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Schwartz v. Travelers of New Jersey Insurance Co.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


May 21, 2009

SAMUEL SCHWARTZ AND ROSE GALLO, PLAINTIFFS-APPELLANTS,
v.
TRAVELERS OF NEW JERSEY INSURANCE COMPANY, DEFENDANT-RESPONDENT.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-4204-08.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 6, 2009

Before Judges Fisher and C.L. Miniman.

In this appeal, we consider the timeliness of plaintiffs' complaint to compel arbitration to decide their claim for underinsured motorist (UIM) benefits against defendant-insurer.

Even though plaintiffs filed a demand for arbitration within six years of the auto accident, they failed to seek relief when defendant refused to participate until nearly another six years passed. We conclude that plaintiffs' inexplicable delay warranted dismissal of the complaint and, therefore, affirm.

Plaintiff Rose Gallo was a passenger in a vehicle owned and operated by plaintiff Samuel Schwartz. The vehicle, which was insured by defendant, was rear-ended by another vehicle on September 23, 1996. On August 22, 2002, defendant authorized plaintiffs' settlement of their claims against the underinsured tortfeasor.

The policy that covered plaintiff Schwartz's vehicle provided that UIM disputes were to be arbitrated in New Jersey. Plaintiffs filed a timely demand for arbitration in New York on September 19, 2002, a few days before the six-year statute of limitations would bar their claim. See Green v. Selective Ins. Co. of Am., 144 N.J. 344, 354 (1996) (holding the six-year statute of limitations applies to UIM claims and that the limitation period begins to run on the date of the accident). See also Price v. N.J. Mfrs. Ins. Co., 182 N.J. 519, 524 (2005).

Because plaintiffs demanded that arbitration occur in New York, defendant wrote to plaintiffs' counsel on October 1, 2002, correctly stating that the policy required arbitration in New Jersey*fn1 ; defendant also asserted that "the statute of limitations has expired on this claim." In the following few months, defendant or its counsel wrote to plaintiffs' counsel on a number of occasions, reiterating defendant's position that arbitration had to proceed in accordance with the policy and requesting information as to whether plaintiffs had filed or intended to file suit.*fn2 Defendant received no response.

Instead, on June 6, 2008, nearly six years after plaintiffs' demand for arbitration in New York and nearly twelve years after the auto accident, plaintiffs filed this action and sought an order requiring defendant to show cause why it should not submit to arbitration. The trial judge entered the order to show cause but, on its return date, determined that plaintiffs were not entitled to relief. As a result, the judge entered an order, on September 15, 2008, stating that plaintiffs' "[o]rder to [s]how [c]ause is hereby DENIED" for the reasons set forth in his written opinion. Plaintiffs' motion for reconsideration was denied on October 14, 2008. Although neither of these orders expressly directs the dismissal of the complaint, we interpret the first order, as illuminated by the judge's written opinion, as directing that relief.*fn3

In examining this procedural history, we recognize that the judge correctly held that the six-year statute of limitations was not offended even though plaintiffs demanded the wrong type of arbitration in the wrong location on September 19, 2002. The issue to be addressed requires inquiry into the relevance of plaintiffs' unexplained delay for another near six years before seeking relief.

We find instructive our Supreme Court's opinion in Galligan v. Westfield Centre Service, Inc., 82 N.J. 188 (1980). There, on April 14, 1977, the plaintiff commenced a timely action in federal district court, asserting subject matter jurisdiction based on diversity. The action was subject to the two-year statute of limitations, which began running on the date of the auto accident, April 17, 1975. Defendant immediately moved for dismissal, claiming a lack of diversity; two days before the federal action was dismissed for that reason, plaintiff filed a personal injury complaint in superior court. The state action was commenced two years and twenty-two days after the auto accident. Id. at 190.

In reviewing these circumstances, the Supreme Court held that the policies underlying the statute of limitations precluded dismissal notwithstanding the plaintiff's failure to file suit in state court within two years of the accident:

It has been recognized that a mistake in the selection of a court having questionable or defective jurisdiction should not defeat tolling of the statute when all other purposes of the statute of limitations have been satisfied.

Examining the circumstances of this case, we find that giving effect to the filing of the complaint in federal court within the limitations period does no violence to the purposes underlying N.J.S.A. 2A:14-2. The federal complaint stated claims identical to those now before us. Defendants concede that the mere lapse of 22 days will not prejudice them on the merits if they are required to litigate the circumstances of the deceased's automobile accident. Timely notice of plaintiff's survival claims -- albeit by the unconventional vehicle of a jurisdictionally deficient complaint -- has alerted defendants to the possibility of having to defend against the allegations. Since the passage of an additional 22 days has impaired neither the defendants' ability to litigate nor the court's capacity to adjudicate, plaintiff's cause of action has not become "stale." [Id. at 193-94 (citations omitted).]

Applying these principles to the present matter, we agree with the trial judge that the demand for arbitration -- even if inconsistent with the type of arbitration required by the policy -- was sufficient to toll the statute of limitations. In addition, as is apparent from defendant's subsequent correspondence with plaintiffs' counsel, defendant was clearly amenable to arbitrating the matter once demanded within some reasonable time after plaintiffs were advised that their choice of a New York forum violated the policy terms. The problem here is the long, unexplained delay once plaintiffs were advised that their demand for arbitration was defective.

In Galligan, the Court viewed the passage of an extra twenty-two days as causing no violence to the policies underlying the statute of limitations. See also Mitzner v. W. Ridgelawn Cemetery, Inc., 311 N.J. Super. 233, 234-35 (App. Div. 1998) (holding that a complaint filed six months beyond the statute of limitations would not be dismissed where plaintiff had previously filed a timely New York action, which was dismissed for lack of personal jurisdiction one month prior to the filing of the New Jersey complaint). Here, plaintiffs would have us conclude that the passage of more than five years and eight months following defendant's refusal to arbitrate in New York -- as compared to the far briefer periods excused in Galligan and Mitzner -- does no harm to the policies underlying the statute of limitations. We do not know how much time beyond the twenty-two days permitted by Galligan, or the similar brief time excused in Mitzner, might be acceptable in similar circumstances. Indeed, the circumstances surrounding such matters should be judged on a case-by-case basis rather than by an attempt to fix a bright-line rule. It is sufficient that we merely state our agreement with the trial judge that plaintiffs were obligated to seek relief on the UIM claim in the proper forum with greater expedition than occurred here.

As the Court held in Galligan, "[t]he most important" of the policies underlying statutes of limitations "recognizes that eventual repose creates desirable security and stability in human affairs." 82 N.J. at 191-92. Although courts are permitted, in appropriate circumstances, to alleviate the sometimes harsh and mechanical application of statutes of limitations, see, e.g., Kyle v. Green Acres at Verona, Inc., 44 N.J. 100, 109 (1965), such departures must nevertheless both provide the answering party with a fair opportunity to defend and -- in light of the potential for fading memories, witness unavailability, and lost evidence -- permit the court to "distinguish valid claims from those which are frivolous or vexatious," Galligan, supra, 82 N.J. at 192. See also Price, supra, 182 N.J. at 524. Accordingly, a "'just accommodation' of individual justice and public policy requires that 'in each case the equitable claims of opposing parties must be identified, evaluated and weighed.'" Id. at 193 (quoting Lopez v. Swyer, 72 N.J. 267, 274 (1973)).

In weighing the competing equities presented here, it suffices that we recognize that plaintiffs have never made any attempt to explain their delay from October 1, 2002, when defendant properly rejected the demand for New York arbitration, to June 6, 2008, when plaintiffs filed their complaint in this action. Defendant's correspondence within months of its unequivocal refusal to arbitrate in New York revealed its willingness to proceed with a properly instituted arbitration proceeding. Had plaintiffs sought relief even as late as defendant's March 13, 2003 letter inquiring about plaintiffs' anticipated demand for arbitration in New Jersey -- that is, at a point approximately six years and five months following the auto accident -- it is likely the matter would have proceeded to a resolution of its merits. However, plaintiffs' much lengthier slumber -- more than five years and eight months -- weighs heavily against the issue of the equitable remedy permitted by Galligan.*fn4

It has been recognized in this setting that the limitations period "should not become a[n] instrument of injustice" when invoked to bar a claim. Price, supra, 182 N.J. at 527. By the same token, an unprincipled or unbridled dispensing of the equitable power to ameliorate the harsh consequences of statutes of limitations to permit the litigation of a stale claim would also constitute an instrument of injustice. Plaintiffs were warned by defendant of the passing time and received defendant's implicit invitation to arbitrate in a manner consistent with the policy even a few months after the passage of six years from the accident. Notwithstanding their awareness of the date of the accident and the applicable limitations period, plaintiffs knowingly slept on their rights for an extraordinarily long period of time -- a period of hibernation, which, if permitted by the trial judge, would have had the effect of permitting the prosecution of the UIM claim more than twelve years after the auto accident. The facts underlying plaintiffs' plea for an equitable tolling of the limitations period are insufficient to rouse the court's conscience in their favor.

Affirmed.


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