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Newark Insurance Co. v. Valora's Second Car Center

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


February 22, 2008

NEWARK INSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
VALORA'S SECOND CAR CENTER, LUONGO TRANSMISSION, EMPIRE FIRE AND MARINE INSURANCE COMPANY, PEERLESS INSURANCE COMPANY, HARLEYSVILLE INSURANCE COMPANY AND RLMB, INC., DEFENDANTS-RESPONDENTS, AND CHRYSLER CORPORATION, DAIMLER CHRYSLER CORPORATION, DEFENDANTS.*FN1

On appeal from Superior Court of New Jersey, Law Division, Cumberland County, Docket Nos. L-808-01, L-536-02, L-236-03 and L-251-03.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 25, 2007

Before Judges Skillman, Winkelstein and Yannotti.

Defendant Valora's Second Car Center (Valora's) is a used car dealer. Valora's was insured under a policy issued by defendant Empire Fire and Marine Insurance Company (Empire). This policy provided two distinct forms of coverage pertinent to this appeal: first, "'Garage Operations' -- 'Auto' Liability" coverage for "an 'accident' . . . resulting from 'garage operations' involving the ownership, maintenance or use of [a] 'covered auto[,]'" and second, "'Garage Operations' -- Other Than 'Auto Liability'" for "an 'accident' resulting from 'garage operations' other than the ownership, maintenance or use of 'covered autos.'"

Valora's sold a used Dodge Avenger to Nicky Green. Valora's had bought this car from defendant RLMB, Inc., a wholesaler of used cars. Before RLMB acquired ownership of the car, its transmission had been repaired by defendant Luongo Transmissions.

On March 5, 2001, several weeks after buying the car from Valora's, Green was involved in an accident with a car being operated by Shirley Van Keuren. Green, Van Keuren and Tyrone Bordley, who was a passenger in Green's car, were all seriously injured in the accident.

At the time of this accident, Green had a personal automobile liability policy issued by plaintiff Newark Insurance Company (Newark Insurance). Green and Bordley submitted claims for PIP benefits to Newark Insurance, which it paid.

Newark Insurance then brought an action against Valora's, RLMB, Luongo, Chrysler and Daimler Chrysler Corporation*fn2 for reimbursement of the PIP benefits it had paid to Green and Bordley. Newark Insurance's claims were based on N.J.S.A. 39:6A-9.1, which provides that an automobile insurer that pays PIP benefits may obtain reimbursement from any tortfeasor who was not required to maintain PIP coverage at the time of the accident. Newark Insurance subsequently filed an amended complaint that added as defendants Valora's insurer Empire, RLMB's insurer Peerless Insurance Company, and Luongo's insurer Harleysville Insurance Company.

Valora's and Empire filed a motion for a summary judgment dismissing Newark Insurance's claims against them based on the part of N.J.S.A. 39:6A-9.1 that bars a claim for reimbursement of PIP benefits against a tortfeasor who is required to and did purchase PIP coverage under its own insurance policy. The trial court granted this motion, concluding that because any tort claim against Valora's would have to be based on its alleged negligence during the period it held the Dodge Avenger for sale, it would be covered under the "auto" liability coverage of its policy, which provides for PIP benefits, and therefore, it could not be subject to a claim for PIP reimbursement under N.J.S.A. 39:6A-9.1.

In addition to Newark Insurance's PIP benefits reimbursement action, Green, Bordley and Van Keuren all brought personal injury actions against Valora's and Luongo. Van Keuren and Bordley also named Green as a defendant in their actions.*fn3

Green settled his personal injury action for $175,000, and Bordley settled his action for $125,000. As a result of these settlements and the trial court's grant of summary judgment to Valora's and Empire, the only remaining claims were Van Keuren's personal injury claim and Newark Insurance's PIP reimbursement claims against RLMB and Luongo, and their insurers, Peerless and Harleysville.

Van Keuren indicated she was willing to settle her claim for $325,000, and Newark Insurance indicated it was willing to settle its claim for $30,000. However, as a result of the settlements with Green and Bordley, there was only a total of $330,000 in insurance coverage available to settle both claims. Defendants indicated they would be willing to settle both claims for a total of $325,000, and it was suggested that Van Keuren accept $305,000 to settle her claim and that Newark Insurance accept $20,000 to settle its claims.

On April 20, 2005, Newark Insurance's counsel sent a letter to the court and parties, which stated that Newark Insurance would agree to accept $20,000 to settle its PIP reimbursement claims against Luongo and RLMB. However, Van Keuren did not agree to a settlement of her claim.

During a telephone conference on April 22, 2005, Newark Insurance's counsel withdrew his offer to settle Newark Insurance's PIP reimbursement claims for $20,000. This withdrawal occurred before any response from Luongo or RLMB to his April 20, 2005 letter.

RLMB and Peerless subsequently brought a motion for enforcement of Newark Insurance's purported agreement to accept $20,000 to settle its PIP reimbursement claims. Luongo and Harleysville joined in the motion. The parties submitted extensive certifications and exhibits in connection with the motion, which are discussed in section II of this opinion.

The trial court concluded in an oral opinion that the April 20, 2005, letter from Newark Insurance's counsel constituted an acceptance of a settlement offer made on behalf of RLMB, Luongo and their insurers and that Newark Insurance's acceptance was not conditioned on Van Keuren accepting the offer to settle her claim for $305,000. Therefore, the court granted the motion to enforce the settlement. Sometime thereafter, Van Keuren's claim was settled, thus concluding the case at the trial level.

Newark Insurance appeals from the order granting Empire and Valora's summary judgment dismissing Newark Insurance's claim for reimbursement of the PIP benefits paid to Green and Bordley. Newark Insurance also appeals from the order granting the motions by RLMB, Luongo, Peerless and Harleysville to enforce Newark Insurance's purported settlement of its PIP reimbursement claims against them. We reverse both orders.

I.

The right of an automobile insurer to obtain reimbursement from a tortfeasor for PIP benefits paid to its insured is governed by N.J.S.A. 39:6A-9.1, which provides in pertinent part:

An insurer, . . . paying [PIP] benefits . . . as a result of an accident occurring within this State, shall, within two years of the filing of the claim, have the right to recover the amount of payments from any tortfeasor who was not, at the time of the accident, required to maintain [PIP] . . . coverage, . . . or although required did not maintain [PIP] . . . coverage at the time of the accident.

Thus, only an alleged tortfeasor who was required to and in fact maintained coverage for PIP benefits "at the time of [an] accident" for which PIP benefits were paid is exempt from a reimbursement claim by the injured party's insurer. Moreover, the term "any tortfeasor" in N.J.S.A. 39:6A-9.1 is not limited to parties who negligently operate a car or other motor vehicle but rather "encompasses all tortfeasors that are not subject to the No-Fault law. " State Farm Mut. Auto. Ins. Co. v. Licensed Beverage Ins. Exch., 146 N.J. 1, 15 (1996).

Valora's is engaged in the business of selling used cars. In the course of that business, Valora's owns those cars during the period between their acquisition and sale. Consequently, Valora's is required to maintain automobile liability insurance upon those cars, N.J.S.A. 39:6A-3, and that coverage must include PIP benefits, N.J.S.A. 39:6A-4.

However, once Valora's sells a car, it no longer has statutory responsibility to maintain automobile liability insurance coverage for the car. At that point, this responsibility is transferred to the new owner -- in this case Green.

After selling a car, Valora's has a continuing exposure to liability for an accident caused by a defect in the car, but this potential liability is the same as that of any other seller or repairer of a product. Although Valora's can obtain insurance coverage for this potential liability, it has no statutory responsibility to do so. And if Valora's does choose to obtain such a policy, it would not take the form of a "standard automobile liability insurance policy[,]" under which PIP benefits must be provided, N.J.S.A. 39:6A-4, but rather a policy providing coverage for products liability or business operations. See Lee R. Russ & Thomas F. Segalia, Couch on Insurance § 1.34 (3d ed. 1995) (describing different types of liability insurance).

Valora's situation is similar in this respect to that of a manufacturer of car brakes or other component parts of a car that owns passenger cars used in the course of its business. Such a business enterprise would not be immunized from a PIP reimbursement claim by an insurer that had paid PIP benefits to a party injured in an accident caused by an alleged defect in its brakes on the ground that it was required to maintain PIP coverage on its cars. See State Farm Mut. Auto. Ins. Co. v. Licensed Beverage Ins. Exch., supra, 146 N.J. at 11-15. Similarly, Valora's is not immunized from Newark Insurance's claim for PIP reimbursement because this claim is not based on Valora's alleged negligence as an owner/operator or a car, for which it was required to maintain automobile liability coverage that included PIP benefits, but rather on its alleged sale of a defective car to Green, for which it was not required to maintain any insurance coverage. See Cynthia M. Craig & Daniel J. Pomeroy, N.J. Auto Insurance Law § 14.4 (2007).

Thus far, we have not referred to the insurance policy Empire issued to Valora's because, even if that policy provided automobile liability coverage that included PIP benefits for the Dodge Avenger after Green acquired title, such coverage would not be required by N.J.S.A. 39:6A-3 and -4, and thus, Valora's would not be a tortfeasor who was "required to maintain [PIP] benefits coverage . . . at the time of [Green's] accident."

N.J.S.A. 39:6A-9.1.

In any event, it is clear the Empire policy did not provide automobile liability coverage to Valora's for any claim arising out of Green's March 5, 2001 accident with Van Keuren. The automobile liability coverage of the Empire policy was set forth in section 1, as follows:

"Garage Operations" - "Auto" Liability We will pay all sums an "insured' legally must pay as damages because of "bodily injury" or "property damage" to which this insurance applies, caused by an "accident" and resulting from "garage operations" involving the ownership, maintenance or use of "covered autos."

The policy contained a definition of "covered auto," which provided in pertinent part:

"[C]overed auto" means a land motor vehicle, . . . licensed for use on public roads, that is owned, hired, used or held for sale by you. . .

Although it "owned" and "held for sale" the Dodge Avenger during the period of time it was part of Valora's stock of used cars, Valora's no longer owned or held that car for sale once it transferred title to Green. Therefore, the automobile liability coverage of the Empire policy no longer applied to that car at the time Green was involved in the accident with Van Keuren. If the Empire policy provided any coverage to Valora's for that accident (an issue that is not before us), it would be under the "'Garage Operations' -- Other than 'Auto' Liability" coverage set forth in section 2 of the policy. This coverage did not include PIP benefits. Consequently, even though Empire could be characterized as a "PIP carrier" with respect to the automobile liability coverage provided under section 1 of its policy, see Unsatisfied Claim & Judgment Fund Bd. v. N.J. Mfrs. Ins. Co., 138 N.J. 185, 195 (1994), it could not be thus characterized with respect to the coverage provided under section 2, which was the only coverage that could apply to a claim against Valora's arising out of the March 5, 2001 automobile accident.

II.

The motion by RLMB and Peerless, in which Luongo joined, to enforce Newark Insurance's alleged settlement of its PIP reimbursement claims against them, was supported by a certification of counsel for RLMB and Peerless. This certification alleged that during a March 30, 2005 telephone settlement conference, Peerless and Harleysville each offered $10,000 to settle Newark Insurance's claim, for a package settlement offer of $20,000. The certification further alleged that Newark Insurance's counsel sent a letter, dated April 20, 2005 and received by counsel for RLMB and Peerless on April 22, 2005, which accepted that offer. However, later that same day, another counsel for Newark Insurance advised the parties during another telephone settlement conference that his client had changed its mind and would no longer accept the $20,000 package settlement offer.

In opposition to the motion, Newark Insurance submitted a certification by Newark Insurance's counsel who had participated in the March 30, 2005 telephone settlement conference. He alleged that, in response to Newark Insurance's $30,000 settlement demand, counsel for Peerless and Harleysville "raised the possibility" of offering $20,000 to settle Newark Insurance's claim "as part of a package" of $325,000 for the settlement of both Newark Insurance's and Van Keuren's claims. However, Van Keuren refused to accept less than the entire $325,000 offered by Peerless and Harleysville to settle her claim. Newark Insurance's counsel also stated that he had a conversation with Harleysville's counsel sometime between March 30 and April 20, 2005, during which Harleysville's counsel reiterated that his client was only interested in a settlement with Newark Insurance if it was "tied to the settlement of Van Keuren's claim." Newark Insurance's counsel asserted that none of the defendants made a firm settlement offer "independent of the Van Keuren claim" before the April 22, 2005 telephone settlement conference during which Newark Insurance withdrew its $20,000 settlement offer.

The record before the trial court on the motion to enforce the alleged settlement of Newark Insurance's PIP reimbursement claims against RLMB, Luongo, Peerless and Harleysville also included the April 20, 2005 letter from Newark Insurance's counsel, which stated in pertinent part:

Please allow the following letter to confirm that I do have authority to resolve my client's PIP claims for $20,000, as to the remaining defendants, Luongo Transmissions and RLMB, Inc. Given the significant flexibility my client has shown in this matter, it is my hope that a full and final resolution can be confirmed as to both defendants, Luongo Transmissions and RLMB, Inc. for the PIP Reimbursement matter.

In the event the PIP matter can not be resolved for $20,000 as to the remaining defendants in my case, we will have to proceed to intercompany arbitration pursuant to your honor's court order.

Accordingly, you may accept $20,000 as my client's final settlement demand, to assist everyone in arriving at the figures needed to secure a global resolution of this matter.

"A settlement agreement between parties to a lawsuit is a contract." Nolan v. Lee Ho, 120 N.J. 465, 472 (1990).

Therefore, as with any other alleged contract, a party asserting that litigation has been resolved by a settlement agreement must show a "meeting of the minds" concerning its essential terms. Cmty. Realty Mgmt., Inc. v. Harris, 155 N.J. 212, 226 (1997).

If there is a factual dispute as to whether a settlement agreement was entered into, an evidentiary hearing must be held. See Harrington v. Harrington, 281 N.J. Super. 39, 46-47 (App. Div.), certif. denied, 142 N.J. 455 (1995).

The previously quoted certification of Newark Insurance's counsel indicates that there is a factual dispute as to whether the parties agreed to the settlement of Newark Insurance's PIP reimbursement claims. Newark Insurance's counsel stated in his certification that counsel for Peerless and Harleysville only "raised the possibility" of a $20,000 offer to Newark Insurance at the March 30, 2005 settlement conference. Such an informal comment would not constitute an offer that could create a binding settlement agreement by Newark Insurance's acceptance. See Richard A. Lord, Williston on Contracts § 4.6 (4th ed. 1990) ("a mere expression of intention or general willingness to do something on the happening of a particular event or in return for something to be received does not amount to an offer").

Newark Insurance's counsel also alleged that the statements to him by Peerless's and Harleysville's counsel regarding a possible settlement of Newark Insurance PIP reimbursement claim were all conditioned upon Van Keuren agreeing to settle her claim. This understanding of Peerless's and Harleysville's position regarding settlement is supported by the April 20, 2005 letter of Newark Insurance's counsel in which he stated: "[Y]ou may accept $20,000 as my client's final settlement demand, to assist everyone in arriving at the figures needed to secure a global resolution of this matter." (Emphasis added). It is undisputed that Van Keuren did not agree to a settlement of her claim before Newark Insurance withdrew its settlement offer at the April 22, 2006 settlement conference, and thus there could be no "global resolution" of the litigation.

For these reasons, we conclude that there were contested issues of fact regarding the alleged settlement of Newark Insurance's PIP reimbursement claims and that the trial court erred in granting the motion for enforcement of that purported settlement without an evidentiary hearing.

Accordingly, we reverse the orders granting Newark Insurance's PIP reimbursement claim and the motion by RLMB, Luongo, Peerless and Harleysville for enforcement of the alleged settlement of Newark Insurance's PIP reimbursement claims and remand the case to the trial court for further proceedings consistent with this opinion.


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