On appeal from the Superior Court of New Jersey, Law Division, Mercer County, L-44-04.
Before Judges Petrella, Lintner and Parker.
The opinion of the court was delivered by: Lintner, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted January 10, 2005
The procedural history and relevant facts giving rise to this appeal are undisputed. Plaintiff, Haim Morag, was involved in an automobile accident. At the time, he had Underinsured Motorist Coverage (UIM) in the amount of $300,000 issued by defendant Continental Insurance Company of New Jersey, (Continental).*fn1 Plaintiff notified Continental that he intended to seek damages in excess of the tortfeasor's $100,000 liability policy. Continental waived its rights to subrogation and plaintiff settled the underlying claim for $97,907. The matter proceeded to arbitration and an award totaling $250,000 was rendered on October 9, 2003, yielding a net recovery of $150,000 after crediting Continental with the liability limits of the tortfeasor's policy.
On October 16, 2003, Continental made a written offer through counsel to settle for $50,000 indicating that if the amount was not accepted it would be withdrawn and the arbitration award would be rejected. On October 29, 2003, counsel for Continental rejected the award, writing the following letter to plaintiff's counsel:
Please be advised that CNA rejects the underinsured motorist arbitration award rendered on July 17, 2003. [sic] This method of rejecting the arbitration award is specifically provided for by Verbiest v. New Jersey Full Ins. Underwriting Associates, 256 N.J. Super. 85 (App. Div. 1992).
Please advise when you file the appropriate Complaint and you may send the Complaint to my attention and I will accept service on behalf of CNA.
On December 22, 2003, plaintiff filed a complaint seeking confirmation of the arbitration award. The complaint also sought damages under plaintiff's UIM coverage and asserted that Continental had acted in bad faith. Contending that Continental's failure to request a jury trial nullified its rejection of the award, plaintiff filed an Order to Show Cause (OTSC) why the arbitration award should not be confirmed. On March 26, 2004, following oral argument on plaintiff's OTSC, the Law Division judge confirmed the arbitration award, finding that"under principles of contract law" the insurer failed to strictly comply with the policy provision requiring a demand for a jury trial. An order confirming the arbitration award and entering judgment in favor of plaintiff for $150,000 plus costs was entered on April 12, 2004. The order further dismissed the remainder of plaintiff's complaint without prejudice"in the event that this [o]rder is reversed and remanded...." Continental appeals and we reverse and remand.
Continental's policy contained the following pertinent language:
If we and an"insured" do not agree:
1. Whether that person is legally entitled to recover damages under this endorsement; or
2. As to the amount of damages; either party may make a written demand for arbitration. In this event, each party will select an arbitrator. The two arbitrators will select a third. If they cannot agree within 30 days, either may request that selection ...