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Ciechanowski v. New Jersey Manufacturers Insurance Co.

July 31, 2009

JENNIFER CIECHANOWSKI AND GEORGE CIECHANOWSKI, HUSBAND AND WIFE, PLAINTIFFS-APPELLANTS/ CROSS-RESPONDENTS,
v.
NEW JERSEY MANUFACTURERS INSURANCE COMPANY, DEFENDANT-RESPONDENT/CROSS-APPELLANT.



On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-2444-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued December 17, 2008

Before Judges Parrillo, Lihotz and Messano.

We are required to interpret the offer of judgment rule, R. 4:58-1 to -5 (the Rule), in the context of plaintiffs', Jennifer and George Ciechanowski, first-party claim for underinsured motorist (UIM) benefits under their automobile insurance policy with defendant, New Jersey Manufacturer's Insurance Company (NJM). The issue arose in the following context.

Plaintiff was injured in an automobile accident on September 30, 2003.*fn1 The other driver's insurance policy contained a liability limit of $100,000, and plaintiff's policy with NJM contained a UIM limit of $300,000. After notifying NJM as required by Longworth v. Van Houten, 223 N.J. Super. 174 (App. Div. 1988), plaintiff settled her claim with the tortfeasor for his policy limits, and proceeded to UIM arbitration in accordance with the terms of NJM's policy. That proceeding resulted in an award to plaintiff of $365,000, less $100,000 plaintiff received by way of her settlement.

NJM refused to pay the award, and plaintiff filed suit. On June 8, 2006, she also served an offer of judgment upon NJM in the amount of $185,000.*fn2 After discovery, the matter was arbitrated again pursuant to Rule 4:21A, resulting in an award in plaintiff's favor of $375,000. NJM rejected that award, and requested a trial de novo. After a four-day trial, the jury found in plaintiff's favor and determined her damages to be $510,000, which, in response to specific interrogatories, the jury apportioned as $275,000 for pain, suffering, and disability, and $235,000 as economic loss.

Plaintiff moved for entry of final judgment on August 23, 2007, and requested the judgment include an award of prejudgment interest pursuant to Rule 4:42-11(b), and interest, costs and fees also pursuant to the Rule. Defendant opposed the motion, arguing the Rule did not apply, and cross-moved, seeking to mold the verdict to its $200,000 policy limits. On January 10, 2008, the judge entered two orders, as well as a short written opinion containing the reasons for his decision. He concluded that the jury's verdict should be molded to the limits of NJM's policy, i.e., $200,000. As a result, plaintiff's "money judgment," R. 4:58-2, was not more than 120% of her offer of judgment. Therefore, the judge concluded she was not entitled to an award of counsel fees, enhanced interest, or litigation expenses under the Rule because it simply "d[id] not apply." The judge calculated pre-judgment interest pursuant to Rule 4:42-11(b) on the molded judgment amount, awarding plaintiff $12,701.37. He entered final judgment in plaintiff's favor against NJM in the amount of $212,701.37, plus taxed costs.

Plaintiff argues before us that the judge erred in using the policy limits to mold the verdict into a judgment, and then in using the amount of that judgment to determine whether plaintiff should recover under the Rule. Instead, plaintiff contends that the jury verdict of $510,000 should be used to determine whether she "obtain[ed] a money judgment, in an amount that [wa]s 120% of [her] offer or more[.]" R. 4:58-2(a). NJM contends that the judge correctly molded the verdict to the limits of its policy, and, since that was the "money judgment" plaintiff recovered, her offer of judgment did not trigger the provisions of the Rule at all. Additionally, NJM cross-appeals from the judge's award of pre-judgment interest. It contends that pursuant to Rule 4:42-11(b), plaintiff was entitled to interest only on the non-economic damage portion of her recovery, i.e., based upon the jury's assessment, 53.9% of the molded verdict. NJM seeks reduction of the judgment from $212,701.37 to $206,828.32.

We have considered these arguments in light of the record and applicable legal standards. We affirm.

The Supreme Court has repeatedly described the [R]ule as being "designed particularly as a mechanism to encourage, promote, and stimulate early out-of-court settlement of... claims that in justice and reason ought to be settled without trial." The [R]ule was intended to penalize a party who rejects a settlement offer that turns out to be more favorable than the ultimate judgment. [Wiese v. Dedhia, 188 N.J. 587, 593 (2006) (quoting Gonzalez v. Safe & Sound Sec. Corp., 185 N.J. 100, 125 (2005) (internal quotation omitted).]

By its terms, the Rule is applicable to all causes of action, "[e]xcept [] a matrimonial action," but only if "the relief sought by the parties in the case is exclusively monetary in nature." R. 4:58-1(a). Although a "UIM claim is a contractual one, arising out of the insurance policy issued to plaintiff by h[er] own insurer," Bardis v. First Trenton Ins. Co., 199 N.J. 265, 275 (2009), we have specifically held the Rule applicable to such claims. McMahon v. N.J. Mfrs. Ins. Co., 364 N.J. Super. 188, 191 (App. Div. 2003).

The Rule "serves the unique and particular purpose of imposing financial consequences on parties who unwisely reject an offer of settlement and insist on a trial." Wiese, supra, 188 N.J. at 593; Schettino v. Roizman Dev., Inc., 158 N.J. 476, 482 (1999). The penalties imposed by the Rule are mandatory. Wiese, supra, 188 N.J. at 592; McMahon, ...


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