Thank you for sharing!

Your article was successfully shared with the contacts you provided.
INSURANCE LAW — Settlements — UM/UIM Coverage A-2870-01T5; Appellate Division; opinion by Axelrad, J.T.C. (temporarily assigned); decided and approved for publication February 6, 2003. Before Judges Wallace, Axelrad and Hoens. On appeal from the Law Division, Burlington County, L-2365-01. [Sat below: Judge Covie-Leese.] DDS No. 23-2-2761 Defendant Lewis R. Bornstein, who was a passenger in a taxicab in New York City, sustained injuries when the driver rear-ended a car. He filed suit in New York against the taxicab company, which had liability limits of $100,000. Defendant had an automobile-liability policy with plaintiff, Ohio Casualty Insurance Company, which had $500,000 underinsured motorist (UIM) coverage; plaintiff promised to pay “compensatory damages which an ‘insured’ is legally entitled to recover from the owner or operator of an . . . ‘underinsured motor vehicle.’” The policy defines an “underinsured motor vehicle” as a motor vehicle “to which a liability bond or policy applies at the time of the accident but its limit for liability is less than the limit of liability for this coverage.” The policy incorporates the Longworth v. Van Houten, 223 N.J. Super. 174, 194 (App. Div. 1988), procedure and requires notice of a tentative settlement, thereby allowing the insurer to exercise its subrogation rights if it so chooses. To do so, it must pay its insured the amount of the settlement within 30 days, but the insured is still entitled to UIM benefits up to the limits of the policy. The policy does not condition payment of UIM benefits on the insured’s exhaustion of the limits of the tortfeasor’s policy; instead, the carrier’s limit of liability is reduced by all sums paid by “persons or organizations who may be legally responsible.” On February 5, 1999, defendant notified plaintiff of the pending New York action and that he intended to file a UIM claim, and invited plaintiff to participate in the lawsuit. On July 20, 2001, in accordance with Longworth, he notified plaintiff that he wanted to accept the taxicab company’s $60,000 settlement offer and asked plaintiff to inform him within 30 days whether it wished to preserve its subrogation rights; if so, he would assign his claim to it for $60,000. Plaintiff filed this declaratory-judgment action, asserting that it should be relieved from any obligation to pay UIM benefits because defendant’s settlement was substantially below the tortfeasor’s policy limit. In response, defendant offered, consistent with Longworth, id. at 191, to credit plaintiff with the tortfeasor’s full $100,000 policy limit, and explained his reasons for accepting 60 percent of it. The court concluded that plaintiff would not be prejudiced, rejecting its arguments that Longworth precludes a claim for UIM benefits unless the insured obtains a settlement “at or near” a tortfeasor’s policy limits, and that the insured’s decision to accept a 60 percent settlement was per se unreasonable. Held: Plaintiff’s arguments are not persuasive under the circumstances of this case. Although an insured does not have an unfettered right to settle the underlying suit for a modest or insignificant sum and pursue a UIM claim, here the settlement amount was substantial when compared to the tortfeasor’s policy limit. There is, therefore, no per se bar to a UIM claim in light of the settlement here. Moreover, defendant’s reasons for accepting the settlement amply support his decision, under the circumstances of this case, to accept the settlement and pursue his UIM remedy. Finally, plaintiff is not prejudiced by this settlement. Even though defendant’s policy does not condition payment of UIM benefits on the insured’s exhaustion of the limits of the tortfeasor’s liability policy, he agreed to credit plaintiff with the full coverage available under the taxicab company’s policy, consistent with the interpretation of N.J.S.A. 17:28-1.1 in Longworth, 223 N.J. Super. at 191. Thus, plaintiff is only responsible for damages suffered by defendant in excess of $100,000. Affirmed. — Digested by P.R. Chenoweth [The slip opinion is 8 pages long.] For appellant — George A. Prutting Jr. (Prutting & Lombardi). For respondents — Lewis R. Bornstein (Morgan, Bornstein & Morgan).

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.