Rutgers Cas. Ins. Co. v. Vassas

• Decision Date: 18 January 1995
• Citation: Rutgers Cas. Ins. Co. v. Vassas, 652 A.2d 162, 139 N.J. 163 (N.J. 1995)
• Parties: RUTGERS CASUALTY INSURANCE COMPANY, Plaintiff-Respondent and Cross-Appellant, v. Chris VASSAS, Defendant-Appellant and Cross-Respondent.
• Court: New Jersey Supreme Court

Page 163

139 N.J. 163

652 A.2d 162

RUTGERS CASUALTY INSURANCE COMPANY, Plaintiff-Respondent and Cross-Appellant, v. Chris VASSAS, Defendant-Appellant and Cross-Respondent.

Supreme Court of New Jersey.

Argued Nov. 7, 1994.

Decided Jan. 18, 1995.

Steven L. Kessel, Red Bank, for appellant and cross-respondent (Drazin and Warshaw, attorneys).

Susan L. Moreinis, Collingswood, for respondent and cross-appellant.

The opinion of the Court was delivered by

GARIBALDI, J.

This appeal raises several questions concerning underinsured motorist (UIM) coverage. We consider whether an insured who receives an arbitration award from his tortfeasor, moves to confirm that award, enters judgment on that award, and issues a warrant of satisfaction of that judgment--all without notice to his UIM insurer--may subsequently assert a claim against his UIM carrier for UIM benefits. We also consider the procedure set forth in Longworth v. Van Houten, 223 N.J.Super. 174, 538 A.2d 414 (App.Div.1988), addressing the competing interests of insureds and insurers, in respect of the insured's third-party claim, the insurer's subrogation rights, and the resolution of the UIM claim.

I

On January 15, 1989, defendant Chris Vassas (Vassas) was involved in an automobile accident with a vehicle driven by Andre Vold (Vold or tortfeasor). Vold was insured under a policy issued by Allstate Insurance Co., providing the statutory minimum liability limits of $15,000/$30,000. Vassas was insured by plaintiff Rutgers Casualty Insurance Company (Rutgers), whose policy included an endorsement for UIM coverage in the amounts of $100,000/$300,000.

Shortly after their collision, Vassas filed suit against Vold for personal injuries sustained in the accident. Vassas's suit against Vold proceeded to mandatory arbitration pursuant to Rule 4:21A-1(a)(1). Vassas accepted the arbitration award of $15,000 plus interest, Vold's policy limit, and confirmed the award, as required by Rule 4:21A-6(b)(3). Judgment was entered on October 2, 1990, whereupon Vassas filed a warrant of satisfaction of that judgment on October 15, 1990, and received Vold's policy limit of $15,000.

On January 8, 1992, Vassas asserted, for the first time, a claim against Rutgers for UIM benefits. The claim letter makes reference to an earlier demand upon Rutgers for UIM coverage arising out of this accident, but no evidence of that asserted prior demand exists. Although soon after the accident Vassas did notify Rutgers of the collision damage to his car, he never notified it of his personal injuries, his suit against Vold, the arbitration award, his acceptance of that award, the entry of judgment, and the issuance of a warrant of satisfaction.

Rutgers immediately filed this suit for declaratory judgment to deny Vassas coverage. Rutgers argued that Vassas's confirmation of the arbitration award, entry of judgment, and issuance of the warrant of satisfaction destroyed its subrogation rights against the tortfeasor, Vold. The trial court, on cross-motions for summary judgment, granted Vassas's motion and denied Rutgers's motion. The court dismissed Rutgers's complaint and ordered it to enter into arbitration with Vassas regarding his UIM claim. The court held that only the issuance of a general release, as opposed to a warrant of satisfaction of judgment, would destroy a UIM insurer's subrogation rights against the tortfeasor, and that the confirmation of an arbitration award does not preclude a UIM insurer from filing a subrogation claim against the tortfeasor.

Rutgers filed a motion for reconsideration under Rule 4:49-2, arguing that because Vassas delayed in seeking UIM benefits, the two-year statute of limitations on the underlying tort had already run, which prevented Rutgers from instituting action against the tortfeasor. The trial court denied Rutgers's motion, asserting that Rutgers had no excuse for its failure to make the statute-of-limitations argument earlier. Moreover, the trial court held that, in any event, the statute of limitations had not commenced running until the arbitrator had set the amount of the arbitration award.

Rutgers appealed to the Appellate Division, which reversed the Law Division in an unreported opinion. The appellate panel held that the motion to confirm an arbitration award, the entry of judgment, and the execution of the warrant of satisfaction in favor of the underinsured tortfeasor, Vold, had the same preclusive effect against the UIM insurer, Rutgers, as did the issuance of a general release. Because the Appellate Division reversed the trial court on this point, it declined to address Rutger's statute-of-limitations argument. Vassas moved for reconsideration, and the Appellate Division issued a supplemental opinion reaffirming its earlier determination.

Vassas filed a petition for certification to this Court, and Rutgers filed a cross-petition. We granted both petitions. 137 N.J. 165, 644 A.2d 613 (1994).

II

In 1983, the Legislature, concerned that victims of automobile accidents were placed at risk not only by uninsured drivers but also by underinsured drivers, introduced legislation providing for UIM coverage. The Legislature enacted N.J.S.A. 17:28-1.1(e)(1), which states, in part:

A motor vehicle is underinsured when the sum of the limits of liability under all bodily injury and property damage liability bonds and insurance policies available to a person against whom recovery is sought for bodily injury or property damage is, at the time of the accident, less than the applicable limits for underinsured motorist coverage afforded under the motor vehicle insurance policy held by the person seeking that recovery. A motor vehicle shall not be considered an underinsured motor vehicle under this section unless the limits of all bodily injury liability insurance or bonds applicable at the time of the accident have been exhausted by payment of settlements or judgments. The limits of underinsured motorist coverage available to an injured person shall be reduced by the amount he has recovered under all bodily injury liability insurance or bonds.

Although the Legislature made uninsured motorist (UM) coverage mandatory, it determined that insurers only need offer UIM coverage to each motorist; purchase of this additional protection is optional. The purchase of UIM coverage is "a matter of contractual agreement." Longworth, supra, 223 N.J.Super. at 178, 538 A.2d 414.

Vassas's insurance policy with Rutgers contained the following pertinent provisions:

PART E--DUTIES AFTER AN ACCIDENT OR LOSS

We [Rutgers] have no duty to provide coverage under this policy unless there has been full compliance with the following duties:

A. We must be notified promptly of how, when and where the accident or loss happened. Notice should also include the names and addresses of any injured persons and any witnesses.

B. A person seeking coverage must:

1. Cooperate with us in the investigation, settlement or defense of any claim or suit.

2. Promptly send us copies of any notices or legal papers received in connection with the accident or loss.

....

C. A person seeking Uninsured Motorist Coverage must also:

....

2. Promptly send us copies of the legal papers if a suit is brought.

....

PART F--GENERAL PROVISIONS

OUR RIGHT TO RECOVER PAYMENT

A. If we make a payment under this policy and the person to or for whom payment was made has a right to recover damages from another we shall be subrogated to that right. That person shall do:

1. Whatever is necessary to enable us to exercise our rights; and

2. Nothing after loss to prejudice them.

Vassas was under a contractual duty to notify Rutgers promptly of how, when, and where the accident had occurred. He had a duty to cooperate with Rutgers in defense or prosecution of any action by or against the tortfeasor. Vassas was further required to forward to Rutgers any "legal papers" filed or received in connection with any litigation arising from the accident. Finally, he was under an obligation to preserve and not prejudice Rutgers's rights to recover any payments made under the policy in a subrogation action. Nevertheless, Vassas did not inform Rutgers of his personal-injury suit against Vold, the arbitration award, his acceptance of the award, the reduction of the award to judgment, and his execution of the warrant of satisfaction to Vold, until January 8, 1992, when he filed his demand for UIM coverage. That date was approximately three years after the accident had occurred and fifteen months after the trial court had entered judgment based on the arbitration award. His delay in reporting those events constituted a breach of the duties imposed by the insurance contract.

More important, Vassas did not advise Rutgers of any of the aforementioned acts until three years after his accident. Rutgers claims that Vassas's failure to advise it of his personal-injury claim against Vold until three years after the accident bars any subrogation claim against Vold under the two-year statute of limitations for personal injuries, N.J.S.A. 2A:14-2.

The limitations period for a subrogation action begins to run at the same time as the limitations period for the underlying action:

As the right of subrogation turns on the obligation or duty that the third party itself owes the subrogor, subrogation is wholly dependent on the merits of the subrogor's claim against the third party. The subrogee, which succeeds to the position of the subrogor, may recover only if the subrogor likewise could have recovered; the subrogee gains no additional rights and is subject to all defenses that were available against the subrogor. Courts therefore have generally recognized that the cause of action for subrogor and subrogee accrues at the same time.

[Holloway v. State, 125 N.J. 386, 396, 593 A.2d 716 (1991) (citations omitted).]

See also Craig & Pomeroy, New Jersey Auto Insurance Law, § 25:3, at 293-94, § 28:3, at 328-33 (1994) (discussing subrogation...