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E-Bulletin -
2008
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Recently, the New Jersey Appeals court rejected efforts to expand the doctrine of Rova Farms to allow recovery for an insurance carrier’s bad faith handling of uninsured motorist (UM) and under-insured motorist (UIM) claims. The Appellate Division affirmed two lower court rulings, Taddei v. State Farm Indemnity Co., A-380606 and Accisano v. Allstate Insurance Co., A-0156006, in which the court molded excess verdicts to the UM and UIM policy limits and found that bad faith must be pled in the Complaint.
First party claims are those in which an insured looks to his or her own insurance carrier when injured by a party with inadequate insurance (UIM) or no insurance (UM) at all. On appeal, plaintiffs argued that the doctrine of Rova Farms, which applies where an insurer’s bad faith failure to settle a claim within policy limits exposes the insured driver to personal liability, should apply to first party claims.
Plaintiffs also argued that without a first person remedy, insurers have no incentive to settle UM/UIM claims in a timely manner, since their exposure is limited to the policy limits. Defendant State Farm argued that there is nothing in the record that would reflect a widespread industry standard to delay UM/UIM matters for the carrier’s own benefit; the Taddei court agreed.
In its opinion, the three judge panel opined that the rationale of Rova Farms did not carry over to first party cases because the carrier’s failure to settle within policy limits does not place the insured’s assets at risk, as it would in other cases. The panel also upheld the lower court’s common practice of molding excess verdicts to reflect the UM/UIM policy limits, finding that the court has in the past appropriately recognized the need to mold jury verdicts to reflect the rights and duties of the parties under the insurance policy.
In Taddei, the plaintiff received a $2.6 million verdict for back and neck injuries that resulted from an accident caused by an unidentified driver. Taddei’s UM coverage was $100,000 per person. State Farm denied the claim. The matter eventually went to trial after UM arbitration. The court molded the verdict to $100,000, stating on the record that the award did not reflect on the merits of any bad faith claims against State Farm, because the issue was not directly presented to the court.
In Accisano, the plaintiff, who injured her neck in a car crash, recovered $15,000 from the other driver and then looked to her own carrier. Allstate denied her claim. In her Complaint, like in Taddei’s, she failed to allege bad faith. The case eventually went to trial and Accisano was awarded $250,000; however, the court molded the verdict to $85,000, reflecting the UIM policy limit of $100,000 and the $15,000 she had already recovered. The panel affirmed the lower court’s ruling finding Accisano’s arguments similar to Taddei’s.
Despite losing on the Rova Farms issue, many plaintiff attorneys believe the court left open the door for bad faith first party claims. Given the panel’s view that the bad faith claim should be included in the UM/UIM case, it may result in having routine negligence cases turn into serious first party bad faith cases in every instance.
If you are a claims professional, please do not hesitate to contact Golden, Rothschild, Spagnola, Lundell, Levitt & Boylan, P.C. We would be glad to further discuss this significant decision with you.
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