On certification to the Superior Court, Appellate Division, whose opinion is reported at 378 N.J. Super. 59 (2005).
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
In this appeal the Court must determine whether an occurrence-based excess liability policy of insurance is unavailable to an accident victim because the tortfeasor failed to give timely notice to its excess carrier.
On January 9, 2000, an automobile driven by Father Fred Miller struck and injured a pedestrian, plaintiff John Gazis. Miller was driving a car owned by his employer, the Archdiocese of Newark, and insured by Lumberman's Mutual Casualty, with liability protection of $250,000, and an excess policy in the amount of $750,000 issued by the National Catholic Risk Retention Group, Inc. (National). National's policy contains language to the effect that an insured forfeits coverage if the insured fails to notify National in writing, and within 120 days, of an "event" that may trigger the policy. National denied coverage on the Archdiocese's indemnification claim solely because it did not receive notice of the claim within the 120 day period required by the policy.
Gazis filed a complaint and the matter went to arbitration, resulting in an award to Gazis that exceeded $1 million. The Archdiocese obtained a trial de novo and ultimately settled with Gazis for $500,000. Cross-motions for summary judgment were filed by the remaining parties, National and Gazis. The trial court denied the motion filed by Gazis and granted summary judgment to National based on the late notice. Gazis appealed.
The Appellate Division reversed and remanded for entry of judgment against National, holding that under this occurrence-based liability policy the excess carrier could not forfeit coverage unless it proved both "a breach of the notice provision and a likelihood of appreciable prejudice." Gazis v. Miller, 378 N.J. Super. 59, at 60, 64 (2005). The panel relied on the rational of Cooper v. Gov't Employees Ins. Co., 51 N.J. 86 (1968), for imposing an "appreciable prejudice" requirement before late notice of a claim could justify a forfeiture of coverage. The panel found the Cooper Court's concern with "affording compensation for tort victims" to be the more compelling justification for adhering to Cooper's prejudice requirement in this excess insurance setting and further found "unassailable" the trial court's finding that National failed to prove that it suffered any prejudice as a result of the delay in notice because National had no duty to defend the case and was aware of the circumstances of the case six months before suit was filed.
The Supreme Court granted National's petition for certification.
HELD: In the absence of "appreciable prejudice," a carrier providing an occurrence-based excess liability insurance policy cannot decline coverage based on the insured's failure to comply with the policy's 120-day notice provision.
1. In Cooper the Court held that an insurance carrier may not forfeit coverage unless the carrier proves both "a breach of the notice provision and a likelihood of appreciable prejudice." Although, to date, Cooper's principles have been applied in a variety of contexts, we specifically declined to extend Cooper to a claims-made policy where doing so would have constituted an unabashed rewriting of the policy coverage purchased. In the context of primary insurance coverage, the distinction between occurrence policies and claims-made policies has continued to be observed in respect of the application of Cooper's appreciable prejudice rule. This appeal presents our Court with its first opportunity to address Cooper's applicability to an excess insurer. (Pp. 6-10)
2. In this matter the Court concludes that the Appellate Division was correct in applying the Court's rationale in Cooper to an excess automobile liability insurer. The Court agrees essentially with the reasoning set forth in the succinct and persuasive opinion authored by Judge Coburn. Our strong public policy -- in favor of spreading the risk of protecting innocent victims of automobile accidents -- permeates our approach to primary policies of automobile liability insurance and logically extends to excess policies acquired to enhance the amount of liability coverage available to protect such victims. Moreover, although this is an excess liability setting, application of Cooper's prejudice requirement does not have the perverse effect of using Cooper's rationale to write a better policy for an insured than that which was purchased. Finally, National has not demonstrated the materiality of the notice provision to the coverage purchased through the risk retention group. Having failed that hurdle, National therefore must show that, in respect of each particular claim, it has been prejudiced by the late notice. (Pp. 10-13)
The judgment of the Appellate Division is AFFIRMED.
JUSTICE RIVERA-SOTO filed a separate dissenting opinion, agreeing with the trial court and stating that the majority has denied National the benefit of its bargain and has in effect rewritten the contract between the parties.
CHIEF JUSTICE PORITZ and JUSTICES LONG, ZAZZALI, ALBIN, and WALLACE join in JUSTICE LaVECCHIA's opinion. JUSTICE RIVERA-SOTO filed a separate dissenting opinion.
The opinion of the court was delivered by: Justice LaVECCHIA
In this appeal we must determine whether an occurrence-based excess liability policy of insurance is unavailable to an accident victim because the tortfeasor failed to give timely notice to its excess carrier. The Appellate Division held that, in the absence of prejudice, the excess insurer could not decline coverage based on the insured's failure to comply with the policy's 120 day notice provision. Gazis v. ...