Appellate Decision – Greg Lois

The Appellate Division affirmed the trial court in ‘Ferrigno v. Tyco.’ Greg Lois co-wrote the Appellate Briefs (with Michael S. Miller, Esq., also of Tompkins McGuire). Decision is here (PDF).

Citation: Ferrigno v. Tyco International, Ltd., App. Div. A-3328-06T3 (Decided Aug. 15, 2008). Download decision (PDF).

PIP reimbursement trumps recovery for injured party

In a case decided August 12, 2008, the Appellate Division held that where a personal injury protection benefits insurer has paid benefits to its inured, it is entitled to reimbursement of those benefits from the insurance proceeds of a third-party tortfeasor pursuant to N.J.S.A. 39:6A-9.1, even if the limits of the tortfeasor’s insurance policy are insufficient to make the insured whole. In Fernandez v. Nationwide Mutual Fire Insurance Company, which is approved for publication, the court resolved a perceived conflict between two prior opinions on this topic. Specifically, the court found that IFA Ins. Co. v. Waitt — often relied upon by injured parties for the proposition that their recovery preempts a PIP carrier’s reimbursement action — holds only that recovery cannot be had against the tortfeasor’s liability insurer for more than its policy limits. The court further held that Knox v. Lincoln General Ins. Co. controlled and requires that the PIP carrier take priority over the injured party in recovering from the tortfeasor.

As a practical matter, this case should be cited by any PIP carrier seeking reimbursement for payments, especially when there is resistance on the basis that there is a pending personal injury case. The Appellate Division has made clear that there is no reason for a PIP reimbursement arbitration to await the outcome of the underlying tort case.

Accident reporting figures published

According to the Division of Workers’ Compensation, 197,006 workplace accidents were reported in 2007. This led to 34,556 new workers’ compensation claims being filed. In addition, 4,773 “re-opener” claims were filed.
These figures show almost no changes in the numbers of filed cases over the past year, but do reflect an increase in reported accidents year-over-year (approximately 20,000 more accidents reported in 2007).

Appellate Division refuses to apply 'Rova Farms' to first party UM claims

In the well known Rova Farms decision, the New Jersey Supreme Court held that a liability insurer who in bad faith refuses to accept a plaintiff’s reasonable settlement demand, will be liable for the amount of any judgment above and beyond the insured’s policy limits. In an opinion approved for publication on June 30, 2008, the Appellate Division held that a UM carrier cannot be exposed to Rova Farms liability in refusing to settle with an insured. The court in Taddei v. State Farm, was faced with a case where the plaintiff/insured made a settlement demand after non-binding UM arbitration of $87,500. A jury eventually awarded the plaintiff $2.6 million. However, the trial judge molded the verdict to the $100,000 policy limit. On appeal , the plaintiff argued that the carrier had acted in bad faith, in light of the refusal to settle. The Appellate Division was un-persuaded, reasoning that the Rova Farms bad faith model is inapplicable in the UM and UIM context because the insured is the claimant and, therefore, not exposed to an award in excess of the policy limit.

Insurance coverage follows indemnity according to appellate court

In a June 26, 2008 opinion from the Appellate Division in the case of Metta v. American Empire Surplus Lines Ins. Co. , the court again affirmed the principle that insurance coverage follows indemnity. Often times, parties seeking additional insured status take the position that when a party is added to another’s CGL policy, they are entitled to the same coverages as the primary insured, without respect to the circumstances underlying a given loss. To the contrary, the court in Metta held that under the pertinent contract, the insured was to indemnify the additional insured only for the insured’s negligence. Thus the court held that since those damages, if any, had not been determined, final resolution had to abide the outcome of the underlying B/I case.

It is important to remember this point of law in determining whether to accept an adversary’s tender demand. Very rarely will it be that one party has agreed to indemnify another for the latter’s negligence. Thus, the Metta court would advise that an additional insured should only be provided coverage where the primary insured is found negligent. However, all too many times, especially in the case of snow removal contracts and the like, tender demands are accepted prematurely and it is ultimately found that the contractor was not negligent. The carrier is then left to pay the judgment against an entity it does not insure.

Tompkins McGuire frequently advises insurers and TPAs on indemnity issues and related insurance coverage concerns. For more information, please contact Joseph Cobuzio, Esq.

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