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Davis v. New Jersey Manufacturers Insurance Co.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 28, 2008

ANDREA M. DAVIS, PLAINTIFF-RESPONDENT,
v.
NEW JERSEY MANUFACTURERS INSURANCE COMPANY, DEFENDANT-APPELLANT.
NEW JERSEY MANUFACTURERS INSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
ROYAL AND SUNALLIANCE INSURANCE COMPANY AND ANDREA DAVIS, DEFENDANT-RESPONDENT.

On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket Nos. L-927-06 and L-962-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued June 9, 2009

Before Judges Lisa and Collester.

Appellant Andrea M. Davis (Davis) and her insurer, New Jersey Manufacturer's Insurance Company (NJM), appeal from the March 28, 2008 order of Judge Andrew J. Smithson granting summary judgment in favor of respondent Royal and Sunalliance Insurance Company (Royal). We affirm.

The facts are undisputed. On May 15, 2000 Davis, an employee of Capital Health System, Inc., (Capital) was a passenger in an ambulance owned by Capital and operated by another Capital employee when it was struck by a vehicle operated by Jose Galarza. Davis suffered personal injuries as a result of the collision.

At the time of the accident Galarza was insured by Clarendon National Insurance Company under a personal automobile policy providing policy limits of $15,000/ $30,000. Davis was personally insured by NJM under a standard automobile policy that provided underinsured motorist benefit ("UIM") limits of $300,000 per accident. The ambulance was insured by Capital through Royal under a commercial policy that provided UIM limits of $1,000,000 per accident. The Royal policy's UIM endorsement contained a "step-down" provision that could potentially lower the UIM limits available under the policy.

By letter dated October 22, 2003, Davis's counsel advised NJM that Davis had received a $14,000 settlement offer from Galarza, against whom she had instituted a personal injury action, and requesting that NJM "advise whether ... [they] may accept the offer of settlement and provide a full release or whether ... [NJM] intend[ed] to pay the settlement offer and pursue subrogation upon completion of the arbitration hearing." Davis's counsel also put NJM on formal notice of Davis's intent to make a UIM claim under the NJM policy. Further, the letter also stated that:

[P]ursuant to Hallion v. Liberty Mut. Ins. Co., 337 N.J. Super. 360 (App. Div. 2001), you are obligated to provide Longworth notice to any carrier you allege is primary and we will take no action in that regard.

The UIM endorsement on the Royal policy contains the following notice provision:

A person seeking coverage under this endorsement must also promptly notify us, in writing, of a tentative settlement between the "insured" and the insurer of an "underinsured motor vehicle", and allow us to advance payment to that "insured" in an amount equal to the tentative settlement within 30 days after receipt of notification to preserve our rights against the insurer, owner or operator of such "underinsured motor vehicle."

On March 17, 2005, nearly a year and a half after being put on notice by Davis and a year after Davis's action against Galarza was dismissed because of settlement, NJM notified Royal of Davis's tort action, her settlement with Galarza, and her demand for UIM arbitration. Judge Smithson found that Royal was prejudiced by NJM's failure to issue a timely Longworth notice and granted summary judgment in favor of Royal.

When a party to an insurance policy providing UIM benefits is involved in an accident, the insured must notify his or her insurer when suit is filed. Longworth v. Van Houten, 223 N.J. Super. 174 (App. Div. 1988). If it appears that the tortfeasor's insurance coverage will not satisfy the insured's damages, notice again should be given to the insurer. Ibid. If the insured receives a settlement offer or an arbitration award that does not satisfy the insured's damages, then the insured must notify the insurer of that fact. Ibid.

In Rutgers Cas. Ins. Co. v. Vassas, 139 N.J. 163 (1995), our Supreme Court expressly approved the procedure set forth in Longworth, requiring an insured to give notice of an intent to settle with a tortfeasor before obtaining UIM coverage. This procedure has been held to "reflect a fair balance between the competing interests of the parties involved." Vassas, supra, 139 N.J. at 172.

In Hallion v. Liberty Mut. Ins. Co., 337 N.J. Super. 360 (App. Div. 2001), we held that:

[A]s between the insured and the insured's carrier, the insured's carrier has the responsibility to provide Longworth notice to the primary carrier. Therefore, when an insured under a policy providing UIM benefits is involved in an accident and has undertaken legal action against the tortfeasor, the insured must provide Longworth notice to his or her insurance carrier. In turn, the insured's carrier is responsible for providing Longworth notice to any asserted primary carrier. To be sure, the better practice is for the insured to provide Longworth notice to all potential UIM providers. However, the ultimate responsibility is upon the UIM insurer to give Longworth notice to the primary carrier. [Id. at 368.]

Here, Royal did not receive a timely Longworth notice from NJM until well after Davis' settlement with the tortfeasor. As a primary UIM carrier, Royal had the right to a Longworth notice within a reasonable time before any final settlement with a tortfeasor and the submission of a general release.

NJM does not dispute that it failed to send a timely Longworth notice to Royal. Nor does NJM dispute that it bears the burden of showing that its inaction did not prejudice Royal, a burden NJM failed to meet. Royal was clearly prejudiced since any subrogation rights it may have had against Galarza were extinguished.

NJM's remaining arguments are without sufficient merit to warrant discussion in a written opinion. See R. 2:11-3(e)(1)(E).

Affirmed.

20080728

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