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Schwartz v. Travelers of New Jersey Insurance Co.

May 21, 2009


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

Per curiam.


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 ...

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