On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-3119-02.
The opinion of the court was delivered by: Fuentes, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Winkelstein, Fuentes and Baxter.
This appeal requires us to determine whether plaintiff, New Jersey Manufacturers Insurance Company ("NJM"), the issuer of a primary insurance policy, is obligated to pay prejudgment interest pursuant to R. 4:42-11(b), where such payment would exceed its coverage limit. We consider this question in the context of an agreement in which NJM and National Casualty Company ("NCC"), the issuer of an excess policy, agreed to settle a claim against their insured, leaving the question of prejudgment interest to be determined by the Law Division.
In granting NJM's motion for summary judgment, the Law Division determined that NJM was responsible only up to its policy limit of $1 million. All sums in excess of this coverage limit, including prejudgment interest, were the responsibility of NCC as the excess carrier. NCC now appeals from this judgment.
After a careful review of the record, we reverse and remand for the trial court to conduct an evidentiary hearing. Applying the standards articulated by the Supreme Court in Kotzian v. Barr, 81 N.J. 360, 367 (1979), we cannot determine from this record whether NJM violated its fiduciary duty to engage in meaningful, timely, good faith efforts to settle the claims asserted by the party suing its insured within the policy's coverage limit.
In order to determine if a carrier is liable for the payment of prejudgment interest, even if such payment exceeds its policy's coverage limit, a trial court must find sufficient evidence showing that the carrier did not engage in good faith negotiations to settle the claim within the policy's coverage limit. In going about this task, the court should consider (1) whether the carrier made timely settlement offers that were reflective of the strength of the claimants' case, as to both liability and damages; (2) whether the carrier's negotiation strategy had a reasonable prospect for a successful outcome; and (3) whether the carrier offered its policy limit of coverage in a timely fashion, after becoming aware that the case would not settle for an amount within the policy's limit.
The coverage issues raised here relate to the defense of the defendant, Grinnell Haulers Inc., in Brodsky v. Grinnell Haulers, Inc., 362 N.J. Super. 256 (App. Div. 2003), rev'd on other grounds, 181 N.J. 102 (2004), a personal injury/wrongful death action brought by the Brodskys in 1999 against Grinnell Haulers and John Bennett. Mr. Brodsky was killed in the accident. Although Mrs. Brodsky survived, she was seriously injured. Grinnell Haulers had a primary insurance policy with NJM, and an excess umbrella policy with NCC. After considerable litigation, including Supreme Court review resulting in a second trial, the Brodsky plaintiffs prevailed in this action, obtaining a $1,640,000 judgment against Grinnell Haulers, exclusive of prejudgment interest. Brodsky, supra, 181 N.J. at 128.
Here, the NJM policy had a coverage limit of $1 million. The excess policy issued by NCC provided $4 million in additional coverage. After considerable litigation, NJM eventually paid its $1 million policy limit; NCC paid an additional $640,000. NJM and NCC disagreed, however, over which carrier was ultimately responsible for the prejudgment interest. The carriers finally agreed to split the prejudgment interest, reserving the right to have the court determine their respective obligations for interest under the terms of the policies.
NCC argues that NJM is responsible for all prejudgment interest, or in the alternative, that NCC is only responsible for its pro rata share of the prejudgment interest. NCC also maintains that NJM acted in bad faith against its own insured, by: (1) arguing that the interest be construed as "prejudgment," as opposed to "post-judgment;" and (2) failing to tender its $1 million policy limit for settlement purposes prior to the first trial. Lastly, NCC asserts that the Brodsky accident consisted of five separate and individual losses. As a result, NJM's policy limit was not exhausted, because the policy provides $1 million coverage for each loss.
We agree in part with the arguments raised by NCC. Under the circumstances presented here, the trial court must determine whether NJM's failure to timely offer its policy limit amounted to bad faith, rendering it liable for the payment of all prejudgment interest. In this light, we need not, and specifically do not reach any of the other arguments advanced by NCC in support of this appeal.
In order to assess the reasonableness of NJM's conduct during the settlement negotiations, we must first describe the facts of the underlying automobile accident case. First, as noted by the Supreme Court, the only issue submitted to the jury during the first trial was the extent of the plaintiff's damages and the apportionment of fault between defendants. Brodsky, supra, 181 N.J. at 107. With respect to damages, we gave the following description of the injuries the Brodskys sustained in the accident:
At the time of the accident Bernard Brodsky was sixty-nine years old and Gloria Brodsky was sixty-three. They were married for forty-three years and had three grown children. After being struck by Horsman, Gloria was thrown into the air and against the concrete road divider, landing on the roadway on her back. According to her orthopedic surgeon, Dr. David Jeffrey Greifinger, Gloria suffered: (1) open fractures of her right forearm, with attendant nerve damage, requiring surgery; (2) a herniated disk (with some disk degeneration pre-existing the accident), which impinged on nerves in her back, resulting in pain running from her lower back down to her calf and ankle; (3) five fractured ribs; (4) an injury to her right hip, which was either arthritis or avascular necrosis (death of part of the bone, as a result of lost blood supply); (5) a bruised liver; and (6) fluid in her lungs, indicating she suffered chest trauma. Greifinger opined that, for the rest of her life, Gloria would experience periodic aches and pains from the injuries to her forearm, back, ribs, and hip. The nerves in her forearm, and her liver and lungs had healed completely. These findings were consistent with Gloria's complaints of continued pain and heaviness in her right arm, shooting pain in her lower back and legs, a dull pain in her ribs, and problems with her hip when she walks.
Defendants' medical expert, Dr. Francis DeLuca, an orthopedic surgeon, opined that the damage to Gloria's hip and back was degenerative, and unrelated to the accident. He noted that Gloria had not sought treatment for her back and hip until more than one year after the accident.
With respect to her claim of negligent infliction of emotional distress, Gloria stated that she observed Bernard being struck by Horsman's vehicle. She had a vivid memory of seeing Bernard's feet, in white socks, at the accident scene, and repeatedly yelling for him to wiggle his toes, so she would know he was alive. She learned of his death while she was in the ...