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Selective Insurance Co. v. Coach Leasing

June 16, 2008


On appeal from the Superior Court of New Jersey, Law Division, Sussex County, Docket No. L-592-05.

Per curiam.


Argued April 9, 2008

Before Judges Axelrad, Payne and Messano.

Plaintiff Selective Insurance Company (Selective) appeals from a series of three orders entered by the motion judge. The first, dated November 1, 2006, vacated a previously entered default judgment in favor of Selective as against defendant Coach Leasing, Inc. (Coach), and permitted Coach to file an answer to Selective's complaint; the second, dated December 15, 2006, denied Selective's motion for reconsideration; and the third, dated March 2, 2007, denied Selective's motion to summarily confirm two previously-entered arbitration awards in favor of Selective, as against Coach, and granted Coach's motion to vacate the awards "with prejudice." We have considered the arguments raised by the parties in light of the record and applicable legal standards. We reverse.


The litigation has its genesis in a July 9, 2000, motor vehicle accident in which a vehicle owned and operated by Selective's insured, Justino Martinez, collided with a bus owned and operated by Coach. Martinez and his passenger were both seriously injured in the accident, resulting in their claims for personal injury protection (PIP) benefits from Selective.

On July 18, 2002, Selective filed a subrogation action against Coach and Leisure Time Tours (Leisure Time) in Monmouth County 1) seeking reimbursement for the PIP benefits paid on behalf of its insured; 2) seeking to compel Coach's insurer to arbitrate Selective's reimbursement claim; or 3) alternatively, seeking to compel Coach, if self-insured or uninsured, to arbitrate the claim. The complaint also sought reimbursement for property damage benefits Selective paid to Martinez. On August 6, 2002, Selective filed an amended complaint adding Oneil A. Wright,*fn2 the bus driver, as a defendant.

On or about March 17, 2003, Coach filed a single answer to the amended complaint on behalf of itself, Leisure Time, and Wright. Of note, Coach admitted the allegation in plaintiff's complaint that Coach was self-insured "for purposes of automobile insurance." Jennifer L. Hechler of Mintzer, Sarowitz, Zeris, Ledva & Meyers, Esqs. was designated as trial counsel.

Meanwhile, Martinez and his passenger filed suit in Hudson County against all three defendants seeking damages for personal injuries resulting from the accident, and against Selective seeking PIP benefits. Martinez's attempts to consolidate the two actions were denied. On June 3, 2003, counsel for Selective wrote to Hechler and advised her of the denial of the efforts to consolidate the two matters. He noted the motion judge's suggestion that the PIP subrogation case "be heard in an inter-company arbitration," and suggested that the parties use Arbitration Forums, Inc. (AFI), as the arbitrator. His letter closed, "If the above is acceptable to you, kindly execute the enclosed . . . [v]oluntary [s]tipulation of [d]ismissal [w]ithout [p]rejudice and return to this office . . . ." Hechler responded on June 11, 2003, by returning the executed stipulation that provided for dismissal of Selective's complaint and submission of the PIP dispute to binding arbitration before AFI. On July 7, 2003, Selective's counsel, John T. Rihacek, filed the stipulation with the court.

In the context of the motion practice that followed, Rihacek certified that he spoke to Hechler on June 17, 2003, was advised that Coach was self-insured, and that Sedgwick Claims Management (Sedgwick) served as third-party administrator of claims made against Coach. Hechler provided the claim number, as well as the name and address of the adjuster at Sedgwick, and Rihacek prepared first a handwritten note, and later a typed memo to his file, reflecting this information. Throughout this litigation, Coach has never denied that its attorney relayed this information to Rihacek, though it denies ever advising him or anyone else on Selective's behalf that Sedgwick was authorized to accept service on behalf of Coach.

On September 3, 2003, Selective's counsel wrote Hechler to advise her that the matter would be heard before AFI as per the parties' agreement, and requested she provide "the name, address, adjuster, and claim number of the entity that will be representing the defendants" at the arbitration in the event that her law firm would not be representing Coach. The record does not reveal any response.

On November 4, 2004, Selective electronically filed its application with AFI and its counsel mailed a copy of the material to Coach, via regular and certified mail, in care of the Sedgwick claims adjuster whose name and address were previously supplied. The record reveals receipt of the material by Sedgwick.

A copy of the arbitration application was sent via regular mail to Hechler as a courtesy, though, since her law firm no longer maintained an office at the address to which the letter was mailed, it was apparently never received. In any event, Coach did not answer Selective's arbitration filing, and neither Coach nor Sedgwick appeared at the hearing before AFI that was held on January 26, 2005.

Selective presented its evidence and the arbitrator rendered a final decision on January 31, 2005, awarding Selective $29,634.98 for payments made on behalf of Martinez and $54,614.02 for payments made on behalf of his passenger. Selective's attorney mailed copies of the arbitration awards, via regular and certified mail, to Sedgwick on March 4, 2005, and the record reveals that too was received.

After some initial attempts to have Coach pay the awards proved fruitless, Selective filed a one count complaint against Sedgwick in the Law Division in Sussex County seeking confirmation of the arbitration awards, the entry of judgment against Sedgwick, and costs and attorneys' fees.

On or about December 29, 2005, Hechler, now known as Jennifer L. Pustizzi, filed an answer and counterclaim on Sedgwick's behalf seeking an order vacating the arbitration awards. Sedgwick asserted that Coach was self-insured for "purposes of any and all liability claims," but also stated that "[a]t all times hereinafter mentioned, Coach [] was insured under a commercial insurance policy issued by USF&G Insurance Company, for purposes of both liability and PIP [] coverage." Sedgwick also admitted that it "was [] authorized to administrate certain liability claims on behalf of Coach []," but asserted that it was improperly named as a party to the litigation, and that it was never notified of the arbitration filing or hearing.

Selective moved to amend its complaint adding Coach as a defendant and simultaneously moved to confirm the arbitration awards against both defendants. On April 18, 2006, the judge entered an order confirming the arbitration awards against Sedgwick and Coach. Coach did not file an answer to the amended complaint and on June 1, 2006, at Selective's request, the judge entered another order vacating his prior order confirming the arbitration awards against Coach only, and entering default against Coach.

Over the ensuing weeks, counsel for Selective and Coach discussed the amount of PIP payments that had been made. Selective agreed, in a letter to Pustizzi dated June 7, 2006, that it would not seek the entry of default judgment against Coach, or move to execute on the confirmed arbitration award as to Sedgwick, for 30 days in order to give Coach time to pay the arbitration awards. However, on July 20, 2006, after no payment was made, Selective applied for the entry of default judgment against Coach. This was apparently ...

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