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Marsden v. Encompass Insurance Co.

January 12, 2005


On appeal from the Superior Court of New Jersey, Law Division, Union County, L-2686-03.

Before Judges Newman, R.B. Coleman and Holston, Jr.

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


Argued: December 15, 2004

Defendant Encompass Insurance Company (Encompass) appeals from an order compelling the submission of an underinsured motorist claim (UIM) to three-party motorist arbitration. We affirm.

The facts are not in dispute. Plaintiff, Arlene Marsden, sustained personal injuries in a car accident caused by tortfeasor, Carol Farley (Farley or tortfeasor), on July 10, 1999. Farley was insured through Prudential Insurance Company, with liability policy limits of $100,000/$300,000. Plaintiff was covered by a policy issued by defendant Encompass, which provided UM/UIM limits of $250,000/$500,000.

On December 5, 2000, plaintiff filed suit against Farley. On May 30, 2001, plaintiff filed an Amended Complaint, adding a per quod claim on behalf of her husband, Robert Marsden.

In non-binding arbitration on March 15, 2002, plaintiff was awarded $250,000, well over the tortfeasor's policy limits of only $100,000. On March 20, 2002, plaintiff forwarded to defendant a Longworth*fn1 notice of a potential UIM claim.

On April 8, 2002, defendant notified plaintiff that"in order for [them] to determine whether or not [she] ha[d] a valid underinsured motorist claim, [they] need to obtain the following:" proof of tortfeasor's policy limits and offer of settlement; copy of the filed suit papers, discovery and arbitration award; complete package of specials including loss wage verification; and diagnosis and medical history.

Plaintiff complied with defendant's request in a letter of April 16, 2002, confirming the $250,000 arbitration award, but notifying defendant a trial de novo was filed by tortfeasor. Plaintiff enclosed the award and a copy of the trial notice, as well as, answers to defendant's interrogatories and a copy of plaintiff's deposition transcript.

Following a verbal authorization, defendant through its claims supervisor, on July 8, 2002, confirmed that it waived"any future subrogation right[s]" and authorized plaintiff's settlement with the tortfeasor for the $100,000 policy limit. Believing that the UIM claim would either be settled or failing that, submitted to three-party arbitration, plaintiff settled her claim for $90,000 against the tortfeasor during July 2002 and dismissed the underlying lawsuit.

On February 26, 2003, plaintiff's counsel sent a letter to defendant, confirming his phone conversation with claims specialist, Louis Negrin (Negrin), and requesting that defendant review the medical specials that were forwarded on April 16, 2002 and contact counsel to discuss a resolution of the claim. Counsel prefaced his UIM settlement demand of $100,000 by describing the accident and the nature of the injuries in the following terms:

As can be seen, as a result of this violent rearend impact caused by the negligence of the underinsured tortfeasor, my client sustained an avulsion fracture at C7. Additionally, she sustained disc herniations at L4-5 and C6-7. Both her treating physician and orthopedic surgeon, Dr. Glushakow, and the referred neurosurgeon, Dr. Prada, recommended cervical fusion and laminectomy due to this severe injury. However, due to my client's severe fear of surgery, she has declined, thus far, that procedure.

However, due to continuing complaints and the pressure resulting from these injuries, she is considering that surgery.

Additionally, as a result of this impact and injury, my client was forced into early retirement as indicated in answer 10 to Form A Interrogatories. That early retirement has resulted in a loss of approximately $12,000 in pension per year due to my client's loss of anticipated salary increases when she was unable to return to work due to these injuries.

In a phone conversation of April 23, 2003 with Negrin, defendant claimed for the first time that the policy requires litigation of the UIM claim, rather than arbitration. A few days later, Negrin called plaintiff's counsel back to indicate he was mistaken and that the policy in effect on the date of the accident permitted arbitration and that the claim would be submitted to UIM arbitration. On April 28, 2003, plaintiff's counsel sent a letter to Negrin demanding three-party UIM arbitration.

On July 17, 2003, plaintiff filed a Complaint against defendant seeking to compel UIM arbitration. Plaintiff filed a notice of motion to ...

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