Lawyers squared off before the New Jersey Supreme Court on Wednesday over whether a policyholder should be allowed to pursue a claim against his UIM carrier, even though his lawyer failed to give proper notice to the carrier that there was a separate claim pending against the at-fault driver.
A lawyer representing the UIM carrier, New Jersey Manufacturers Insurance Co., asked the court to overturn a 2-1 appeals court ruling where the majority said the UIM claim could go forward to at least give the plaintiff, Robert Ferrante, and his attorney, Joseph Grimes, a chance to demonstrate that NJM suffered no prejudice by the lack of notice or the fact that Ferrante received $100,000 from the other driver’s carrier.
“Telling half the truth is like telling a whole lie,” NJM’s counsel, Daniel Pomeroy, of Pomeroy, Heller & Ley in New Providence, told the court Wednesday.
Grimes, of Grimes & Grimes in Cherry Hill, countered that there was “no effort to deceive.”
The at-fault driver, who was not identified, had a policy with Allstate Insurance Co. with a $100,000 limit. At a trial, following a failed arbitration proceeding, Grimes and the driver’s attorney entered into a $25,000-$100,000 high-low agreement. The Salem County jury awarded Ferrante and his wife $250,000 in damages, triggering the high. Allstate paid the $100,000 as required by the high-low agreement.
It was only after the verdict was announced that Grimes notified NJM of the UIM claim. NJM at first waived any subrogation rights after Grimes told the carrier that the at-fault driver was judgment-proof. NJM later reversed its position and decided to fight the UIM claim. A trial judge dismissed the UIM action based on Ferrante’s failure to provide NJM with adequate notice of the underlying claim and the high-low agreement. NJM has also argued that, had it known of the underlying action, it could have intervened to protect its interests.
In September 2016, Appellate Division Judges Jack Sabatino and Amy O’Connor said that while the lack of proper notice was “troubling,” Ferrante should have a chance to show that NJM was not prejudiced by the high-low agreement, especially since Grimes said early on that he believed Ferrante’s damages were worth more than $100,000 and that he agreed to the $100,000 cap because that represented the limits of the at-fault driver’s Allstate policy.
Appellate Division Judge Allison Accurso dissented, saying it appeared that the lack of notice was a deliberate move. NJM then appealed.
Before the Supreme Court Wednesday, Pomeroy said: “If you leave things out, it’s a lie. The system will break down … if there isn’t candor.”
Chief Justice Stuart Rabner asked what should occur if Ferrante can show NJM suffered no prejudice.
If there is intentional misleading, Pomeroy said, “you don’t need prejudice.”
“There is always the potential for prejudice,” added Justice Barry Albin.
Pomeroy said that if the lack of notice is caused by simple negligence or a mistake, there should be a rebuttable presumption of prejudice. “But if it’s intentional, there is no need to show prejudice,” he said.
Grimes argued, ”There was no effort by me to deceive NJM,” although he acknowledged, when asked by Justice Jaynee LaVecchia, that notice was not provided when the lawsuit against the other driver was filed, or after the failed arbitration.
“I did not,” Grimes replied. “But it was not intentionally misleading,” he added.
UIM carriers are entitled to what is called a Longworth notice when a UIM plaintiff receives a settlement offer, or if an arbitration award is rejected because it was insufficient. The requirement stems from the Appellate Division’s 1988 ruling in Longworth v. Van Houten.
The state Supreme Court, in its 1995 ruling in Rutgers v. Vassas, expanded on that and required UIM carriers to receive notice when a complaint against a tortfeasor is filed and when it is determined that the tortfeasor’s insurance coverage is insufficient to cover the plaintiff’s damages.
The case is Ferrante v. New Jersey Manufacturers Insurance.