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Gomez v. First Jersey Casualty Insurance Co.


April 1, 2010


On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, L-9996-08.

Per curiam.


Argued February 1, 2010

Before Judges Alvarez and Coburn.

Defendant First Jersey Casualty Insurance Company (First Jersey) appeals from a March 2, 2009 judgment in favor of plaintiff Aldaberto Gomez, individually and as the assignee of rights of Jerome Shephard. The lawsuit sought to compel First Jersey to indemnify Shephard as to an August 15, 2008 judgment in the underlying matter of Gomez v. Los Amigos Tavern, Inc. and Jerome Shephard. We affirm for the reasons expressed by Judge Francis in his cogent oral opinion issued March 2, 2009.

Gomez was a patron at the Los Amigos Tavern in New Brunswick on November 2, 2003, when he was injured by Shephard, a bar security employee. On September 30, 2005, Gomez filed a personal injury action against Los Amigos and Shephard. A $125,000 default judgment was entered on July 25, 2006.

On April 23, 2007, First Jersey's authorized claim administrator, Risk Control Associates Insurance Group (RCA), sent Shephard a reservation of rights (ROR) letter informing him that he was in violation of Los Amigos' policy with First Jersey because he failed to notify the insurer of the claim "within a reasonable amount of time after its occurrence." The ROR also stated that any action undertaken by First Jersey is "with a reservation of rights to possibly deny coverage for late reporting of the claim and the intentional act exclusion." Most significantly, the letter noted:

FJCIC is assigning the below described attorney to move for vacating the default judgment. FJCIC fully reserves its right to disclaim coverage to Los Amigos for this claim if the court refuses to set aside the judgment and allow a defense to be entered. This clearly would prejudice our rights under the policy due to your late reporting of the claim. Since you and Los Amigos would be responsible for this judgment, you may want to retain counsel to protect your interests, and associate themselves with the attorneys we have appointed, described below. This would be at your own expense.

Shephard did not respond to the letter, but he fully cooperated with the trial counsel provided by the insurer in the defense of the personal injury action. Ultimately, the jury rendered a verdict against the bar and Shephard in the amount of $135,450, exclusive of costs and prejudgment interest, on October 13, 2008. RCA notified Shephard it would not indemnify him because the jury found his conduct to be intentional, an exclusion from coverage under the policy. Shephard thereafter assigned his rights to Gomez, who subsequently brought a declaratory judgment action against First Jersey.

In rendering judgment in favor of Gomez, Judge Francis stated: the last message in that paragraph [of the ROR], in that second paragraph, is that the carrier reserves its right to disclaim coverage, which covers everything, if the court refuses to set aside the judgment and allow a defense to be entered. The court set aside the judgment and allowed a defense to be entered.

So, therefore, a layperson . . . may have concluded the default judgment has been vacated, a defense is being offered; therefore, this reservation of rights no longer applies.

In other words, the judge found that the language of the ROR letter could easily confuse a layperson into believing the ROR was applicable only if the default judgment was not set aside.

Once the court indicated at the initial oral argument that it was inclined to rule against First Jersey, counsel for First Jersey requested and was granted additional time to examine the trial file. A final decision was accordingly postponed. At the continuation of the argument on March 2, First Jersey supplied a certification from trial counsel stating that Shephard "clearly expressed" his understanding of the limits of the policy as to intentional conduct, and that Shephard could not afford to hire an attorney.

In response, Gomez had obtained a certification from Shephard stating that he did not meet with trial counsel prior to trial, and that a different attorney from trial counsel's office had represented him at depositions. Shephard denied discussing coverage exclusions, or his right to reject the representation extended by the insurer, with either individual.

The motion judge decided that no plenary hearing was necessary to resolve this factual dispute because in any event the written notification did not explicitly inform Shephard of his right to reject the defense. Given this fact, Shephard's silence could not be construed as acquiescence pursuant to the seminal case of Merchants Indemnity Corp. v. Eggleston, 37 N.J. 114, 127-28 (1962). The trial court considered the factual conflict seemingly created by the certifications not to be material to the resolution of the indemnification. We agree.

The issue is not whether the attorney retained by the insurer believed that Shephard understood the parameters of the ROR, nor whether Shephard could have afforded to retain his own counsel. The issue is whether the notification supplied by First Jersey "fairly inform[ed] the insured that the offer may be accepted or rejected." Id. at 128. An insured's silent acquiescence will be construed to mean affirmative consent to representation with an ROR only if the notice was unambiguous. Ibid.

Accordingly, we conclude First Jersey's claims of error to lack merit. No genuine issue of material fact arose from the conflicting certifications produced by both sides prior to the final oral argument on Gomez's motion for judgment. The ROR letter did not unambiguously express Shephard's right to reject the offer to defend.



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