On appeal from Superior Court of New Jersey, Law Division, Warren County, Docket No. L-478-04.
The opinion of the court was delivered by: Skillman, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Skillman, Winkelstein and Yannotti.
The issue presented by this appeal is whether an insured that has had all costs of defense and settlement of a claim paid by one insurer may pursue a coverage action against a second insurer even though the first insurer would be subrogated to any recovery from the second insurer. We conclude that an insured lacks standing to maintain a coverage action under such circumstances and that the first insurer's claim for contribution against the second insurer is the only coverage claim that survives the settlement. We also conclude that the first insurer must pursue this claim in its own name.
Defendant Raritan Valley Disposal (RVD) contracted with defendant West Amwell to furnish a garbage truck at the municipal transfer station for West Amwell's residents to deposit their trash every Saturday. RVD was responsible for bringing the truck to the transfer station and parking it at a location designated by the West Amwell employee in charge of the site. RVD's driver had no responsibility for assisting West Amwell's residents in loading trash. Once the RVD garbage truck was filled or the transfer station was closed for the day, RVD was responsible for removing the truck and disposing of its contents.
The contract under which this service was performed obligated RVD to maintain insurance coverage and list West Amwell as an "additional named insured." To satisfy this obligation, RVD named West Amwell as an additional insured under its business automobile policy, which had been issued by third-party defendant Illinois National Insurance Company (Illinois National).
On May 12, 2001, Greta Schmidt was fatally injured while unloading her trash at the West Amwell transfer station. The accident occurred when another West Amwell resident, defendant Edward Hawley, backed his pick-up truck into Schmidt, pinning her against the parked RVD garbage truck. Ms. Schmidt's five-year-old daughter, Emily Marshall, observed the fatal accident from inside Schmidt's car.
Following the accident, Schmidt's estate brought this survivorship and wrongful death action against Hawley, West Amwell, RVD and the manufacturer of Hawley's pick-up truck, Ford Motor Company. The complaint also asserted an emotional distress claim on behalf of Ms. Schmidt's daughter.
At the time of the Schmidt accident, West Amwell was not only named as an additional insured under the policy Illinois National issued to RVD but also had its own general liability policy issued by the Public Alliance Insurance Coverage Fund (PAIC). West Amwell notified PAIC of the accident and subsequent lawsuit, and PAIC undertook West Amwell's defense in accordance with its obligations under the policy.
After the lawsuit had been pending for several years, West Amwell filed a third-party complaint against Illinois National seeking coverage under the policy Illinois National had issued to RVD. Before there was a ruling on this third-party complaint, PAIC entered into a settlement of the Schmidt estate's claim against West Amwell for $1,850,000. Hawley's insurer settled the claims against him for $500,000, and Ford settled for $15,000. The case subsequently proceeded to trial solely against RVD, which resulted in a jury verdict in RVD's favor.
Notwithstanding PAIC's defense and settlement of the underlying action on its behalf, West Amwell continued to pursue its third-party coverage action against Illinois National. This claim was brought before the trial court on cross-motions for summary judgment. Illinois National argued that West Amwell lacked standing to pursue a coverage action for the defense costs and settlement PAIC had paid on its behalf. Illinois National also argued that the business automobile policy it had issued to RVD did not provide coverage ...