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Barbara Wismer and Russell Noles v. andrew Weinman

September 28, 2012

BARBARA WISMER AND RUSSELL NOLES, PLAINTIFFS,
v.
ANDREW WEINMAN, D.C., AND HIGHTSTOWN CHIROPRACTIC, LLC, DEFENDANTS-RESPONDENTS, AND ALLIED PROFESSIONALS INSURANCE CO., DEFENDANT-APPELLANT.



On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-5853-08.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: February 1, 2012

Before Judges Cuff, Waugh and St. John.

This appeal concerns an attorney fee award to a chiropractor for fees incurred in a coverage action against his professional malpractice insurer following the carrier's declination of coverage and rescission of the policy. While conceding that it is required to reimburse the chiropractor for the attorney's fees incurred to defend the negligence action filed against him, the insurer argues the award of attorney's fees by the Law Division for fees incurred during an arbitration proceeding regarding the coverage dispute between the insurer and its insured is barred by the disposition of the coverage arbitration award. The chiropractor insists the issue of attorney's fees incurred in the coverage action/arbitration was not at issue in the arbitration, the rules of the arbitration precluded submission of that issue, and the law of this State permits an award. We affirm in part, but remand for further proceedings consistent with this opinion.

I.

Plaintiffs Barbara Wismer and Russell Noles filed a medical negligence action against Andrew Weinman, a licensed chiropractor in this State, and Hightstown Chiropractic, LLC.*fn1

Weinman held a professional liability policy of insurance with Allied Professionals Insurance Co. (APIC). Learning that APIC had disclaimed coverage, plaintiffs filed an amended complaint against APIC seeking judgment that it wrongfully disclaimed coverage and requiring it to provide a defense to their complaint. Represented by privately retained counsel, Weinman filed an answer denying negligence and a cross-claim against APIC. In their cross-claim, Weinman alleged APIC breached its contract and sought declaratory relief that APIC wrongfully disclaimed coverage and owed Weinman a defense and indemnification. In the cross-claim, Weinman also sought attorneys fees and costs incurred.

Initially, APIC filed a motion to dismiss the complaint and cross-claims filed against it or to sever plaintiffs' and Weinman's claims. The court denied the motion. Later, APIC filed a verified complaint and order to show cause to compel arbitration of the coverage claim. By order dated November 30, 2009, Weinman was ordered to submit to and participate in arbitration regarding his malpractice insurance coverage with [APIC] pursuant to a contractual arbitration clause in his insurance policy with the American Arbitration Association venued in California under the proceeding entitled Allied Professional Insurance Company v. Andrew Weinman, AAA#73 195 03188 09 TNM[.]*fn2

Plaintiffs were not ordered to participate in the arbitration, and the order provided the medical negligence action would not be stayed pending resolution of the coverage dispute.

Weinman hired California counsel to represent his interests in the arbitration proceeding. Following extensive discovery, including interrogatories, production of documents and depositions, the matter was submitted to an arbitrator, who rendered a decision on January 10, 2011. The arbitrator found that Weinman truthfully answered question three of the Member Renewal Application;*fn3 therefore, he did not breach the APIC policy provision cited by it to deny and rescind coverage. The arbitrator also found that APIC wrongfully denied insurance coverage to Weinman without any legal or factual grounds to do so. The arbitrator found APIC owed coverage for the Wismer claim. The arbitrator also ordered

[t]he administrative fees and expenses of the American Arbitration Association totaling $1,950.00 shall be borne solely by [APIC]; the compensation and expenses of the arbitrator totaling $19,629.20 shall be borne equally by both [APIC] and [Weinman]. Respondent Weinman is awarded his personal costs in defending this Arbitration against

[APIC] upon demonstration by [Weinman] that these incurred costs have been incurred and paid.

The award further provided that it "is in full settlement of all claims and counterclaims submitted to this Arbitration. All claims not expressly granted herein are hereby, denied."

In an email message dated January 21, 2011, California counsel for Weinman sought clarification of the award. Counsel inquired "whether 'personal costs' include attorney's fees which have been incurred and paid?" By letter dated February 7, 2011, counsel for APIC argued that an award of attorney's fees is barred by American Arbitration Association (AAA) Commercial Arbitration Rules and California law. The arbitrator issued a Clarified Decision and Supplemental Order on February 10, 2011. It provides:

Arbitrator deems that he has authority and jurisdiction to answer this question.

In clarification thereof, personal costs incurred and paid by [Weinman] in defending this Arbitration do not include Attorney's Fees.

Attorney's fees are not awarded to [Weinman].

On March 25, 2011, Weinman submitted a motion in the Law Division for attorney's fees incurred in the defense of the negligence action, the action to compel arbitration, the arbitration proceeding, and the motion seeking a fee award.

APIC initially contested only the amount of the fees. Days before the return date of the motion, it submitted a brief contending that the arbitral award denied fees and Weinman was barred from seeking fees in this state. Finding the court had jurisdiction, the motion judge awarded Weinman $85,845.70 for fees and $12,441.27 for costs incurred in the defense of the negligence claim and in prosecution of his coverage claim in New Jersey, and $46,500.98 for fees and $1,884.22 for costs incurred in the California arbitration. In a separate order, the motion judge awarded a fee enhancement of twenty per cent to the New Jersey and California counsel fee awards. Including enhancement, the final fee award is $103,012.84 (New Jersey fees) and $55,801.18 (California fees), plus costs.

On appeal, APIC argues the motion judge erred in awarding attorney's fees because the arbitrator did not award fees, Weinman's only remedy was to file a motion to vacate or modify the arbitrator's decision, and Weinman was collaterally estopped from seeking fees post-arbitration in this state. APIC also argues there is no authority to award fees incurred during the arbitration, Weinman waived his right to seek fees by failing to submit a claim for pre-arbitration fees, and the arbitrator's award definitively ruled on Weinman's ability to recover attorney's fees. Finally, APIC contends the judge failed to explicate the basis for the quantum for the fee award as required by Rendine v. Pantzer, 141 N.J. 292 (1995), and should not have awarded a fee enhancement.

Weinman contends the only issue before the arbitrator was coverage, his post-award inquiry only sought a clarification of the scope of personal costs, and APIC has taken inconsistent and mutually exclusive legal positions throughout the coverage litigation. Weinman also contends the Law Division retained jurisdiction to award attorney's fees incurred to prosecute the coverage action in its entirety, and the judge implicitly accepted the reasonableness of the legal tasks performed, the hours ...


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