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William Davis and Mamie Davis v. Valero Refining Company New Jersey


October 14, 2011


On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-1555-07.

Per curiam.


Submitted September 6, 2011

Before Judges Payne and Messano.

Defendant J.J. White, Inc. (White) appeals from the October 1, 2010 order of the Law Division enforcing a settlement previously reached between the parties and dismissing all claims and cross-claims in the litigation. White also appeals from an order entered the same day denying its cross-motion to extend discovery. We have considered the arguments raised in light of the record and applicable legal standards. We affirm.

Plaintiffs William Davis and John Graybeal, who were employed by White as boilermakers, filed suit alleging injuries caused by a fire and explosion at the Valero Refinery in Paulsboro.*fn1 Valero contracted with White to provide maintenance services at the facility.

White, in turn, contracted with defendants Workplace Compliance Solutions, LLC, whose principal and lone employee was defendant Martin Chesney (collectively, WCS), and Med-Tex Services, Inc. (Med-Tex), to provide safety services at the facility. WCS and Med-Tex were contractually obligated to defend and indemnify White and Valero against any and all claims for injuries suffered by any person arising from the work they performed. WCS and Med-Tex were also obligated to provide comprehensive general liability insurance.

Med-Tex secured a policy through Aspen Specialty Insurance Company (Aspen), but, among its cross-claims, White alleged MedTex breached its contract by failing to secure the proper coverage naming White as an additional insured on a primary basis. White made a similar cross-claim against WCS, which had secured insurance through American Safety Casualty Insurance Company (American Safety). White initiated a separate declaratory judgment action in federal district court when Aspen and American Safety refused its request for defense and indemnification.

The parties mediated the dispute before a retired judge of the Superior Court on August 5 and 6, 2010. A settlement offer was made to plaintiffs in the amount of $1.6 million dollars. It is undisputed that pursuant to the settlement offer, all claims and cross-claims would be dismissed, although White was free to pursue its declaratory judgment action in federal court against American Safety.

We glean the following from the certifications filed in conjunction with the motion practice that followed, and the oral argument before the Law Division.*fn2 On September 10, WCS moved to enforce the settlement, the terms of which had changed since the mediation. In his certification, WCS's counsel, Michael J. Notartomas, confirmed that plaintiffs were offered $1.6 million at the mediation to settle their claims, and that White's carrier, American Contractor's Insurance Group (American Contractor's), agreed to fund the settlement and seek reimbursement from American Safety through prosecution of the declaratory judgment action in federal court, where all parties would stipulate that the settlement amount was reasonable.

Attached to counsel's certification were copies of several emails. The first, from Valero's counsel to plaintiffs' counsel dated August 10, "confirm[ed]" an earlier conversation "settling all claims of all plaintiffs v. all defendants for a combined payment of $1,650,000." The second, dated the same day and sent four minutes later from American Contractor's adjuster, Susie McGee to Valero's counsel and copied to White's counsel, confirmed her approval of "the additional $50,000." McGee further noted, "we now have settlement. I appreciate everyone sticking with me during the negotiations." The balance of McGee's email confirmed the continued vitality of "the dec[laratory judgment] action."

On August 27, White's counsel, Peter S. Cuddihy, sent an email to all involved.*fn3 He advised that White would dismiss its cross-claims against Med-Tex, but not against WCS. Cuddihy intended to contact the court and advise that the case was not settled.

Notartomas quickly responded by email, claiming Cuddihy "specifically advised that [his] cross claims would be resolved by way of the settlement and [Cuddihy was] proceeding solely with the dec action." Cuddihy responded:

[White] has decided that it would be unwise to dismiss the contractual cross-claims . . . for failure to procure insurance coverage.

Your carrier is convinced that it has an excellent chance of winning the declaratory judgment action.

If it does win that action . . ., then [WCS] will have breached its contractual obligations [to White] . . . . It is for this reason that [White] cannot dismiss those claims at this time.

Since your carrier is not contributing the requested amount toward the settlement of this case, it has not bargained for anything here and is not in a position to object to the claims being pursued in the context of this litigation.

Notartomas further certified that "[i]n subsequent conversations . . ., [Cuddihy] acknowledged his prior agreement to withdraw[] the cross claims in exchange for a consent as to the reasonableness of the settlement amount but was subsequently instructed to proceed otherwise."

Plaintiffs filed opposition to WCS's motion to enforce the settlement, but only to the extent that they requested "any[] Order entered in connection with [WCS's] Motion should . . . not involve Plaintiffs' tort claims and/or settlement." White filed opposition and a cross-motion to extend discovery for ninety days. Cuddihy certified that "a settlement agreement in which [White] agreed to dismiss its cross-claims against [WCS] was not reached in this matter." He further certified that plaintiffs' counsel "specifically rejected the [$]1.6 million .

. . offer" made at mediation "out of hand."*fn4 Plaintiffs' "counter-demand" was made specifically to Valero's attorney, and accepted without any consultation with counsel for White or WCS.

Cuddihy further certified that from August 10 to August 25, counsel for plaintiffs and Valero were negotiating an agreement with White's workers' compensation insurance carrier regarding the compensation lien. Cuddihy sent an email to Notartomas on August 16. It read:

This . . . will . . . confirm our conversation earlier today at which time I advised you that in the event the lien issue can be worked out and the case can be settled for $1,650,000[], [White] would like your carrier to match the $412,500[] contribution which [Med-Tex's] carrier has agreed to contribute toward the settlement of this case. As discussed, such a contribution would result in the settlement of all cross-claims against [WCS] in this case as well as a settlement of all claims being advanced against your client's carrier in the declaratory judgment action.

Cuddihy certified that an agreement on the workers' compensation lien was not reached until August 25, resulting in a letter dated August 27 from plaintiff's counsel to all other counsel indicating that the case was settled and all liens were waived. Cuddihy concluded, "[WCS] [has not] given any bargained for exchange in this matter which would entitle them to a dismissal of [White's] cross-claims against either defendant."*fn5

At oral argument before the motion judge, Cuddihy explained that White, through its carrier, agreed to defend Valero as an additional insured under its policy. However, because of a self-insured retention, "[a]t the end of the day, . . . the carrier will be getting that money back from []White. So []White has an interest in the cross-claims . . . against [WCS]."

Cuddihy further argued that "at the end of the day," White "ha[d] to pay a majority of [the settlement]," and, while it "wa[s] willing to let it go for the [$]1.6 [million,] . . . [it was not] willing to let it go for anything more than that." Regarding McGee's email approving the additional $50,000, Cuddihy contended that "[s]he came up with the extra 50 without talking to the principal from []White . . . ." He argued there was "no meeting of the minds" regarding the settlement.

The judge concluded:

Having heard counsel's argument, I am still not convinced to any degree that the tentative settlement that was reached for the 1.6 offer, which he does not dispute, was materially changed by the adjuster extending an offer for an extra $50,000, except if . . . his client or someone that he represents could be called upon to pay that extra 50, that would be a different story. . . . I am . . . satisfied that there was an enforceable settlement here, that it should be enforced, that all claims and cross-claims . . . are dismissed with prejudice, and . . . that unless and until there would be a negative impact to Mr. Cuddihy's client, that to allow an overall comprehensive settlement to be disturbed under these circumstances would be inappropriate.

The judge entered the order under review enforcing the settlement, and, on that basis, he denied White's cross-motion to extend discovery. This appeal followed.

Before us, White contends the judge applied an incorrect standard to decide WCS's motion to enforce the settlement in that he only considered whether White was prejudiced by enforcement of the alleged settlement. White also argues that it was error to enforce the settlement because the $1.6 million offer to settle was "completely extinguished by plaintiffs'" $1.65 million counteroffer, and because WCS provided no "consideration which would entitle [it] to the dismissal" of White's cross-claims. Alternatively, White contends the judge should have held a hearing to determine whether a settlement had in fact been reached.*fn6

We conclude that the judge correctly determined an enforceable settlement existed on August 10, 2010, albeit for reasons slightly different from those he expressed. See ElSioufi v. St. Peter's Univ. Hosp., 382 N.J. Super. 145, 169 (App. Div. 2005) (noting "that a correct result, even if predicated on an erroneous basis in fact or in law, will not be overturned on appeal").

It is undisputed that McGee, the adjuster for American Contractor's, White's insurer, and someone who had actively participated in the mediation and negotiations, consented to the settlement of plaintiffs' claims for $1.65 million. Her email clearly acknowledged her agreement to settle the case for an additional $50,000. McGee's email did not revoke the prior agreement to dismiss all cross-claims in this litigation and reiterated that coverage claims would now proceed in the declaratory judgment action. At oral argument before the motion judge, White's retort to McGee's representations was simply that she had not obtained its consent, and therefore, there was no "meeting of the minds."

However, there is nothing in the record to indicate that, pursuant to the policy of insurance, American Contractor's was required to obtain White's consent before settling the case. Indeed, absent such express language, the general rule is that the insurer, in agreeing to provide a defense and indemnification, reserves the right to control the settlement of claims as long as it proceeds in good faith. See, e.g., Radio Taxi Serv., Inc. v. Lincoln Mut. Ins. Co., 31 N.J. 299, 305 (1960). Absent a showing of bad faith, the insurer's settlement of a third-party's claim does not breach its fiduciary duty to its insured. Webb v. Witt, 379 N.J. Super. 18, 35 (App. Div. 2005). There has been no allegation that American Contractor's acted in bad faith in agreeing to the settlement.

The fact that the policy contained a self-insured retention provision does not change this analysis. Although not exactly on all fours, in American Home Assurance Company v. Hermann's Warehouse Corporation, 215 N.J. Super. 260, 265-66 (App. Div. 1987), aff'd., 117 N.J. 1 (1989), we held that, absent bad faith and a consent provision, the insurer need not obtain the insured's consent prior to settling the litigation, even though the insured was responsible for the payment of a sizeable deductible as a result.

In short, absent anything in the record to the contrary, McGee's agreement to settle the litigation was effective and binding upon her company's insured, White. The settlement was enforceable as a result.


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