On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-1169-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 14, 2011*fn1
Before Judges Grall, LeWinn and Coburn.
The City of Trenton filed a complaint against two contractors it retained as third-party administrators - defendant Inservco Insurance Carriers, Inc. (Inservco) and defendant Cannon Cochran Management Services, Inc. (Cannon). During the separate terms of their respective contracts, defendants were obligated to notify Trenton's excess automobile insurance carrier of claims in accordance with the policy issued by the carrier, General Security Property & Casualty Company (General Security).
Inservco was Trenton's third-party administrator from January 1, 2000 to January 1, 2004, and Cannon was the administrator thereafter. Although Trenton received a claim on June 9, 2000 for personal injuries sustained in a March 24, 2000 auto accident, General Security was not notified until December 3, 2004. By that date, non-binding arbitration in a personal injury case arising from the accident resulted in an award for the claimant in excess of Trenton's self-insured retention and covered by General Security. Additionally, demand for trial de novo had been filed and a jury had been selected. The case was ultimately mistried because the jurors were overheard discussing the case before all the evidence was presented.
Consequently, General Security, reserving its right to disclaim coverage due to Trenton's late notice, stepped in and settled with the claimant. General Security subsequently invoked a provision of Trenton's policy requiring binding arbitration of coverage disputes between them and was awarded $750,000 plus interest by arbitrators who found that Trenton's notice was untimely and prejudiced General Security.
Trenton then filed this suit to recover from defendants the amount the arbitrators awarded General Security. Trenton alleged that both third-party administrators failed to notify General Security of the claim and thereby breached their respective contracts and negligently performed their respective fiduciary duties. Upon receipt of the complaint, both defendants filed answers, raised affirmative defenses asserting Trenton's failure to mitigate damages and avoid the consequences of any breach, and filed cross-claims seeking contribution and indemnification from each other.
The trial judge awarded Trenton summary judgment on its claim that Inservco breached their contract. Subsequently, and before Trenton litigated Cannon's liability, the judge granted Trenton's motion for summary judgment against Inservco in the full amount Trenton owed General Security and denied Inservco's cross-motion to preserve its claim for contribution from Cannon. With respect to contribution by Cannon, the judge concluded that there was no equitable, common law or statutory right to contribution on a contract claim. The judge later certified the judgment as final pursuant to Rule 4:42-2.
Inservco appeals, alleging that there is a disputed issue of material fact as to whether its breach proximately caused Trenton's damage and, in the alternative, that it should have been permitted to seek contribution from Cannon.*fn2 This court must consider the evidence in the light most favorable to Inservco and determine whether Trenton is entitled to judgment as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Applying that standard, we affirm the partial grant of summary judgment on liability. Nevertheless, there are disputed material questions of fact pertinent to avoidable consequences that require reversal of the award of damages against Inservco - specifically, evidence tending to show that Trenton could have avoided some of the loss after Inservco's contract expired if Trenton had made reasonable efforts to notify General Security or Cannon had not breached its contract. Accordingly, we reverse the damage award and reinstate Inservco's cross-claims for contribution and indemnification.
The pertinent facts are stated in the light most favorable to Inservco. The City of Trenton is self-insured, but it has a excess automobile insurance policy with General Security that covers claims in excess of Trenton's $300,000 self-insured retention.
As third-party administrator for Trenton from January 1, 2000 until January 1, 2004, Inservco contracted to estimate the value of claims and notify Trenton and General Security "of any specific claim that may involve" the excess carrier. The contract also required Inservco to "comply with all reasonable claims reporting requirements of the excess carrier in such cases." When Inservco's contract was terminated, Cannon's contract similarly obligated it to report claims to General Security "in accordance with the reporting requirements established by the carrier."*fn3
General Security's policy requires notice in three circumstances implicated by the personal injury claim at issue. Pursuant to Section IV(A)(1)(a)(1), (6) and (8), immediate written notice is required where a claimant's demand is for more than fifty percent of the self-insured retention; where the claimant has a resulting "disability" that is in excess of or reasonably likely to be in excess of six months; or where the claimant has "multiple injuries."
On March 24, 2000, Joseph Escoto, the passenger in a car driven by Michael Cottrell, was injured when an on-duty police officer rear-ended Cottrell's car. Cottrell submitted a claim for damages to his car that did not implicate the policy. On June 12, Trenton received a notice of claim from Escoto's attorney and sent the claim to Inservco on July 20. In the notice of claim, the lawyer reported that ...