On appeal from Superior Court of New Jersey, Law Division, Ocean County, Docket No. OCN-L-3950-02.
The opinion of the court was delivered by: Fuentes, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Wefing, Wecker and Fuentes.
This appeal requires us to address a narrow issue of insurance law: Whether the New Jersey Property Liability Guaranty Association ("PLIGA") is obligated to pay excess coverage under a policy of insurance issued by a now insolvent carrier, when the primary coverage limits have not been paid by reason of insolvency of the primary insurer, and the excess policy provides that if the insurer issuing the primary coverage is unable to pay by reason of insolvency, the excess coverage would be collectible "only after the amounts set forth in the limits of the underlying [primary] coverage have been paid."
The question arises in the context of a settlement reached by plaintiffs and defendants, and approved of by PLIGA, where:
(1) the insolvent carrier issued both the primary policy and the excess policy; (2) the coverage limit under the primary policy was one million dollars; (3) PLIGA paid its statutory maximum of $300,000 under the primary policy; and (4) the insured-tortfeasor was explicitly released from any personal liability arising out of the underlying cause of action.
We hold that, under these circumstances, PLIGA is not obligated to pay the statutory maximum, because the claim asserted does not fall within the meaning of a "covered claim" under the excess policy. Our conclusion is informed by our recent decision in Johnson v. Braddy, 376 N.J. Super. 215, 219-220 (App. Div. 2005), aff'd, No. A-5-05, 2006 N.J. LEXIS 21 (Feb. 1, 2006), wherein we held that "if a plaintiff's damages exceed the tortfeasor's insurance coverage, the tortfeasor remains personally liable for the excess."
Here, but for the settlement agreement, the tortfeasor would have remained personally liable to pay the difference between PLIGA's statutory maximum of $300,000, and any award up to the one million dollars coverage limit of the primary policy. The personal liability protection provided to the tortfeasor in the settlement agreement prevents us from ascertaining whether he (the tortfeasor) is able to meet this financial obligation. Thus, without more, we are compelled to enforce the clear, unambiguous "coverage-trigger"*fn1 in the excess policy, requiring that the full amount of primary coverage be paid, before any obligation under the excess policy can arise. Because the trial court held otherwise, we reverse.
The legal issues discussed here came before the Law Division by way of cross-motions for summary judgment. We will thus recite the salient facts of the case based on the limited factual record developed before the trial court.
Plaintiff, Chase Shaler ("Chase"), is a minor. He brought this legal action by and through his Guardian Ad Litem, Melissa Shaler ("Shaler"), who also asserted an individual claim. The suit alleged medical malpractice against defendants Toms River Obstetrics & Gynecology Associates ("Toms River"), Dr. Joseph Cudia ("Cudia"), and Community Medical Center (the "Center"). Under plaintiffs' theory of liability, Cudia, an obstetrician employed by Toms River, deviated from the standard of care expected of a physician of his specialty and training, by committing obstetrical negligence during the delivery of Chase. Specifically, plaintiffs allege that Chase sustained severe brain injury, manifested by cerebral palsy, progressive microcephaly, and subarachnoid hemorrhaging, resulting in significant developmental delays.
Plaintiffs' cause of action implicated three separate liability insurance policies. Cudia had both a primary and an excess liability policy covering him individually. Toms River had a ...