RAYMOND C. ELLINGTON VS. CURE AUTO INSURANCE, ETC. (L-3293-16, MIDDLESEX COUNTY AND STATEWIDE), A-2470-16T4

Background

On Sept. 4, 2011 Raymond Ellington (insured) struck the rear of an SUV occupied by four plaintiffs; Ellington was insured by CURE with $25,000/$50,000 BI limits.
Personal-injury plaintiffs sued Ellington (filed Apr. 26, 2013). On Feb. 7, 2014 they sent a detailed demand offering to settle for policy limits if tendered within 30 days, asserting aggregate claims exceeded limits.
CURE did not respond to that demand, and waited nearly eleven months before tendering limits (Jan. 8, 2015); it conditioned settlement on extinguishing claims against CURE and later deposited limits into court (Feb. 6, 2015).
Arbitration yielded a $1,300,000 award; parties later entered a consent judgment against Ellington for $1,155,000 after a settlement that preserved pursuit of bad-faith claims against CURE.
Plaintiffs sued CURE for bad faith, alleging CURE unreasonably failed to investigate/timely settle within policy limits and thereby exposed Ellington to an excess judgment.
Trial court denied CURE’s Rule 4:6-2(e) motion to dismiss; Appellate Division affirmed that the complaint, read liberally with attached documents, states a bad-faith claim warranting further proceedings.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether complaint pleads bad-faith failure to settle within policy limits	CURE ignored a clear demand and unreasonably delayed, breaching fiduciary duty to insured	New Jersey law does not recognize a bad-faith claim absent an excess verdict or improper disclaimer; recognizing it would unduly limit insurer settlement control	The complaint, with attached demand and chronology, sufficiently pleads a bad-faith claim; dismissal denied
Whether a unilateral 30-day demand can support bad-faith claim	Plaintiffs rely on demand as basis for showing opportunity to settle within limits	CURE and amici argue nonnegotiable time-limited demands shouldn’t create liability and lack meaningful opportunity to evaluate	Court declined to decide merits; record on a motion to dismiss is insufficient to resolve whether demand was reasonable
Whether insurer’s conditioned tender (refusing assignment/pursuit of claims) defeats bad-faith claim	Plaintiffs say conditioning and delay show insurer prioritized its interests over insured	CURE contends it may rely on policy terms and avoid responsibility if it tenders limits and defends settlement conditions	Court found allegations that CURE prioritized its interests and delayed are sufficient to plead claim; factual resolution left to later stages
Whether settlement was collusive and defeats damages	Plaintiffs assert settlement was reasonable and resulted from insurer’s conduct; damages flow from excess judgment	CURE/Amicus argue settlement may be collusive and that insured voluntarily incurred excess liability, negating recovery	Court noted collusion/assignment issues raise factual questions inappropriate for dismissal; trial court can address at summary judgment/discovery

Key Cases Cited

Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474 (recognizes insurer fiduciary duty to attempt settlement within policy limits and permits insured recovery when insurer’s bad faith exposes insured to excess judgment)
Fireman's Fund Ins. Co. v. Security Ins. Co. of Hartford, 72 N.J. 63 (insurer forfeits right to control settlement when it breaches implied covenant of good faith; insured may recover reasonable settlement paid)
Banco Popular N. Am. v. Gandi, 184 N.J. 161 (pleading standard: complaint includes exhibits and documents forming basis of claim for Rule 4:6-2 review)
Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739 (liberal, hospitable approach to pleading review; courts search complaint in depth for a viable cause of action)