Ferrante v. N.J. Mfrs. Ins. Grp., 180 A.3d 1133

Background

In 2006 Ferrante was injured in an accident caused by a tortfeasor whose liability policy limit was $100,000; Ferrante had $300,000 UIM coverage with NJM.
Ferrante sued the tortfeasor in 2008, proceeded to arbitration (award ~ $100,000), rejected the award, and demanded a trial de novo — all without notifying NJM or giving NJM a chance to exercise subrogation.
Ferrante rejected a $50,000 settlement offer, accepted a high–low agreement (floor $25,000; ceiling $100,000), and went to jury trial; jury returned larger awards but judgment was molded to $100,000 under the high–low agreement.
Ferrante waited until 2011 to send NJM a Longworth-type notice seeking UIM benefits and omitted the arbitration, the high–low agreement, and the completed trial; NJM only learned the full history in discovery years later.
The Law Division dismissed Ferrante’s UIM claim for failure to comply with notice rules; the Appellate Division reversed and remanded to determine whether NJM suffered prejudice; the Supreme Court granted review.
The Supreme Court reversed the Appellate Division and reinstated dismissal, holding Ferrante’s total failure to notify NJM (which extinguished NJM’s subrogation/intervention rights) precluded UIM recovery.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does an insured’s complete failure to notify the UIM carrier of litigation against a tortfeasor bar UIM recovery?	Ferrante: court should remand; carrier must prove prejudice before denial.	NJM: total nondisclosure nullified carrier’s subrogation rights and bars coverage.	Held: Complete nondisclosure that irretrievably destroys subrogation/intervention rights forfeits UIM coverage.
Is a prejudice inquiry required before denying UIM benefits for deficient notice?	Ferrante: yes; prejudice must be shown and should be determined by trial court.	NJM: where notice was completely withheld and subrogation rights destroyed, no prejudice inquiry is needed.	Held: No prejudice inquiry necessary where insured never gave carrier any notice and carrier never had an opportunity to act; forfeiture is appropriate.
Does entering a high–low agreement or rejecting arbitration/settlement without notice waive or reduce UIM recovery?	Ferrante: high–low was a legitimate risk-management device and did not waive UIM; insurer authorized settlement later.	NJM: the high–low/agreement and secret litigation prevented NJM from intervening and exercising subrogation.	Held: Ferrante’s secret high–low agreement and litigation eliminated NJM’s subrogation option and supports forfeiture.
Can insurer’s late invocation of Longworth/Vassas defenses be deemed waived?	Ferrante: NJM waited to raise the defense until late and thus waived it.	NJM: prejudice and loss of rights are clear despite timing of assertion.	Held: Timing did not preclude NJM’s defense; the merits control where insurer’s subrogation/intervention rights were irretrievably lost.

Key Cases Cited

Zirger v. General Accident Ins. Co., 144 N.J. 327 (1996) (insured must notify carrier of suit against tortfeasor so carrier can intervene and preserve subrogation)
Rutgers Cas. Ins. Co. v. Vassas, 139 N.J. 163 (1995) (failure to notify carrier of suit and arbitration can bar UIM recovery)
Longworth v. Van Houten, 223 N.J. Super. 174 (App. Div. 1988) (insured must notify carrier of acceptable settlement offers so carrier may elect to pay and obtain subrogation)
Longobardi v. Chubb Ins. Co. of N.J., 121 N.J. 530 (1990) (insured’s post-loss duty of candor and prohibition on misrepresenting material facts)