On appeal from Superior Court of New Jersey, Law Division, Essex County, No. ESX-L-1628-03.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Wefing, C.S. Fisher and Messano.
The parties appeal and cross-appeal from a judgment entered by the trial court following a proof hearing.*fn1 After reviewing the record in light of the contentions advanced on appeal, we reverse and remand for further proceedings.
Unfortunately, although the incident which gave rise to this appeal was relatively straightforward, the subsequent legal proceedings became complex and, unfortunately, acrimonious. In May 1998, plaintiff John P. Reilly*fn2 was struck by an automobile while he was either in the process of, or after, alighting from the driver's side of his vehicle. Mr. Reilly, who was eighty-three years old at the time of the accident, suffered significant injuries in this accident, and he filed suit in October 1998. The vehicle that struck Mr. Reilly was insured with Allstate Insurance Co. with a policy limit of $25,000. In February 2001, Allstate offered its policy limits to settle Reilly's claim. Reilly was insured by Rutgers Casualty & Surety Co. and had underinsured motorist (UIM) coverage of $100,000. Upon receipt of this offer from Allstate, Reilly's attorney notified Rutgers in accordance with Longworth v. Van Houten, 223 N.J. Super. 174 (App. Div. 1988).
After an extended exchange of correspondence, Rutgers offered to settle Reilly's UIM claim for $50,000. It recognized the severity of his injuries but asserted that he was comparatively negligent in trying to get out of his car into moving traffic. Plaintiff rejected this offer (and a subsequent increase to $60,000), and the parties proceeded to arbitration. Prior to that arbitration, plaintiff's attorney put defendant on notice that it considered the failure of Rutgers to offer the policy limits to be bad faith on its part. The arbitration resulted in a gross award of $250,000, but found plaintiff to be 10% at fault, resulting in a net award of $225,000.
In response, the attorney representing Rutgers told plaintiff's counsel that it would offer $70,000 to settle plaintiff's UIM claim. Plaintiff would not accept that offer. Instead, he commenced suit to establish his damages and also sought damages from Rutgers, contending it had acted in bad faith throughout.
Plaintiff's counsel knew which firm was representing Rutgers in connection with this UIM claim. He did not, however, inquire whether counsel would accept service of process and did not provide counsel with a courtesy copy of the summons and complaint. Instead, he served Rutgers at its place of business on March 26, 2003. When an answer was not filed by April 30, 2003, plaintiff's counsel on May 2, 2003, requested that default be entered against Rutgers. Default was entered on May 5, 2003.
Two weeks later, plaintiff notified the attorney with whom he had been dealing that default had been entered against Rutgers. Shortly after that, Rutgers offered plaintiff the full $75,000 to settle the UIM claim but plaintiff would not accept it. Nor would plaintiff consent to setting aside that default and permit Rutgers to file an answer. Although plaintiff opposed Rutgers' motion to set aside the default, the motion was granted by an order entered July 25, 2003.
Plaintiff then filed two motions in September. The first sought to set an expedited trial date within sixty days and the second, to dismiss Rutgers just-filed answer for failure to respond to the interrogatories, demands for admission, and request for production of documents that had been served upon Rutgers in early April 2003. Rutgers responded that there was no need for an expedited trial date in light of the fact that the discovery end-date was only two months hence. It also asserted that the bulk of the discovery to which it had not responded related to plaintiff's bad faith claim but that it was its position that plaintiff did not have a claim for bad faith until he received a damage award at least in excess of $100,000 ($25,000 recovered from the tortfeasor plus $75,000 offered by Rutgers for the UIM claim). Rutgers asserted it would provide the remaining discovery within five days. Plaintiff's motion was argued on December 5, 2003. We are informed that the trial judge executed an order granting plaintiff's motion but agreed not to file the order for ten days to provide Rutgers an opportunity to provide the outstanding discovery.
Plaintiff contended that Rutgers did not supply the outstanding discovery and on February 18, 2004, moved to strike Rutgers answer nunc pro tunc as of December 5, 2003. The trial court granted this motion and entered an order on March 11, 2004, striking Rutgers answer without prejudice nunc pro tunc to December 5, 2003. Rutgers moved immediately to vacate that order, and plaintiff opposed that relief. The trial court denied the motion, noting on the order that discovery remained outstanding. On May 28, 2004, plaintiff moved to strike Rutgers answer with prejudice. Following oral argument, the trial court granted that motion by order entered June 25, 2004. Rutgers moved for reconsideration, but its motion was denied. At no point in any of these discovery-related matters had the trial court delineated the manner in which defendant's discovery responses had been deficient.
For a variety of factors that do not bear upon our decision, the proof hearing did not take place until October 26, 2005. The trial court did not enter judgment until June 2, 2006.*fn3 This appeal by Rutgers from the order of June 25, 2004, striking its answer with prejudice, the order of August 6, 2004, denying its motion for reconsideration and the judgment of June 2, 2006, awarding damages for bad faith, followed. Plaintiff has cross-appealed from the denial of his request for punitive damages.
We are satisfied that, for several reasons, the trial court erred in striking Rutgers' answer with prejudice. When plaintiff propounded discovery in connection with his bad faith claim, Rutgers responded, "Objection, these Interrogatories concern a claim of bad faith, which claim is not ripe at this time. Without waiving this objection, ...