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Taddei v. State Farm Indemnity Co.

January 21, 2010


On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-6655-07.

Per curiam.


Argued January 4, 2010

Before Judges Lisa, Baxter and Alvarez.

This appeal involves the application of the entire controversy doctrine. In particular, we now resolve the question left open in our opinion in Taddei v. State Farm Indem. Co., (Taddei I), 401 N.J. Super. 449 (App. Div. 2008), namely whether a plaintiff, whose uninsured motorist (UM) claim proceeds to verdict against the tortfeasor, is barred on entire controversy grounds from filing a subsequent complaint against the insurer and its claims adjusters alleging their bad faith in not settling plaintiff's UM claim and forcing him to trial. We now answer that question in the affirmative. We therefore affirm the Law Division's January 6, 2009 order that dismissed plaintiffs' August 20, 2007 complaint on entire controversy grounds. The Law Division judge did not abuse his discretion when he concluded that plaintiffs' failure to plead their bad faith claim in the original 2005 complaint precludes a separate and independent action alleging bad faith involving the very same accident that was the subject of the 2005 complaint and an ensuing January 2007 jury trial. We therefore affirm the dismissal of plaintiffs' 2007 complaint.


On July 18, 2001, plaintiff Leona Taddei lost control of his vehicle and crashed into the concrete divider on the roadway when he was cut off by a pickup truck operated by a driver who left the scene of the accident. Because the identity of the tortfeasor was unknown, plaintiff placed his own insurance carrier, defendant State Farm Indemnity Company (State Farm), on notice on November 4, 2001 of a potential UM claim under his $100,000 policy.

Plaintiff's treating physician diagnosed him as suffering from, among other things, a herniated disc in the lumbar spine, several bulging discs in the cervical spine, as well as a right shoulder rotator cuff tear. Plaintiff underwent conservative treatment, which included a minimally invasive neurosurgical procedure that was not successful. Plaintiff was subsequently examined by a physician on behalf of State Farm (IME), who opined that the "treatments [rendered] were necessary and appropriate for [plaintiff's] diagnoses."

On October 30, 2003, State Farm notified plaintiff that it would not "honor" his UM claim because plaintiff was at fault for the accident and therefore barred from presenting a claim. After receiving State Farm's October 30, 2003 letter, plaintiff requested a UM arbitration, and also renewed his request that State Farm consider settling his claim. A March 21, 2005 arbitration proceeding resulted in a finding that the uninsured motorist was 100% responsible for the accident; the arbitrators awarded plaintiff $92,500 as compensation for his injuries.

In response to the March 21, 2005 arbitration award, State Farm tendered $50,000 to plaintiff, accompanied by a letter explaining that its efforts to resolve plaintiff's UM claim through negotiations "were not successful and appear to have reached an impasse." State Farm explained that under those circumstances, it had decided to issue payment in the amount of $50,000 "without prejudicing [plaintiff's] right to receive a higher amount in the future through continuing negotiation or alternative means of resolution." The letter closed with a statement that State Farm would keep the claim "open subject to a final determination of damages."

On April 14, 2005, plaintiff replied to State Farm's letter, arguing that his case was worth "substantially more" than his $100,000 policy, that the $92,500 arbitration award was not excessive, and that although he preferred to settle the case, he would not settle for the $50,000 State Farm previously sent.

On April 25, 2005, plaintiff filed suit against State Farm alleging that he had sustained personal injuries as a result of the negligence of the uninsured tortfeasor.*fn1 The complaint sought first-party damages from defendant State Farm. Notably, the complaint did not allege bad faith on the part of State Farm in its handling of the settlement negotiations or in its evaluation of his UM claim; the allegations of the complaint were confined to plaintiff's cause of action against the tortfeasor for personal injury.

On May 24, 2006, plaintiff and State Farm engaged in mandatory court-ordered arbitration. The arbitrator, like the three who had conducted the earlier arbitration, found the uninsured driver to be 100% responsible for the accident and awarded plaintiff damages of $87,500. State Farm rejected the arbitration award and exercised its right to a trial by jury.

On September 14, 2006, months before the trial was scheduled to start, plaintiff again wrote to State Farm, urging the claims adjuster to review the arbitration materials with a view to settling the case, observing "it is quite clear that neutral people who reviewed the evidence are much closer to [plaintiff's] demands than State Farm's past offer[] [of $50,000]." Shortly before trial, plaintiff expressed a willingness to settle for $87,500. State Farm offered an additional $25,000, which would have brought plaintiff's recovery to $75,000. Plaintiff rejected that offer as insufficient.

The case went to trial before Judge Winard and a jury, commencing on January 22, 2007 and concluding two days later. In pretrial motions, plaintiff mentioned, for the first time, a "potential bad faith case," to which State Farm responded that bad faith had not been pled and, in any event, did not exist.

The jury returned a verdict of $2,500,000 in damages for plaintiff and $100,000 for his wife's per quod claim. Over plaintiff's objection, Judge Winard molded the verdict to conform with plaintiff's UM policy limit of $100,000 and entered judgment in plaintiff's favor against State Farm in that amount. The judge rejected plaintiff's assertion that State Farm's bad faith throughout the settlement negotiations entitled plaintiff to a judgment for the full amount of the jury's verdict without regard to the $100,000 cap ordinarily imposed by the insured's UM policy limits. Judge Winard declined to make any findings of fact as to plaintiff's bad faith claim in relation to the molding of the verdict because the issue had "not been squarely presented to the [c]court."

On March 16, 2007, plaintiff filed a notice of appeal challenging Judge Winard's refusal to enter judgment against State Farm in an amount equal to the jury verdict of $2,500,000 based upon State Farm's alleged bad faith. While plaintiff's appeal of Taddei I was pending, plaintiff filed a complaint on August 20, 2007 in Essex County against State Farm and its agents, defendants Kathleen Savastano and Jennifer Karsko, alleging bad faith by State Farm because at the time that State Farm sold the insurance policy to plaintiff[], they had an undisclosed policy which denied valid UM and UIM claims and summarily denied and rejected UM and UIM arbitration awards, irrespective of the validity and value of these claims, in an effort to cause their policyholders to devalue and discount legitimate UM/UIM claims to avoid such legal expenses and costs.

In his complaint, plaintiff alleged a violation of the New Jersey Consumer Fraud Act, common law fraud, negligence, negligent misrepresentation, breach of duty of good faith and fair dealing in violation of the New Jersey Unfair Claim Settlement Practices Act, and violations of ...

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