Ebert v. Balter

• Decision Date: 30 April 1964
• Docket Number: No. 4--396,4--396
• Citation: 83 N.J.Super. 545,200 A.2d 532
• Parties: Beatrice EBERT and Casimir Ebert, her husband, Plaintiffs, v. Leon I. BALTER, Defendant and Third-Party Plaintiff, v. ALLSTATE INSURANCE COMPANY and State Farm Mutual Automobile Insurance Company, Third-Party Defendants.
• Court: New Jersey County Court

Page 545

83 N.J.Super. 545

200 A.2d 532

Beatrice EBERT and Casimir Ebert, her husband, Plaintiffs, v. Leon I. BALTER, Defendant and Third-Party Plaintiff, v. ALLSTATE INSURANCE COMPANY and State Farm Mutual Automobile

Insurance Company, Third-Party Defendants.

No. 4--396.

Union County Court, Law Division, New Jersey.

April 30, 1964.

Steven Wise, Linden, for third-party plaintiff (Leo Kaplowitz, Linden, attorney).

William J. Murray, Jersey City, for third-party defendant State Farm Mut. Auto. Ins. Co.

HOPKINS, J.C.C.

Third-party plaintiff, a defendant in an automobile accident case, seeks judgment against third-party defendant State Farm Mutual Insurance Company (hereafter referred to as State Farm) for damages. He requests that State Farm be ordered to pay all counsel fees and costs incurred by him, allegedly because State Farm withdrew from the defense of the automobile negligence suit. Balter also asks that State Farm be required to pay the judgment rendered against him in favor of the original plaintiff Ebert. Although the facts developed at the hearing were substantially the same as those recited in the Appellate Division opinion at 74 N.J.Super. 466, 181 A.2d 532 (1962), it is necessary, in view of the circumstances and my disposition of this case, to repeat and elaborate upon them somewhat.

Balter had an automobile liability insurance policy with Allstate Insurance Company (hereafter referred to as Allstate) that expired at midnight on January 16, 1957. On January 14, 1957, he contracted for such a policy from State Farm to be effective at 12:01 A.M. on January 17, 1957--that is, upon the expiration of the Allstate policy.

At approximately 4 P.M. on January 16, 1957 he was involved in a minor automobile accident with an automobile operated by Mrs. Ebert. Only slight property damage and no personal injuries were noted at the time. Both parties left the scene without exchanging any credentials or making any report. A week or less after the accident Balter received a telephone call from Mr. Ebert advising that Mrs. Ebert had been injured in the accident. Immediately thereafter Balter, erroneously believing the date of the occurrence to have been January 17, went to the State Farm office and reported the details of the accident to its agent. In truth, since the accident occurred on January 16, Balter's coverage was with Allstate.

After receiving Balter's report of the accident State Farm assigned the matter to one of its claim adjusters, Donald Julian. He examined the accident report and on February 26, 1957 interviewed Balter and obtained a signed statement from his concerning the details of the accident. This statement against fixed the accident on January 17. The investigating claims adjuster also obtained a non-waiver agreement from Balter which reads (handwritten matter is enclosed in parentheses--remainder is printed form):

'AUTHORIZATION FOR CLAIM SERVICE AND NON-WAIVER OF RIGHTS

The undersigned requests and authorizes STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY to investigate, negotiate, settle, deny or defend any claim arising out of an accident occurring on or about (1/17/57) .

It is agreed that such actions shall not waive any of the rights of the undersigned or of the Company under any contract of insurance.

Dated at (4:00 P.M.) this (27) day of (Feb.) 19(57).

(Leon Balter)

Signature

_ _r)

Signature' Julian stated that upon taking this non-waiver agreement he told Balter 'that the reason for this (non-waiver), of course, was that the home office hadn't notified me that the policy was in force and because of that fact I would take the non-waiver.' The reason Julian had not received notice of coverage from State Farm's home office was that Balter had only recently taken out his policy and the application had probably not been processed by the home office.

Meanwhile, State Farm received a letter dated February 6, 1957 from Eberts' attorney. This letter, directed to the attention of Julian, fixed the accident as occurring 'on or about January 16, 1956.' The year 1956 was in error but the 16th day of January was correct. Mr. Julian saw this letter and contacted the attorney. However, although he investigated the case until he was relieved by another State Farm investigator in March or April 1957, Julian did not do anything with reference to verifying the date of the accident, other than the taking of the statement of the details of the accident from Balter.

When Balter received his formal policy from State Farm, the agent sent a covering note that stated: 'Don't worry about that small claim. Nothing will come of it.' A few months after making the initial report of the accident to State Farm, Balter inquired on two separate occasions as to the status of the claim. The agent told him that he was 'an old worry wart, that nothing will come of it, to go home and forget it,' and assured him that 'everything was O.K. Leave it to us.'

Approximately 23 months after the accident the Eberts instituted suit against Balter seeking damages. The complaint alleged that the accident occurred on or about January 16, 1956. Balter was served on December 29, 1958, and on the next day delivered the papers to Frank Rutkosky, the State Farm claim adjuster who relieved Julian in investigating this claim. Rutkosky told Balter that such things happen every day and that he should 'Take it easy. This is going to take time. You are going to have to live with this awhile.' When Balter informed Rutkosky that he had contacted his own attorney, Rutkosky replied: 'Well, you could if you want to, but it isn't necessary.'

On January 19, 1959 William J. Murray, the attorney for State Farm, filed an answer to the complaint. This answer recognized that the date of the occurrence was January 16, 1957 and not 1956, as alleged in the complaint. State Farm, on behalf of Balter, propounded interrogatories to the plaintiff Eberts on January 15, 1959. Two of the answers, which apparently were not received until March 24, 1959, state that the date of the accident was January 16, 1957. Subsequently on July 14, 1959, State Farm took the deposition of Mrs. Ebert. Again, January 16, 1957 was declared to be the date of the accident.

On August 3, 1959 Balter, at the request of State Farm, visited the office of Murray. As a result of this meeting, Balter realized that he was mistaken as to the date of the accident. He signed a statement that the accident did occur on January 16, 1957. Murray then advised Balter that in view of the established fact that the accident occurred the day before his State Farm policy became effective, State Farm was withdrawing from the case. This withdrawal was confirmed by a September 10, 1959 letter from State Farm to Balter.

After leaving Murray's office on August 3, 1959, Balter went directly to the office of his personal attorney. This attorney telephoned Allstate on August 11, 1959 and notified that company of the accident. The Superior Court, Appellate Division, has held that Allstate was not required to defend or pay any judgment since Balter had failed to comply with the 'as soon as practicable' notice of accident provision of the Allstate policy. 74 N.J.Super. 466, 181 A.2d 532.

Returning to the pertinent facts of the instant proceeding, Murray was permitted by court order to withdraw as Balter's attorney on October 26, 1959. Thereafter Balter's personal attorney took over the defense of the automobile accident case. After a two-day jury trial in October 1961 the jury returned a verdict of no damages for Mrs. Ebert and an award of $750 for medical expenses to Mr. Ebert. However, upon their motion a new trial was granted. This second trial resulted in a hung jury. Finally, after a two-day jury trial in January 1964 judgment was entered in favor of the Eberts for the sum of $1,800 and costs.

Balter contends that State Farm is liable for the expenses of defending the suit and for the judgment. He claims that State Farm negligently investigated and undertook the defense and therefore is estopped to deny liability. He asserts that State Farm, which had exclusive control over the defense of the automobile accident action, was early put on notice that a question as to the date of the accident existed. He maintains that this notice required State Farm to make diligent inquiry to determine the correct date and to notify the insured seasonably. Balter argues that waivers such as he signed should be strictly construed against insurers; here, he urges, the agreement should be limited to the waiver of rights held under the policy, and not to waive any rights by estoppel under the facts of this case.

State Farm stresses the fact that no insurance policy was in effect at the time of the accident. Nothing that it was required under the policy to defend Balter even if the suit was groundless, it argues that it is not estopped to deny liability because of the reservation of rights by the non-waiver agreement. Further, State Farm asserts it was not negligent in conducting the investigation and defense. Claiming that it could not have learned the exact date of the accident any earlier than it did, State Farm insists that the only gap in the investigation was caused by Balter himself. The company states that even if it were negligent in handling the instant claim, that fact is immaterial since there is no showing that it acted in bad faith. The parties concede the good faith of each other.

I deal initially with the issue of whether State Farm was in fact negligent in its investigation and defense of the claim. The negligence claim is predicated on the allegation that State Farm failed to investigate properly in order to determine whether or not the loss was one for which it was liable under the policy.

The terms of the policy constitute the measure of the insurer's liability, in the absence of an estoppel or waiver on the part of the company. Neilson v. American Mutual Liability Insurance Co. of...