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Hallion v. Liberty Mutual Insurance Company

March 1, 2001

DALE HALLION AND JEROME HALLION, HER HUSBAND, PLAINTIFFS/RESPONDENTS,
v.
LIBERTY MUTUAL INSURANCE COMPANY, DEFENDANT/APPELLANT, AND CNA INSURANCE COMPANY, DEFENDANT/RESPONDENT



Judges Wallace, Jr., Carchman and Lintner

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

Argued January 10, 2001

Defendant Liberty Mutual Insurance Company (Liberty Mutual) appeals from the entry of a judgment compelling it to arbitrate plaintiff's underinsurance motorist claim (UIM). The judgment also provided that CNA Insurance Company (CNA) was not required to participate in the arbitration. On appeal Liberty Mutual contends that its insurance policy affords excess coverage to CNA's primary coverage policy, that it was not obligated to provide Longworth *fn1 notice to CNA, and that, in any event CNA was not prejudiced by the failure to receive Longworth notice. Further, Liberty Mutual raises for the first time on appeal plaintiffs failure to provide it with Longworth notice and therefore plaintiffs' claim should be denied. We affirm.

We are hampered somewhat by the sparse record on appeal. We glean the following facts from the record submitted. Plaintiff Dale Hallion *fn2 was involved in an automobile accident on November 7, 1995, while operating a vehicle owned by her daughter. There were two other vehicles involved in a chain collision accident, both insured by Allstate Insurance Company. The vehicle that struck plaintiff's vehicle was operated by Paula R. Scott who was struck from behind by a vehicle owned by Kessart Morrison. The liability coverage on the Scott vehicle was $15,000. Plaintiff was insured by Liberty Mutual and the vehicle she was driving was insured by CNA. The Scott and Henry vehicles were each insured by Allstate Insurance Company.

The Liberty Mutual policy provided UIM coverage in the amount of $500,000, while the CNA policy provided UIM coverage in the amount of $300,000.

Plaintiffs filed a complaint against Scott in 1996. *fn3 We are informed by plaintiffs' counsel that Scott failed to answer, and a default was entered. Although the case was not settled, plaintiffs executed a release on September 25, 1997. A proof hearing on the default was scheduled for November 20, 1997. Settlement discussions led to Scott's insurer offering to pay the full policy limit of $15,000 in settlement of the case. Plaintiffs' counsel accepted the offer. The next day, November 21, 1997, plaintiffs' attorney forwarded a Longworth letter to Liberty Mutual seeking consent to accept the settlement offer. However, unbeknown to plaintiffs' attorney, the motion judge prepared and entered an order on November 20, 1997, dismissing plaintiffs' complaint.

After receipt of the Longworth notice, Liberty Mutual retained Commercial Litigation to conduct an asset search of Scott. On December 22, 1999, Commercial Litigation reported that Scott did not appear to have any assets. Neither plaintiffs' attorney nor Liberty Mutual informed CNA of the settlement offer.

On December 2, 1997, plaintiffs forwarded to Liberty Mutual documentation containing all pertinent medicals and authorizations and requested that Liberty Mutual evaluate the records for a possible settlement of their UIM claim. Liberty Mutual set up a claim file.

On June 10, 1998, plaintiffs wrote to Liberty Mutual demanding arbitration within thirty days and giving notice to their arbitrator. Liberty Mutual failed to respond to this notice within the allotted time, but eventually appointed an arbitrator.

On April 1999, plaintiffs' attorney sent a letter to CNA advising it of plaintiffs' UIM claim and demanding arbitration. CNA set up a claim file. However, on July 19, 1999, CNA wrote to plaintiffs rejecting their UIM claim because neither plaintiffs nor Liberty Mutual informed it of the offer from the tortfeasor, and therefore, CNA was unable to protect its subrogation rights.

On September 9, 1999, plaintiffs filed a complaint and an order to show cause against Liberty Mutual and CNA seeking an order compelling defendants to be responsible for plaintiff's Dale Hallion's UIM claim and ordering arbitration. Thereafter, defendants submitted letter briefs in opposition to plaintiffs' request. The motion judge ordered all parties to appear on October 20, 1999, to show cause why the relief sought by plaintiffs should not be granted. On the return date of the order to show cause, plaintiffs' attorney failed to appear, and the motion judge decided to determine the matter on the papers.

CNA and Liberty Mutual each submitted letter briefs. Liberty Mutual essentially argued that CNA should provide the primary coverage with regard to plaintiffs' UIM claim and that Liberty Mutual was only responsible for any amount above the UIM policy limits of the host vehicle insured by CNA. Liberty Mutual's attorney acknowledged that he had conducted discovery from plaintiffs during the past ten months, obtained all necessary medical records, had scheduled a medical examination of Dale Hallion, and that the results of the asset search of the tortfeasor revealed no assets. Liberty Mutual argued that the failure to comply with the Longworth notice procedures did not prejudice CNA because any subrogation claim was worthless. Further, Liberty Mutual argued that if the motion judge decided in favor of CNA, the judge should find that Liberty Mutual is the excess carrier and dismiss the complaint as to Liberty Mutual.

CNA argued in its brief that consistent with case law, the failure of plaintiffs or Liberty Mutual to notify CNA of the settlement offer barred the UIM claim against CNA. In addition, CNA argued that its subrogation rights against the tortfeasor had been prejudiced.

The motion judge entered an order on November 10, 1999, partially granting plaintiffs' request. The judge ordered Liberty Mutual to arbitrate the matter and "be solely responsible for the entire award by virtue of their failure to place CNA on notice of the claim as required by law." The only reason given was a handwritten note at the bottom of the order that "CNA Insurance is not required to arbitrate this matter pursuant to the holding in Rivers v. Allstate Insurance Co., 312 N.J.Super. 379 [7 ...


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