July 20, 2011
LORRAINE JACKSON, PLAINTIFF-RESPONDENT,
NEW JERSEY INDEMNITY INSURANCE COMPANY, DEFENDANT-RESPONDENT, AND IFA INSURANCE COMPANY, DEFENDANT-APPELLANT, AND AVIS RENT A CAR SYSTEM, INC., AND ENTERPRISE LEASING COMPANY, DEFENDANTS.
On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-0497-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 24, 2011
Before Judges Grall and LeWinn.
Defendant IFA Insurance Company (IFA) appeals from the January 9, 2008 order granting summary judgment to its co-defendant, New Jersey Indemnity Insurance Company (Indemnity). We reverse.
In May 2003, while driving her vehicle insured by IFA, plaintiff Lorraine Jackson was struck by a vehicle driven by Karen Harris. Harris had leased that vehicle from Enterprise Leasing Company (Enterprise), which is self-insured; Harris' personal vehicle was insured by Indemnity. Plaintiff sued Harris in 2004 and obtained an $86,360 default judgment.
In 2008, plaintiff sued Indemnity and IFA. She claimed Indemnity "breached its obligations of good faith and fair dealing by failing to" defend Harris and that IFA breached its contract by failing to pursue uninsured/underinsured (UM/UIM) claims on her behalf. In her complaint, plaintiff asserted that she "put IFA . . . on notice of a claim for UM/UIM [a]rbitration" by letter dated October 11, 2004. She further asserted that "[h]aving had no response to that correspondence in writing, [p]laintiff next put . . . Indemnity . . . on notice of the UM/UIM claim regarding their insured . . . Harris."
Indemnity moved for summary judgment; it submitted letters that its claims adjuster sent to Harris between February 2004 and January 2005, to which Harris apparently never responded. Indemnity claimed that it "never got proper notice pursuant to the contract of insurance[,] . . . [and] never got the cooperation required under the contract . . . ." Therefore, it denied coverage. Indemnity asserted that it first received notice of the claim when plaintiff's counsel sent it a copy of the default judgment.
IFA argued in opposition that Indemnity had failed to demonstrate "appreciable prejudice" and had not fulfilled its "reciprocal duty . . . to secure cooperation . . . that would require something more than just sending letters, as was done in this case. It would require sending out an investigator, something of that nature. And there's no indication that that was done in this case." IFA further asserted that Indemnity was notified of the claim "well before the default was entered."
In granting Indemnity's motion, the judge noted there was no question of liability as Harris had "rear-ended . . . plaintiff." The judge noted further that Harris left the scene of the accident before the police arrived, never responded to plaintiff's complaint, and never responded to the letters from Indemnity's claims representative. The judge concluded that "under the terms of the policy, there [was] definitely a failure to notice, a failure to cooperate." The judge acknowledged, however, that he did not "know if [Indemnity had] been prejudiced or not."
On appeal, IFA contends that the judge erred in granting summary judgment because Indemnity had failed to (1) demonstrate appreciable prejudice and (2) fulfill its duty of reciprocal cooperation. We concur that the motion judge failed to address either factor.
When reviewing an order granting summary judgment, we apply the same standards that are applied by the trial court. Liberty Surplus Ins. Corp., Inc. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007); Stoffels v. Harmony Hill Farm, 389 N.J. Super. 207, 209 (App. Div. 2006). Summary judgment may be granted when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
However, "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). "Because we review issues of law de novo, we owe no deference to an interpretation of law by the trial court . . . that may differ from our own." M.S. v. Millburn Police Dep't, 197 N.J. 236, 246 n.10 (2008) (citing Manalapan, supra, 140 N.J. at 378). "Our review of the trial court's legal conclusions is de novo." Myron Corp. v. Atl. Mut. Ins. Corp., 407 N.J. Super. 302, 309 (App. Div. 2009) (citing Manalapan, supra, 140 N.J. at 378), aff'd, 203 N.J. 537 (2010).
New Jersey has long required "a showing of prejudice before a contract of insurance may be avoided." Pfizer, Inc. v. Emp'rs Ins. of Wausau, 154 N.J. 187, 206 (1998). "The reason for the New Jersey rule is to protect the interests of policyholders because insurance contracts are contracts of adhesion and policyholders should not lose the benefits of coverage unless the delay has prejudiced the insurance company." Ibid. In short:
The insurance contract not being a truly consensual arrangement and being available only on a take-it-or-leave-it basis, and the subject being in essence a matter of forfeiture, we think it appropriate to hold that the carrier may not forfeit the bargained-for protection unless there are both a breach of the notice provision and a likelihood of appreciable prejudice.
[Cooper v. Gov't Emps. Ins. Co., 51 N.J. 86, 94 (1968) (emphasis added) (footnote omitted).]
Indemnity contends that it has been prejudiced because of the entry of a default judgment, "from which" it asserts "there could be no relief." In support of this contention, it cites Hager v. Gonsalves, 398 N.J. Super. 529 (App. Div.), certif. denied, 195 N.J. 522 (2008). Indemnity did not assert this claim in the trial court. In fact, Indemnity made no allegations of prejudice in its motion papers or at oral argument.
Moreover, Indemnity's reliance on Hager is misplaced. There, the pivotal question was whether the driver of the insured vehicle at the time of the accident was a permitted user under the policy. Id. at 537. Because the insured's failure to cooperate had prevented the insurer from determining this issue, we found appreciable prejudice. Ibid. Here, Indemnity's claims adjuster was aware of the accident at least as early as February 19, 2004 when the adjuster wrote to Harris. The police report clearly established Harris' liability; there was no question she was the driver and that she was at fault.
Furthermore, at oral argument on the summary judgment motion, plaintiff offered to vacate the default. Indemnity's counsel responded that he "still [did not] know . . . even if [plaintiff] vacates the default, whether or not . . . the . . . alleged tortfeasor . . . has satisfied the requirements under the provisions of her policy." Under the circumstances, Indemnity is hard-pressed to assert appreciable prejudice due to entry of default.
Because we are satisfied that summary judgment was improperly granted due to Indemnity's failure to demonstrate appreciable prejudice, we need not address IFA's second claim regarding a reciprocal duty of cooperation. Indemnity has not responded to this point and we do not consider it dispositive of this matter.
Indemnity contends, for the first time on appeal, that because there was no cross-claim by IFA, there is "no justiciable issue." Indemnity never asserted this argument in response to IFA's opposition to its summary judgment motion. Therefore, we will not consider it on appeal. See Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973). Moreover, we concur with IFA that it "has a stake in the proper adjudication of [Indemnity's] disclaimer of coverage," as it will affect the amount of the credit to which IFA will be entitled in the UIM arbitration proceedings. IFA is clearly "a party aggrieved" by the summary judgment order and, therefore, "may appeal from it."
Ellison v. Evergreen Cemetery, 266 N.J. Super. 74, 78 (App. Div. 1993)
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