberty Mutual Insurance company, who assigned attorney John Strichek to represent the Pasterlaks. An answer was not filed on their behalf until July 9, 1991, almost one year after suit was instituted. The reason for the delay does not appear in the record.
On September 11, 1991, Ippolito learned that the Pasterlaks' policy limit was $100,000 per person. On April 19, 1993, Strichek informed Ippolito that there was additional insurance covering the Pasterlaks in the amount of $15,000 per person issued by Continental Insurance. Ippolito thus believed that there would be $115,000 insurance coverage available to satisfy plaintiff's claim against the Pasterlaks.
On August 26, 1993, Ippolito informed Harleysville that plaintiff intended to make a claim against it under the UIM endorsement of the policy. He requested that a representative contact him because he "need[ed] the consent of Harleysville to settle the main liability action."
In preparation for trial, Ippolito determined that the cost of expert witness fees would total $30,000. In November 1993, Strichek extended an offer of $85,000 to settle plaintiff's claim against the Pasterlaks. Plaintiff decided to accept the offer in light of the cost of prosecuting the matter to judgment and with the understanding that he could pursue a UIM claim against Harleysville. According to Ippolito, the case was marked settled with the Middlesex County Assignment Clerk's office, subject to approval of the settlement by Harleysville. However, an Order of Dismissal with prejudice was entered by the Assignment Judge on January 10, 1994. The form order recites that it was being entered because "[c]counsel ... represented to the Court that the ... cause has been settled."
A letter from Ippolito to Harleysville, dated June 3, 1994, stated that plaintiff had settled his claim with the Pasterlaks for $85,000, subject to Harleysville's approval, and asked the representative to inform him if Harleysville approved the settlement or intended to pursue subrogation. The letter reflects that there had been prior communications between Ippolito and Harleysville concerning plaintiff's UIM claim. Ippolito informed Harleysville that he was "still preparing the financial package," but believed plaintiff's claim would "approach $200,000." The Harelysville policy provided $300,000 per person UIM coverage.
The following month, Harleysville replied that it could not approve the settlement until it more fully understood plaintiff's claim. It listed the missing information it required for that purpose. Ippolito supplied information to Harleysville in February 1995, demanded the UIM limits in settlement, and asked Harleysville to approve the settlement with the Pasterlaks. After additional demands and exchanges of correspondence and information, Harleysville informed Ippolito on August 3, 1995, that it approved plaintiff's settlement with the Pasterlaks. It informed Ippolito, however, that the approval was not to be considered as "a waiver of any defense Harleysville has to Francis Hreshko's claim for underinsured motorist benefits."
It was not until Harleysville approved the settlement that plaintiff executed a release. The release, dated August 7, 1995, inexplicably ran only in favor of Barbara Pasterlak. Additionally, it was not until the release was forwarded to Strichek that a stipulation of dismissal with prejudice was signed by Strichek and Ippolito and filed with the court.
Plaintiff engaged his current attorney in June 1998. When Harleysville refused to settle or arbitrate plaintifff's UIM claim, the current suit was instituted. Plaintiff's only claim for relief was an order seeking arbitration. The parties engaged in discovery which included the deposition of Peter Pasterlak. In that deposition, Pasterlak stated that, after he struck plaintiff in the rear, his car was struck by Coelho, which ...