On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-3119-02.
The opinion of the court was delivered by: Skillman, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Skillman, Fuentes and Gilroy.
This appeal requires us to consider the circumstances under which a primary insurer may be held liable to an excess insurer for prejudgment interest awarded to the plaintiff in an underlying tort action based on the primary insurer's alleged failure to engage in good faith settlement negotiations.
In the early morning hours of February 16, 1998, an employee of Grinnell Haulers sideswiped a vehicle occupied by Bernard and Gloria Brodsky, causing it to come to a rest on a shoulder of the highway facing oncoming traffic. Brodsky v. Grinnell Haulers, Inc., 181 N.J. 102, 106 (2004). The Brodskys exited their car and stood on the shoulder. Minutes later, a vehicle driven by William Horsman hit Mr. Brodsky and then the disabled car, which struck Mrs. Brodsky. Id. at 106-07. Mr. Brodsky died soon after, and Mrs. Brodsky suffered severe permanent injuries. Id. at 107.
The Brodskys filed a personal injury and wrongful death action against Grinnell and Horsman. Ibid. Horsman, who was not insured, filed for bankruptcy, and the bankruptcy court discharged Horsman from any debt arising from the accident. Ibid.
Grinnell had a primary insurance policy with plaintiff New Jersey Manufacturers Insurance Company (NJM), with a coverage limit of $1 million, and an excess policy with defendant National Casualty Company (NCC), which provided an additional $4 million in coverage.
In October 1999, the Brodskys made a settlement demand of $5 million against Grinnell, which was lowered to $3.5 million in September 2000. This demand remained firm in the face of offers by Grinnell for $400,000 and $750,000 before the first trial in December 2001.
At that trial, the only issues were the apportionment of fault between Grinnell and Horsman and the extent of the Brodskys' damages. Brodsky, supra, 181 N.J. at 107. The jury found Grinnell sixty percent negligent and Horsman forty percent negligent, and awarded the Brodskys $1,640,000 in damages, plus prejudgment interest, for a total judgment of $1,945,533.17. Ibid.
On appeal, we concluded that the trial court erred in giving an ultimate outcome instruction and therefore reversed and remanded for a new trial on the apportionment of liability. Brodsky v. Grinnell Haulers, Inc., 362 N.J. Super. 256, 262, 284 (App. Div. 2003). The Supreme Court affirmed this decision. Brodsky, supra, 181 N.J. at 128.
Before the trial on remand, Grinnell's counsel informed NCC's counsel in September 2004 that NJM had authorized payment of its full $1 million policy limit to settle the Brodskys' claims. However, NCC's counsel allegedly asked Grinnell's counsel to withhold this offer from the Brodskys' counsel in order to convince the Brodskys to settle for less than $1 million.
Around the same time, the Brodskys lowered their settlement demand to $1.5 million. However, NCC allegedly offered to contribute only $100,000 to meet this demand, insisting that NJM pay the remaining $1.4 million. NJM refused to pay this amount, taking the position that it was not obligated to pay anything above its $1 million policy limit to settle the case. The communications between NCC and NJM ...