Griggs v. Bertram

• Decision Date: 05 October 1978
• Citation: 163 N.J.Super. 87,394 A.2d 174
• Parties: Clinton GRIGGS, an infant by his Guardian ad Litem, Sumner Griggs and Sumner Griggs, Individually, Plaintiffs, v. William BERTRAM, Defendant and Third-Party Plaintiff, v. The FRANKLIN MUTUAL INSURANCE CO., Third-Party Defendant.
• Court: New Jersey County Court

Page 87

163 N.J.Super. 87

394 A.2d 174

Clinton GRIGGS, an infant by his Guardian ad Litem, Sumner

Griggs and Sumner Griggs, Individually, Plaintiffs, v. William BERTRAM, Defendant and Third-Party Plaintiff, v. The FRANKLIN MUTUAL INSURANCE CO., Third-Party Defendant.

Middlesex County Court, Law Division, New Jersey.

Oct. 5, 1978.

Edward K. Zuckerman, Somerset, for defendant and third-party plaintiff (Rosenhouse, Cutler & Zuckerman, Somerset, attorneys).

Bernard F. Boglioli, West Long Branch, for third-party defendant (Boglioli, Stamelman & Stein, West Long Branch, attorneys).

HAMLIN, J. D. C. (temporarily assigned).

This is a motion for involuntary dismissal pursuant to R. 4:37-2(b) made at the close of third-party plaintiff's case on liability. The motion requires that the court review briefly the current state of the law involving suits between policyholders and "breaching" insurance carriers so as to rule on a specific point of first impression regarding the effect of an independent settlement between an original claimant and the policyholder in the face of a disclaimer by the insurance company. The case between the third-party litigants was tried to the court without a jury.

In this matter the third-party plaintiff Bertram was originally sued in tort by an infant through his guardian Ad litem, Griggs. Thereafter Bertram filed this third-party action against Franklin Mutual Insurance Company (Franklin), following its disclaimer of coverage under a standard homeowners' policy. When the matter was called for trial Griggs settled with Bertram in the form of an agreement conceding liability by Bertram for the claimed injury and assessing fair settlement value in the sum of $9,000. Pursuant to this settlement the judge then sitting in this matter entered an order for judgment in favor of the infant plaintiff, Griggs, in the stated amount. In view of Bertram's lack of assets, the settlement agreement provided that Griggs would not pursue Bertram personally in return for Bertram's agreement to pursue his remedy against Franklin on Griggs' behalf and pay over to him the amount of settlement recovered. This third-party action revolves around Bertram's claim for $9,000 he is obligated to pay to Griggs and for reasonable attorney's fees and expenses based upon Franklin's alleged untimely and therefore wrongful disclaimer of the duty to defend. This motion was made at the conclusion of Bertram's presentation testing that claim. In ruling on the motion the court makes the following procedural and factual findings based upon stipulations of counsel, evidence adduced and pleadings filed.

Prior to and as of May 4, 1974 Bertram, then an infant, was a person included in coverage pursuant to a homeowners' policy issued by Franklin. The policy required Franklin to defend and pay certain damages incurred by the policyholder. The policy contained two provisions which are at issue here. The first is the standard intentional tort exclusion. ¹ The second is a provision which prohibits recovery unless there is settlement entered into with participation by Franklin, or judgment following actual trial. ²

On May 4, 1974 Bertram and Griggs attended a basketball game held by the Monroe Township school system. While outside the school building Griggs and Bertram exchanged more words than good sense. Youthful energy matched in equal amount by rashness prevailed, and in the following fight Bertram hit Griggs, knocking him to the ground and then hit him again. Timely notice was given to Franklin of the possible claim. Bertram was interviewed by Franklin's investigator during August 1974. During that interview Franklin's investigator secured from Bertram (then 16 years of age) an admission that his striking was intentional. At the conclusion of the interview there was no indication of an intention to disclaim. No other witnesses were interviewed or sought. Physical examination of the claimant was not sought or secured.

Subsequently Bertram received a claim and representation letter from Griggs' attorney which was forwarded in timely fashion to Franklin and received by it on December 4, 1974. Franklin undertook no investigative action. Indeed, Franklin did nothing after securing the admission that the tort was intentional. Franklin made no indication to Bertram of any intention to disclaim coverage. Shortly before the statute of limitations ran a complaint was filed by Griggs on January 16, 1976 seeking damages from Bertram, the Monroe Township Board of Education and Monroe Township. The latter two defendants were dismissed from the action on motion for summary judgment.

The Griggs complaint, as it pertained to Bertram, alleged injuries arising out of a "dispute" between the original parties. Although no specific allegation of intentional tort was made against Bertram, a fair reading of the complaint and inclusion by reference of an allegation of assault and battery placed that issue in the cause, as well as the claim in negligence. Bertram forwarded the summons and complaint to Franklin in timely fashion. On February 23, 1976 Franklin, for the first time, disclaimed by reason of the intentional tort exclusion and advised the hiring of counsel. Bertram thereafter filed an answer and a third-party complaint against Franklin in four counts. Bertram in this trial proceeds only on the third count, positing his claim solely on Franklin's delay in advising him of its intention to disclaim, thus prejudicing him in defending on the Griggs cause of action.

At the original trial call Griggs and Bertram, in the absence of Franklin, entered into a settlement agreement previously referred to. Pursuant to that agreement a consent order for judgment was signed by the judge who presided over the settlement negotiations, approving the settlement in favor of the infant plaintiff Griggs in the sum of $9,000. Thereafter the outstanding third-party action was assigned to the present court for resolution, resulting in this trial and the instant motion.

Bertram contends that Franklin's delay in advising him of its intention to disclaim for 18 months subsequent to its "investigation" estops Franklin from asserting any defense under the terms of the policy of insurance. Bertram specifically abandons any claim of coverage and concedes that the disclaimer by Franklin on the intentional tort exclusion, if made promptly or given in timely fashion, would have been valid. Franklin asserts that its disclaimer has not been shown by Bertram to be untimely or prejudicial on the evidence and, alternatively; that even if the disclaimer is not viable it may rely on the policy provision barring liability unless there was a settlement with company participation or a judgment following actual trial. Bertram concedes the proffered settlement/judgment would not fulfill the policy condition but contends Franklin is estopped not only from denying coverage generally, but from relying on any terms of the policy. Lastly, Franklin contends that even if plaintiff's proofs are sufficient to defeat its motion on the issue referred to, independent of policy provisions, affirmative evidence must be adduced by Bertram as to the fairness and reasonableness of the settlement amount agreed to by Griggs and Bertram.

The law regarding disclaiming insurance carriers and their liability therefor is not in itself novel. See, generally, Annotation, "Liability of Insurer on Refusal to Defend," 49 A.L.R.2d 694; 7A Appleman, Insurance Law and Practice, § 4687. It is well settled that an insurance carrier is not a favored party in litigation with its policyholders. Our courts have consistently held that as between a carrier and a policyholder all ambiguities are to be resolved in favor of the insured. Bryan v. Employers Surplus Lines Ins., 60 N.J. 375, 290 A.2d 138 (1972). Similarly, exclusionary clauses are to be resolved under the same principle. Butler v. Bonner & Barnewall, Inc., 56 N.J. 567, 267 A.2d 527 (1970).

Do the facts here make out a sufficient case to withstand a motion at the close of plaintiff's case, given the standard to be applied? See Dolson v. Anastasia, 55 N.J. 2, 258 A.2d 706 (1969).

Generally, an insurance carrier is under a duty upon notice of a possible claim to act diligently on behalf of its insured to investigate the facts of that claim, and if that...