*1 N. W. 2d tions, and exhibition of the genitals” lewd (216 are embraced within “obscene” as at used 646) word L. 1971, c. 449. And we now a defendant hold that if convicted under the statute trier of fact finds from the evidence: depicts (1) describes, patently offensive “[t]hat the material ain way, explicated above; sexual conduct as contemporary community (2) average person, applying that to the ap-
standards, peals material, whole, the dominant theme as a taken prurient matters; to the interest material, whole, literary, (3) ar- that the taken as a lacks serious tistic, political, or scientific value.” 216 at 647. N. W. 2d Miller v. 413 U. S. at California, supra, 2A-28, See Ct. S. 37 L. Ed. 2615-2617, 430-433; at Note, “The Supreme 87 Harv. L. Rev. 1972 Term,” Court 160-175 (1973); 6 Conn. L. Rev. Note, “The New Obscenity Standard,” 165 (1973). —
No. A-128 Reversed. —
No. A-129 Reversed. Hughes, For reversal —Chief Justice Justices Clipfoed Sullivan, Jacobs, Mountain, Pashman —6. For affirmance —None. INC., RESORT, FARMS PLAINTIFF-RESPONDENT
ROVA CROSS-APPELLANT, INSURANCE AND v. INVESTORS AMERICA, COMPANY OF A NEW JERSEY CORPORA- TION, DEFENDANT-APPELLANT AND CROSS-RESPON- DENT.
Argued August January 21, 1974. 1974 Decided *4 Mr. Robert F. Novins argued the cause plaintiff-re- Novins, Novins, spondent Far- cross-appellant (Messrs. Grossman, &ley Liston, Jr., Mr. attorneys; Edward F. Novins, on brief; Mr. of counsel).
Mr. Elmer J. Bennett argued the cause for defendant-ap pellant and cross-respondent-petitioner (Messrs. Carpenter, & Bennett Morrissey, attorneys, Mr. Michael S. Waters and brief; Mullett,
Ms. Heather on the Mr. Thomas L. Mor rissey, of counsel). opinion the Court was delivered by
Hughes, C. J. We consider here cross from appeals Appellate Division Investors, affirmance (Rova v. 124 N. J. Super. 248 (1973)) of a judgment entered court, trial sitting without a jury, generally favor of a plaintiff against the defendant, its insurer. The claim rested on al bad leged faith by the insurer in exposing its insured to pay ment of substantial sums in policy limits, for which sums recovery was sought and awarded Plaintiff, below. here in responding defense of is judgment, Rova Farms Resort, Inc., a New Jersey corporation, which we shall call “Rova” variously or “the insured.” from Appealing judgment against Investors Insurance Company *5 America, Jersey also New hereafter referred corporation, insurer,” “Investors,” to as “the or “the insurance company.” with an The events accident relevant sequence began severe which occurred on the entailing injuries, personal Rova, on which a recreational resort premises operated in Jackson New a lake Jersey, used Township, including commercial and In- guest patrons diving bathing. vestors had issued comprehensive to Rova its policy gen- eral which in full force liability insurance and effect on the date of form, accident. In the usual it bound Investors “ * * * pay to on behalf of Rova all the insured sums shall become legally obligated damages because of pay * * * bodily injury, and sustained caused any person accident,” $50,000. with a limitation also ob- Investors defend ligated al- any suit the insured against such injury and leging seeking on account thereof. damages The contract further entitled to make in- Investors vestigations, claim or negotiations settlement as it suit might expedient and, deem while the in- binding sured with cooperation Investors, insured, forbade the ex- own cost, or cept to make pay any settlement.
Such was the contractual between relationship Investors and Rova on when July 25, invitee, Rova’s commercial Lawrence dove from a McLaughlin, “diving platform” into or 4 feet of water under murky circumstances described in the carefully opinion detailed Francis, Justice writ Farms, Court, Inc., for this v. ing McLaughlin Rova N. J. 288 And no (1970). gesture was made in the instant or otherwise litigation question palliate significance the terrible injury physical sustained when McLaughlin’s struck the unseen bottom of head the lake.1 tragic injuries, sustaining 1“He struck the bottom suffered frac damage fifth tures fourth and cervical vertebrae to spinal body paralyzed His cord. from fifth cervical vertebra very down and he has little movement of his arms. isHe almost quadriplegic permanent.” (McLaughlin a total and the condition is Rova, 299). 56 N. J. at *6 was in joined Suit instituted his wife McLaughlin, loss, Rova and its consequential against general manager. Investors, do, as its contract obligated assumed the defense of the action, assigning experienced trial attor- ney, Liebowitz, Mr. Milton D. ex- conduct it. There was tensive pretrial discovery, including depositions of McLaugh- lin and, and others in the usual course Investors in- fully the vestigated circumstances, taking and state- interviewing ments from and witnesses, relevant preparing photographs like. the
At trial, one over stage plaintiffs before were successful in objection to their adding original allegation negligence Rova an willful against additional and wanton charge misconduct on its in part and maintenance operation of the facility. The and investigations pretrial discovery e., were main chiefly case, oriented toward the issue in i. Rova, conduct of whether and negligent willfully wantonly tortious, and the alleged contributory negligence of McLaughlin. Naturally, this pretrial did preparation not bear on the importantly damage issue inasmuch as Mc- injuries Laughlin’s were so severe as to be beyond quite question. injection
The the additional issue of willful wanton and caused warn Investors to its negligence insured of its denial such coverage conduct, wrongful as distinguished from and ordinary negligence, to invite Rova’s attention to of its advisability counsel retaining independent for its own protection. Heeding admonition, Rova did retain counsel, Mr. Nathaniel Roth, H. to act in its interest. There- after, he was not although permitted to in participate because of actual trial Investors’ preemption of the defense was its contractual (as right),2 Mr. Roth did participate relationship attorney 2This is tlie usual situation in the between the personal By retained and the insurer counsel of the insured. policy, pointed out, terms of Professor Keeton has the relation ship company is one under which the retains control of the defense trial, settlement discussions during pointedly and repeatedly of Rova to suggesting vulnerability loss liability in view of the grave injuries involved. in- He constantly as to Investors’ to offer quired willingness limit so, it to do and in urged fact one was point permitted in an court open (in discussion jury) absence to denounce what he considered the cavalier conduct of both counsel for plaintiffs Investors to reach failing attitudinal detente essential to settlement. case came trial McLaughlin 10, 1969, on June
before and a Judge Rosenberg jury Passaic County. trial McLaughlin present the first in a day, strapped wheelchair, and was presumably seen by judge jury, *7 but that became ill night so that he was not released from the to return on hospital days and his subsequent testimony entered the by way case of reading his 4:16- deposition (B. 1(c)). On that first trial day Investors $12,500 offered case, settlement of the that figure approximating the “spe- cial” Mr. damages at McLaughlin some earlier dur- stage At no discovery. ing time thereafter did Investors increase offer, that albeit its was $50,000 limit and any ver- dict that beyond would have to be paid by its insured.
Hot in view surprisingly, of the grave involved injury and its lifetime the consequences, jury returned a verdict for in a plaintiffs total $225,000, amount of $15,000 thereof allocated being to the wife for consequential losses. An ap- peal was directed by Investors to the Appellate Division. Even magnitude the verdict returned In- impel did vestors to increase its offer nor to explore otherwise the pos- sibility of settlement. The Appellate Division reversed in an unreported opinion, holding insured’s negligence attorney participates and the Keeton, insured’s sufferance. Liabil ity Responsibility Settlement, Insurance and 67 Harv. L. Rev. (1904). totality n. This of control exercised particularly carrier’s counsel should result in a keen alertness on part company attorney opportunities and its to settlement protect which would the insured. willful, a justify finding as to gross was not so proved had conduct, and erred in judge failing wanton therefore jury. jurors issue from the Because withhold this Rova Farms found willful wanton and negligence have and contributory any ordinary have consequently disregarded re- the case was remanded for negligence by McLaughlin, in an reminded Investors let- opinion trial. Mr. Liebowitz issue of bad faith in ter had solicited) (which since, of concern with should be to it settlement dealing he potential exposure an adverse verdict 'the event of “[t] injuries up severe could be involving personal in this case Investors, Committee, Claims $500,000.00.” through its Still did not major part experienced lawyers, comprised flinch at this dismal because its eventua- prospect, perhaps could harm of such only tion Investors to the extent 10% retrial, verdict. As there no projected happened, this Court reversed Division reinstated Appellate Rova, McLaughlin supra. verdict. Investors thereafter $50,000 Rova, its with much paid difficulty, including nationwide fund to its members has a relation- appeal (Rova to a church-social not relevant ship membership group here), finally a mass Rova Farms raise money, meeting loan on of the bulk of the funds from obtaining mortgage $175,000 plus the excess property, paid judgment Au- thereon, on payment accrued interest completing *8 7, 1970. gust bad thus suffered from what deemed the
Having of in in faith to Investors settling attempting it, settle the case Rova sued Investors the instant against fees, action for such losses counsel and for on plus interest the total excess loss it from the time such sums were paid paid entry until the time of judgment present of case. thereafter on the here runs (Interest judgment reviewed under R. 4:42-11 entry from the date judgment (a) that is not issuable question here.) merits, May full on the trial on hearing judge After Rova 1972, entered for Investors judgment against Rova amount of excess which had judgment paid, $175,000, thereon, the interest it had had plus pay which $197,150.68. a total Later making judgment the court amended such allow counsel fee judgment Rova’s at to. torney R. under 4:42-9 fee counsel (a) (the not in (6) volved this but denied appeal), plaintiffs application for assessment additional interest interval above mentioned.
The Division Appellate having the trial court’s affirmed judgment, this Court N. J. granted certification (63 (1973)). Investors challenges judgment against it on the not, that it had principal ground ease, on the whole validly been have bad adjudged to exercised faith in the premises. Collaterally, it the relevance of suggests (1) specific offer settle within policy limits latter as (which it denies) on bearing a “bad legitimacy issue, faith” and (2) Rova by equivocation as to its financial capacity to con- thereto, tribute “prevented” settlement rea- should son of such “unclean hands” estopped from recovery. frivolous nature of these latter can points appeal best be demonstrated in the context of our discussion of the main issue, the trial court’s basic finding of bad faith on the part of Investors.
Rova’s cross-appeal challenges part judgment below by the (undisturbed Appellate Division) denied interest on amount it says it wrongfully was caused to pay 7, 1970, on August between that date and the date of the entry judgment review, here under May 1972.
Considering of our scope first appellate review of in a judgment ease, here, non-jury entered we note that our courts have held that the on which findings it is based “* * * should not be disturbed unless they are so wholly in-
484 and that the justice,” in a denial of result as to supportable juris finding fact original court should exercise its appellate where there and in none but clear case diction sparingly Dusseault, v. 60 matter. is no doubt about the Greenfield J. b. 33 N. 1960), Div. aff’d o. 436, N. J. 444 Super. (App. is on factual reviewed finding 78 That based (1960). involved are credibility matters determinations Co., New Zinc v. Brundage Jersey not without significance. is J. the trial con judge N. 450 are (1967). Findings 48 when sub supported by on binding appeal adequate, sidered New Au Jersey evidence. Turnpike stantial and credible Sisselman, N. 358 v. J. Div. thority Super. 1969), 106 (App. den. 54 N. J. 565 has otherwise been certif. It stated (1969). function is a not one: we do appellate limited “out disturb and findings the factual conclusions of the legal trial we mani judge unless convinced that are so they are with festly inconsistent unsupported competent, relevant reasonably credible evidence offend as to Fagliarone interests of justice,” Twp. Bergen, No. 78 N. J. Super. 155 Div. 1963), and (App. appellate whether, therefore ponders court on the there is contrary, sub stantial in support evidence trial judge’s findings Inc., I Weiss v. conclusions. 65 J. Zapinsky, N. Super. 357 Div. 1961). (App. record below with
We turn to the examination mind, as on the of the trial validity standards in bearing failed determination that Investors to use faith judge’s to its contractual and that regard liability Rova with Rova for such cause was entitled to judgment. That such contractual embodies obligation implied covenant of good here, fair is nor indeed do we issue dealing think presently open substantial Radio question. See Service, Taxi Inc v. Lincoln Mutual Ins. N. J. 299 Assoc., Bowers v. Camden Fire Ins. (1960); N. J. (1968).
I We note substantial evidence before the court revealed that a multitude of circumstances which In- impelled should have vestors to attainable settlement of the energize clearly ar- McLaughlin claim. Settlement at could have been trial for ranged $75,000, an attorney amount which plaintiffs’ was authorized by his clients was made known to accept, to Liebowitz, and, McLaughlin trial to Roth judge, to through Liebowitz, to Investors. those somewhat During hectic trial days there were raised storm many signals po- tential financial disaster in the face of which Investors main- tained a first- imperturbability, never its singular increasing day $12,500. offer The mere at the appearance trial of 27 year man, life, old visibly unquestionably shattered was a factor which have might been expected inspire to con- cern to a seasoned trial attorney did) no doubt it (as to client, his an experienced insurance company.
During customary “settlement” conferences the trial aware of the judge, grave physical aspect case and results, unpredictability jury that suggested Investors be well might advised to limit policy its and this was pay promptly reported Liebowitz to Investors. Liebowitz added his own recommendation to Investors that it pay $50,000 “if would settle the that case.” Investors remained unmoved. stated he would McLaughlins’ attorney recom- $50,000 mend acceptance of clients, offered, to his if it were and asserted that he would although to coerce try them it, he accept “fairly had control” way of them (a saying they his respected advice). Rova had instructed Roth that, previously if Investors $50,000, its put up he was authorized $25,000, add which Rova somehow would raise and pay. Roth never disclosed this to Liebowitz be- he feared, cause in view of the adamant stance of Investors, unmoved by the exhortations not only court but own attorney, that he would be his client to exposing share in the payment of an amount contractually the obligation of limit. For this reason i. e., the policy to pay,
Investors money, no client had his dissembled, asserting he its non-liquid question true, begged but literally had Investors scrutiny of beyond property poteutial (not money by raise used to' eventually Which was eared to look) cast upon obligation the bulk of the mortgage pay communication. this debacle of honest unhappy unfounded, response Roth’s fears were not And limit offer Investors’ to his to Liebowitz pleas *11 will his client’s to announce exhorting Liebowitz Roth kept view and (in this something, to contribute ingness was $12,500 offer), Investors’ "stonewall” nature of apparent never told either in faith.3 Liebowitz itself of bad suggestive had recom he Mr. or Roth that attorney, Rapuano, plaintiffs’ did he make $50,000, it nor mended to his that company pay further, so, had Had done any effort to settle the ease. he had it some belated accident Investors that logic persuaded of hands, a have been clearly on problem its settlement would persisted despite attainable. Investors’ unresponsiveness con had been fact that Liebowitz from to end beginning had cerned the bad faith even about to his client danger 3A a demand the insured settlement for an that contribute policy liability in of amount within basis of one limits was the sole liability imposing & the earliest cases on a carrier. Brown excess McCabe, Stevedores, Co., & Accident Inc. v. Guarantee 232 London 1915). (D. suggestion F. toward 298 Ore. A that insured contribute settlement, though offering a within its carrier was not maximum liability support of limits one the factors relied on.to Cooper, following v. F. 2d Am. Mut. Liab. Ins. Co. 61 446 cases: (5th 1932), 736, 595, L. Ed. Cir. cert. den. U. S. 53 S. Ct. 77 289 ; Boling Co., 160, (1933) v. 46 1483 New Amsterdam Cas. 173 Okl. Royal (1935). P. 2d See also v. Indemn. 68 916 Ins. Co. Home 737, (Sup. 1972), Misc. N. Y. 2d aff’d 39 2d 327 S. 748 Ct. (App. 1972). D. A. N. Y. 2d Since S. Div. participate a effort carrier to induce insured to settle policy faith, ment bad an insurer invites within limits is evidence suggests making if trouble contribution without it clear that company Keeton, ready policy limit. its stands to contribute entire Law, (3971). 7.8(c) Insurance § wanted letter of our ease of Bowers language Assoc., Camden Fire Ins. Committee, Claims supra ap parently the decisions, architect of Investors’ also had given thought to its obligation to act and was con cerned the spectre about of “bad faith” at the very meeting at which it set its apparently inflexible settlement figure $12,500.
This sciential grasp however, its did not legal duty, interrupt the even tenor of Investors’ of containment at the level $12,500 illusion, it never had although nor had its attorney, that insured could the risk escape of jury confrontation on the fault vis-a-vis the issue of grave injury Mr. realized, involved. Liebowitz only but reported to the insurance company that verdict potential $50,000, could exceed the McLaughlins that could produce “* ** a prima Liebowitz, facie case of negligence, he, could not see getting out of this case on a motion,” and “* * * that he could never have seen Judge Rosenberg any other judge not permitting this case to togo jury.” Hence, from the time of first view of this unfortunate plain- tiff in the courtroom, had ample Investors opportunity understand that its fate (and insured) its exposed would rest in the hands a jury it would not be rescued *12 by control of the issue by court as a matter. legal of $225,000
Even after the effect chastening verdict ameliorated reversal and direction of (as by a new appellate Liebowitz’ advice to that and Investors it trial) should probable it is an 4“When that adverse verdict will exceed the limit, policy propriety accept of insurer’s refusal to settle coverage requires ment offer which is within the a resolution of con flicting judgment, duty in interests. In our in view of the of the good faith, surer to act the resolution can lead to fair but one justly only if result: Both interests can be served treats insurer coverage if settlement offer as it had full for whatever verdict regardless limits, might recovered, be of and makes its decision rule, go to settle on basis. to trial that That we to deem .which appropriate one, applied jurisdictions be the been has in other [Bowers, supra, 71-72]. such cases.” N. J. at in the con- faith” issue of “bad brooding think about the $500,000 verdict, maintained of Investors text a possible to the recom- responsive was this aplomb. Perhaps strange Claims urged Claims who Manager mendation of its of its “good was conscious Committee, indeed it though “* * * of nevertheless the courage faith” to have obligation, to be too observe cynical It convictions.” their of it that a large proportion this time was by apparent have to exhibiting courage might paid cost of whom had Investors, prom- other than one to namely, ised faith in the same. coverage good providing volunteer a contribution of Eoth to
The reluctance its cash of poverty, his protestations Eova supported was a of the settle- part of the “fencing” an element relevant cul- We think the trial. during ment discussions diminishes in this technique of participation Eoth’s pability of Investors’ twin factors under the point the vanishing to a settlement contribute to that Eova unconscionable appeal obligation of its policy its offer underpinned by 25% below: expressed by Judge Wiley astute observation pro- fiduciary company duty I has almost a think the insurance done, any fencing and, if to be the last there is tect their insured They company. person going insurance have to do is the good protect their client. the interest of act in as to sanguine and its counsel seemed quite Investors contributory McLaughlin’s convincing jury prospect way abandonment (by survived the hope That negligence. it, two on which thereof) of bases proof to offer inability e., rested, i. intoxication other things, originally among lake water on the part of the depth foreknowledge its prejudice against The reasonableness of McLaughlin. settlement, persuasive on is not hope, based this financial di- faith, haunting possibility considering fact, Investors’ belief in its eventual vindication saster. In nature, since somewhat aberrational seems have been case after our (long Supreme even trial of the instant *13 to the extent liability confirmed a finding Court had con- Claims Committee of the members $225,000) lawyer v. Rova McLaughlin that firm view tinued to express case.5 a “no liability” McLaughlin judgment knew after the Investors Although bond, Rova an produce appeal Rova could not even that execution to supplementary proceedings, was subjected concern by was unmoved Investors property, on its levy And of settlement. re-explore possibility its insured to McLaughlin certification when this Court granted prospect a new added to case, existing dimension was did) eventually it retrial, might (as in that this Court Even this not cause $225,000 did judgment. reinstate the hesitate Nor insurance company did the Investors quail. Liebowitz advice. When lawyer’s on occasion to reject $50,000 offering consider trial advised his client to during as ease,” was the response if “would settle the here who had been Scheer, Claims Manager testified below by these settlement discussions: advised Liebowitz of kept Q. his Did advice? you accept couldn’t, the was never made. A. We demand Liebowitz, after been ordered When retrial had an Division, prospect advised Investors Appellate $500,000 and recommended offering adverse verdict Mr. Scheer’s re- $50,000 time, here was appropriate recalled at trial below: sponse he Q. Did make an offer? you
A. No.
Q. you Mr. advice? Did follow Liebowitz’s A. No. submission that regarded Investors’
Apropos
conced
liability,
case one of
McLaughlin
questionable
carrier,
is not
of a
we recall that
prescience
expected
ing
Bowers,
we noted in
decision not
settle
supra, that
“[a]
honest,
and objective
must be
one.
thoroughly
intelligent
president
kept
bim of
to remind
Investors’
5The “reserve” card
—
liability.”
injury
weak
“severe
valuation said
case
*14
It
a
must be
realistic one when
tested
as
necessarily
the
sumed
of the
he
expertise
This
must
company.”
expertise
a
applied,
case,
a
all
given
of
the
consideration
factors
bearing upon the
a
advisability
pro
settlement for the
tection of the insured. While
view of
carrier or its
the
attorney as to liability
factor,
is one
a
important
evaluation
requires more.
It
includes consideration of
anticipated
adverse;
a verdict,
range
should it be
and
strengths
weaknesses of all of
be pre
the evidence to
sented on
known;
either side so far as
history of
par
ticular geographic
nature;
area in
cases of similar
relative appearance,
persuasiveness,
likely
appeal
claimant,
the insured, and
Garner
the witnesses at trial.
v. Am.
Co.,
Mut Liab. Ins.
31 Cal.
107 Cal.
App.
Rptr. 604, 607-608
In
(1973).
this connection we observe
no
one associated with the
case ever
McLaughlin
doubted that in
verdict,
the event of an adverse
damages
awarded could greatly exceed the limits of coverage; and
as to liability,
not whether the
question
carrier,
its
attorney, or the insured
a
considers
defendant
liable but
what the jury could
justified
from
finding
evidence
available and adduced.
Board
Education
Lumber
Cf.
Mut.
mens
Cas.
F.
Supp.
(D.N.J. 1968),
aff’d
It is not necessary whether speculate the basis of Investors’ odd attitude toward the McLaughlin case based on an inbred or cynicism institutional about swimming accidents, diving nor to motives, seek its further nor to further particularize the testimony below. That evidence forged ponderous chain of circumstance only which not amply supported the of bad faith on the of In finding part vestors, but would wonder as suggest to how the Court could have reached other conclusion. This so is particularly when one considers the development of the law with respect to the fiduciary responsibilty insurance carrier toward assured, its in instances of judgmental choices such as existed here.
II. a matter that, would argue insurer The appellant in settle- offer limit obligation no law, had within demand firm, explict authorized ment without It attorney. points McLaughlins’ part figure .on in- New cases6 Jersey major each four' *15 out that in of the for an excess liability of the carrier’s the volving question to settle offered formally claimant had judgment, insured. of the sum exceeding coverage action for a not ever pre- in the no demand Since instance present conflict between sented, insurer maintains that no those,of and, conse- emerged the insured ever interests than good have exercised less cannot be held to quently, amount of faith in the claim for the face settling coverage. of the law. view unduly seems to us an constricted
This either offers dur involved claimant cases cited Although the carrier’s trial their delineation of pending appeal, ing embrace the situation faith would obligation clearly good When In instant case. vis-a-vis settlement in the disclosed exist, in interest can vestors that no conflict of suggests a for until there has been law, under circumstances be offer limits by plaintiffs, malized within policy de of older thinking concepts, emergence before dealing of those fair velopment principles equity, faith as in Investors (such very cites) eases good new bare honesty breathed into the contractual lifegiving in mentioned as between existing sometimes relationship Ins. Royal Indemnity McDonald v. sured and insurer. Cf. Co., Maryland 109 N. J. L. 308 & A. 1932); (E. Auerbach Co., 140 N. E. 577 (Ct. App. 247; Cas. N. Y. 2 1923). Taxi, supra; Bowers, supra; 6Radio Ins. v. Allstate Kaudern Supp. (D. F. 1967) ; v. Lumber Board Education N. J. Co., supra. mens Mut. Cas.
There was always, in fact and in a law, conflict of inter- est between and its from Investors insured the time it realized the awful and rec- gravity McLaughlin’s injury a un- ognized jury, its insured one confront day must spared from such trial court by legal ordeal control and vulnerable, under view the proba- the most simplistic bilities, to an beyond far limit. verdict policy These factors projected urgent duty the most immediately faith act and with diligence attempting settlement, limit, arrange possible including even if had something to be added Rova. thus could Only the larger interest Rova protected. Bowers,
We must reiterate here our observation supra, “[g]ood broad And that concept.” where under the policy the insurer reserves full control settlement of claims the insured, him against prohibiting from effecting any except at his own compromise expense, — that reservation viewed in the light the carrier’s ob ligation to on pay behalf of the insured all sums to the up — *16 policy limit which he shall become im to obligated pay poses upon insurer the duty to exercise faith in good claims. settling out, We pointed we had as before (Radio Taxi, that of supra), purpose this of insurance is type protect the insured from liability within the limits of the contract, and that, therefore, the courts allow cannot the insurer to frustrate that a selfish purpose by decision as to settlement which exposes the insured to a judgment beyond the specific monetary protection which his premium has purchased.
By virtue of the terms such policy, proscribing from behalf, insured in his own carrier has settling made itself the of the insured in this agent Fidelity respect. Robb, & Cas. Co. v. 267 F. 2d 476 473, (5th 1959). Cir. Thus relationship company to its insured re garding settlement is one of inherent fiduciary obligation. Bowers, Taxi, supra; Radio N. J. 31 at 313 supra, (Jacobs, ; Co., J. v. Aetna 9 dissenting) Gruenberg 566, Ins. Cal. 3d
493 1032, 510 P. 1043 480, 491, (1973) 108 Cal. Rptr. When (Roth, pro. opportunity Justice tem. dissenting). may coverage, settlement limit of approximates be on the for the company gamble insurance tempting af a trial, considerably outcome of not being its exposure Kaudern, in fected a verdict supra, excess See coverage. 88; 277 F. Farm Auto Dumas v. Mut. Supp. State cf. Co., Ins. N. H. 274 784 Rec 781, A. 2d (1971). on the of the carrier ognizing temptations part in are conflict with of the insured directly the interest within the limits of settling thereby avoiding and coverage prospect judgment, this Court declared that where, ease, as in the present adverse verdict at trial is likely limit, to exceed the the boundaries of good faith become more in favor of the compressed insured, can carrier serve its justly interests those of insured claim only if it alone be treating might Bowers, liable for any verdict which be recovered. Education, supra; Board supra. Despite the fact Bowers holdings the other main New cases Jersey cited involved firm claim ant offers, would be unrealistic to that such an offer believe is a prerequisite finding the insurer to have acted other than in Law, faith. Keeton, See Insurance 7.8(c) § (1971). better view is that the insurer has an affirma tive duty to explore settlement possibilities. 7A Appleman, Practice, Insurance Law and p. (1974 Supp.); § v. Allstate Ins. F. 191, 197 Supp. (M. D. Fla. Self most, 1972). At the absence of a formal request settle within the policy is merely one factor considered light the surrounding circumstances, on the issue of good faith. Cernocky Ins. Indemnity Amer., No. Co. Ill. 196, 216 App. 2d N. E. 2d 198, 205 (1966).
Even cases in jurisdictions those other which have found in favor of company the insurance on the basis that no settle- ment demand was made injured party, generally sug- gest that the evidence did not indicate that a settlement
494 See, e. g., Cotton any have effected in event. been could Fields, 740, E. Ga. 128 App. Mut. Ins. Co. 106 S. States Co., Ins. Cal. Merritt v. 34 3d App. Reserve 358 (1962); LaRocca v. Farm Mut. Cal. 511 State 110 Rptr. (1973); F. 163 D. Pa. aff’d (W. Auto Ins. 329 Supp. 1971), Merritt, In for F. 2d Cir. 1973). example, 474 1338 (3rd declared: the court settle, any did he nor no offer to [the claimant] At time did make compensation ever advance insurance carrier or his counsel or his profitably
any suggestion [110 discussed. could be that settlement Rptr. at 524]. Cal. prior suggestion made feasible was ever settlement was No that judgment anyone [Id. 525]. at with the suit. connected in LaRocca that the. claimants’ Similarly the court noted he would testify not asked and did attorney “was $50,000 policy or recommended settlement have settled if * * F. limits were offered at Supp. [emphasis Contra, (almost precisely) McLaughlin supplied]. case, which, seen, we for settle- opportunities as have at in- genius ment were so viable that took special kill them. transigence to an
For were Roth’s of his client’s protestations poverty for the way excuse Investors. It had a clear out sealing issue been willing (had expend limits); for as Keeton has observed: policy Professor company may protect against liability, itself where recognized being the claim settlement is excess of the value making policy limits an offer settle for maximum sum by advising willing limits, continued within insured of pay can ness to such sum time that the claim be settled for plus willing or for that sum that sum whatever insured to add. [Keeton, Liability Responsibility Settlement, Insurance (1954)]. L. Rev. Harv. below testimony counsel Despite he thought demand from the was a McLaughlins explicit prerequisite *18 his movement on this attitude is discordant with part, the re- in fiduciary that its role was bound quirement company the to consider itself for potentially Hable the entire amount We any judgment. do think Investors would have that if been complacent so fact its Rova had coverage been unlimited.
The
that an
proposition
insurer
be found liable
cannot
for an excess judgment
where a firm and
except
binding offer
refused,
has
made and
been
a
rejected by
was
federal court
Robb,
&
Co.
Fidelity
Cas.
267 F.
473,
2d
475-476 (5th
also
Cir.
See
v. American
1959).
Young
Cas.
416 F.
2d
910-911
1969).
Cir.
in Bell v. Com-
(2d
Similarly,
Newark,
J.,
mercial Ins. Co.
N.
It insured.” between company conflict interests replied: W. 2d The court 427 S. at 33. *19 insurance com an are asked to a matter law that We hold as failing
pany a case for bad to settle cannot be liable held money for an which is no demand for settlement amount there when coverage by policy of afforded the insurance. the limits of is within opinion not law nor should it so. such is are of the We 2d at [427 34]. S. W. insurer, an We, too, having contractually hold that insured, of its power the independent negotiating restricted take duty has a to the initiative fiduciary attempt positive a within the policy coverage. Any settlement negotiate to an within to settle opportunity doubt as to existence or as to ability face amount coverage willing nuess of insured excess settlement pay required to insurer, be resolved in favor of the insured unless the must evidence, affirmative demonstrates there was not by only some limits, settlement within possibility no realistic but have the insured would not contributed to also that whatever sum have above been figure might settlement available. 911. 416 F. 2d at Young, supra, Prom what has been said clear that an of fact existed opposite pattern it is here.
Ill rest our here on the plenitude We decision evidence be- low to we have support findings to adverted. Yet with view some unease the our we effect that present rules have, in a more constricted future case where a might more decision settlement plausible against might nevertheless ex- loss, an an insured excess to settle pose opportunity hav- been rejected. our ing present Under rule is insured and not the which is an called company upon pay when the goes carrier’s evaluation and is not awry adopted so jury, company’s as the viewed long judgment dishonest, or other- actually unreasonably optimistic being faith, wise in bad with such as to im- negligence or infected reach, pede reaching, capacity “good having faith” decision.
Thus, law, force an the situation of insured (who comes that class of “consumers” among for whose general has been concern in protection increasing years), there recent verdict, threatened by possible excess is not one. enviable position The assured is not in a exercise effective control over by independent action, the lawsuit or to further his own interests even appear jeopardy. may when those interests serious The assured possibility only face the of substantial loss which can he forestalled action of the carrier. Thus the find assured hünself and his goods position passenger voyage in the of a on a to an unknown management destination on a vessel under the exclusive of the crew. App. 34 Cal. Rptr. Reserve [Merritt v. Ins. 110 Cal. (1973)]. the insured has contracted with the Although for a company *20 amount of he specific coverage, to make the powerless carrier use that in a for coverage protection. settlement his legal remedy separate repre The normal for conflicts in interest is however, conflicting remedy, possesses sentation the interests. This only situation, present a limited in the for while usefulness the advised, usually is, may separate employ assured can be as he that he interests, separate representation usually counsel to his look after nothing independent legal assured, amounts to more than to the advice litigation of since control the remains in the hands of the carrier. split, Control the defense of lawsuit cannot be the and inde pendent legal advice to the assured cannot the force carrier to ac cept accept. a settlement offer not it does wish to In this instance legal separate representation remedy inadequate the normal is an [Merritt, supra, solution to t.he conflict interest. 519]. at The problem conflict arises out the in current terpretation faith” in “good this most juris other dictions. Good faith has been construed to require the insurer to consider the interests of the insured as well as its own in whether or deciding to settle the case within the limits of the policy. company must weigh con flicting interests by making decision to settle or to trial go as it had full if coverage whatever verdict be re- See, Bowers, e. g., supra; limits.
covered, of policy regardless Education, 544; Koppie 293 F. Supp. Board supra, Co., 844, 847 (Iowa 1973); Allied Mut. Ins. 210 N. W. 2d N. W. National Indemn. Crabb v. also, Duty An Insurance Note, Company’s D. See 1973).
(S. Settle, to Cal. L. Rev. 130 (1968). 41 S.
Yet however much carrier considers interests settlement, its insured in the decision to pondering effect, settle, however reason- moment it decides not to it in ably, in order to pro- sacrifices interests insured mote its own. It is the insured to to the benefit of always settle and of an verdict. thereby avoid excess danger an only insurer its own to Since serves interests declining compromise coverage, within the a decision not insurance to settle is perforce selfish one. In save to some attempting money of its own on the policy, company necessarily automatically exposes the insured to the risk of excess Note, See judgment. Excess Liability: Reconsideration of Rule, Bad Faith L. Negligence Rev. Stan. California’s 475, 483 (1966). This is when particularly significant any settlement opportunity approximates limit. If insurer, chosen having go trial wins the litigation pays except nothing expenses; should it be unsuccessful it loses no more than it would have to pay settlement, had since excess is placed upon the shoulders of only true loser, the insured.
Moreover the rule permits a carrier to li- escape ability for unless its decision go to trial is marred bad by dishonesty, faith or negligence creates an anomalous situation for insureds. aWhere settlement ex- opportunity ists, the more faultless the *21 client seems have been the more he feasibly may subjected ¡trial be by the to a company of case and all the dangers it entails. In the case of an obviously blameworthy client, the carrier would normally take of a advantage settlement opportunity within policy lim- its since any other disposition be unduly optimistic. would The least blameworthy insured, however, may more readily a since re- face of excess judgment, delivered to the risk be a ease liability” a to be “no thought to case compromise fusal Thus, in those cases would not be as unreasonable. regarded within a be effected limits compromise may where be, worse more innocent insured to appears position in and the more he is he is to loss. exposed form carrier to rule requiring even the Additionally, entire were liable for the alone its though as judgment considerations institutional may polluted by risk be involved. See insured specific the interests of the ignore 128. These L. Rev. at considerations Note, S. Cal. supra, future costs a settlement keep to purpose extend to a claim-consciousness, create down, numb the public’s future claim of discouragement for the image conservative of which none precedents, to establish favorable ants or protection par with the anything has to do purposes efforts, it be hoped, at hand. Such might ticular insured dis savings company would result overall a claims or marginal creating the pressing couraging a low-verdict which could be used as bargain cases body Note, See supra, claims. settling tool subsequent ing L. Rev. Institutional na at 482-483. interests this Stan were carriers whether or not pursued by they ture might verdict; of a specific for the entire amount adverse liable has particular is insured case who yet generally the burden of excess loss from any stemming had to bear not to an “institutional” decision settle. much more we recall in- But that we have importantly carrier -fiduciary dicated bears relationship insured; construed, norm, yet good presently insurer to be less responsive to the fiducial ob- permits other than One type fiduciary. appellate ligation norm, court, though pointed out its applying unique in this regard. effect duty imposed upon faith thus the carrier is one
peculiar legal relationships to this situation. In most determination conflicting parties merits interests one of the to the con- *22 case; judge own trustee flict is forbidden. No man can be may in Ms no beneficiary; weigh personal against no his of Ms interest that agent personal principal; may profit against that of evaluate his his public private against public may gain interest. no officer balance Yet policy who an offer to settle an excess claim within the carrier receives weigh limits on the instructed to its own interest scales is along in faith de with those its assured order to make a accept reject Reserve, [Merritt termination whether supra, or offer. v. to Rptr. 521]. 110 Cal. at be to issue, may necessary it in an One day, appropriate insured has interests. separate conflicting these has amount he protection pur that right expect where to effect necessary compromise cha will offered in ed be hand, the insurer On the other litigation. end to the ease, settle a for and decline to own interests its pursue similarly as not in bad or (so reason whatever long it is free apart, contractually These elements wrongful). limit fraction its insured’s nothing to offer a However, carrier chooses not offer the at where the all. whether it bear one wonders should not coverage, limits decision, result unilateral financial unhappy opposite alone from the result profits gamble. since it the insurer own pursue would enable This resolution in measure without those of its sacrificing great interests as was clear the burden insured so whom long mistake borne.7 The kind of we project, should be rule would conflicts of interest under nagging present settle has law^ been See already regarded favorably by some. Crisci Se 425, 13, Ins. Cal. Cal. 426 P. curity Rptr. rule, requiring contended a new 7It is some that the carrier consequences all policy to bear cases the financial of its failure to offer its settlement, plaintiffs’ will make it easier counsel money suits, from exlract insurers means of will in nuisance costs, thereby premium substantially. crease claims will raise rates however, presently note, We under the doctrine force the com making pany, already supposedly, though is settlement decisions as be liable sum of would the entire adverse verdict. There willing should no more present, carrier fore. a to settle under such a prove than it broadened rule should in such an event plaintiff prey no to unreasonable easier demands than Were a now. L. 47 Neb. Rev. 705 (1968); *23 Comment, 177 (1967); Settle, L. Note, An to Cal. Insurance S. 41 Company’s Duty Note, Rev. Recon Liability: Excess 120, 138-142 (1968); Rule, sideration Bad Negligence Faith 18 of California’s Note, L. Stan. Rev. Insurer’s 475, 482-485 (1966); Refusal — to A Above Settle Proposal Imposition Liability Limits, Policy 60 Yale L. J. 1037, 1041-1042 Com (1951); L. ment, Mich. L. Rev. 13 U. Chi. Note, 48 95, 102 (1949); Crisci, Rev. 109 In supra, (1945). the Supreme Court of California observed: it will in
Obviously, always be insured’s interest to the within the settle when there is how- policy any limits danger, ever a slight, of in those limits. judgment excess of Accord- the a ingly rejection of settlement within where the limits there is of a any danger judgment in excess the limits figures presently higher carrier to settle more often or at than does, suggest company ignoring only this fact would been has the the standards set forth this Court. Furthermore, any such rule conceivable on costs which a effect example, might could exert be more than For offset other factors. savings might having company’s maneuver be realized from to the trial, position during original on issue of bad faith having litigate liability brought by from not clients. to excess suits history McLaughlin cost-inflating The is case in which one prominently, trifling factors stand out for Investors’ with its fiduciary obligations upon visited substantial financial adjudged loss below. any event, possibility may In that a broadened in- standard adoption. crease insurance rates should not alone defeat its An in- justified surer’s decision not to settle is on basis of that decision’s contribution, keeping down, costs class, to benefit of all insureds. policyholders particular Since as a rather than the individual case, profit company’s involved a thus from the refusal to settle coverage afforded, surely within the a then insureds as should whole expense judgment. share when the refusal in an results Note, Company’s Duty Settle, An See Insurance to 41 S. Cal. L. (1968). Cost, reasonably distributed, Rev. should never impediment justice. doing be to court, however, application 8The omitted actual such a on rule grounds present provided that the standard a sufficient basis which on impose liability Rptr. to 17, case under [58 Cal. at. consideration. P. 2d at 177]. of interests basis on the all, only if at justified,
can be knowledge of the common insurer, and, in light an insured which usual methods one of the settlement un- not be it may a liability policy, under protection receives limits with a purchases policy for an insured who reasonable avail- the limits is to a sum of money believe that equal with liability part on his so to avoid and will nsed able expectation of such In view covered accident. regard inter- own to further its should not be permitted an insurer within the settle by rejecting opportunities ests absorb losses unless it is also willing limits failure from its to settle. result and avoids the apply a one to simple rule is proposed within offer whether settlement of determination burdens *24 would rule proposed limits was reasonable. policy the a insurer, with an faced set- that danger the also eliminate it and limits, will reject offer or near the tlement at to further its own inter- money with the insured’s gamble * * * ests. a small is more than most there Finally, importantly, in a rule that would justice require of elementary amount the insurer’s and insured’s in that, in this situation where conflict, the insurer, may reap the necessarily terests settle, not of its to should also suffer benefits determination 17, 426 P. detriments of decision. Cal. at Rptr. the [58 2d at 177]. indicated,
As the unnecessary is instant to em- case an brace such extended rule. But since this as all Court courts, other seeks to the law from prevent inflicting unjust results, it is not discordant with its the obligation, foresee or the thereof.9 probability possibility * * ;g 9“* no constitutional mandate that not court beyond necessary go what a ease Whether an decide at hand. narrowly expansively judge’s issue will be dealt with for a calls many things, including guidance evaluation of for the need the agencies government general public. end, bar or or the To that * * may express upon existing Court doubts [Busik doctrines Levine, (1973)]. v. 63 N. J. 363
IY. we turn to Rova’s Lastly, cross-appeal challenge trial refusal to award it- interest on prejudgment court’s $197,150.68 sum that insured was required pay not McLaughlins. Whether or interest should prejudgment be ordered in a action for out successful the overage arising of a carrier’s failure to a claim not been settle has frequently considered by the various of the nation. Some jurisdictions have held action sounds in tort rather than con- tract and only therefore interest should run from the date of See, insured’s judgment the insurance against company. Hardin, e. g., Southern Farm Bureau Cas. Co. Ins. v.
Ark. 1011, W. 351 S. 2d This same rea- (1961). — that the is not on soning litigation suit the insurance — contract one but in tort also has been used as the basis an award precluding attorney’s fees arising out of Crabb action. v. National See Indemn. 205 N. W. supra, 639. Jersey We note in New even the labelling liability suits as tortious nature would purely pre insureds, clude the award interest since here prejudg ment interest is in actions tort virtue of Court required Levine, Rule See also Busik 63 N. J. 4:42-11(b). R. (1973).10 apply To to successful suits this 4:42-11(b) Interest, would, however, nature various difficulties. present run would not from paid time insured excess to use, money’s claimant thus was deprived but *25 4:42-11(b) part: provides 10R. in actions, products liability actions, including In tort court the judgment per shall in include annum on the interest at the 6% amount of the award from of of action the date the institution the tort, or from a date the 6 months after date of whichever is the later. Busik We stated in this rule extends to cases came to date, January 31, 1972, although trial after its effective the tort prior may adoption. have involved occurred to the rule’s N. J. at 355, began trial 360-361. The between Rova Farms and Investors April 24, on 1972. the insurer he his action against
from date instituted the insurer’s the date of the six months after or from a time in time “tort,” Yet at what point whichever was later. For example, an settle be said to occur? insurer’s failure to to the place prior McLaughlin “tort” take did Investors’ trial, negotia carrier not initiate settlement when the did trial, tions; through few days or the first June during 1968, a was most 12, opportunity ap when settlement June tested; later, when Investors allowed the but or parent a verdict? Or did the jury continue the point trial to rendered 22, 1970, when that verdict was on tort occur June Court; still, when later the insurer final action of this and, 1970, Rova ac 7, excess on pay August refused R. would require tually 4:42-11 (b) did so? Application a six sub because date months an answer to such questions time be later above points to some would sequent carrier on suit against institution Rova’s than the 20, 1970. November
However, it to resolve the issue unnecessary should compensation dependent we do not think that since action, an but rather on the na label we place upon on what and the rem injury upon plaintiff inflicted ture of the settle, by him. A wherein wrongful failure edies requested fiduciary imposed by has breached the obligation the insurer See sounds both tort contract. policy, virtue of Crisci, P. 18, 426 178. Inves 58 Cal. at supra, Rptr. resulted in the ex tors’ to effect settlement disinclination pay and the carrier’s failure to cess verdict in question; result, from Rova Farms to so. As do required overage $197,150.68 paid when Rova in satisfaction August insured was deprived McLaughlin judgment, carrier, pay refused to monies, having whereas the these Thus, sum. itself, despite had use of thereby ac at trial characterize the present desire company’s award we tort, appropriate feel that one simply tion as run from the date that should interest prejudgment *26 was $197,150.68. This course insured the claimant the paid Cas. Mut. v. Lumbermens in Board Education taken interest awarded court specifically where the federal supra, paid on “from which the upon the excess the date [insured] 555. that amount.” 293 F. Supp. im- refuse to case,
In did not present judge the trial Investors’ with interest because he pose agreed prejudgment in tort. The merely view him that the action before sounded R. 4:42-9 fees on basis of attorney’s fact that he awarded n —(cid:127) indemnity policy “In an action a (a) (6) upon liability — the nature of the that he regarded insurance” indicates Rather, an contract. case in as a suit insurance part upon be- Rova not entitled to interest decided that judge monies interest on the cause it had not that proved gave did not show and therefore McLaughlins pay acquired a of interest dint that it had loss specific suffered least some of the monies decided that at payment. judge by affiliated members been to Rova supplied have paid from cor- actually have come never consequently may that be- short, thought resort. In it was assets of the porate interest Rova on proof paid was insufficient cause there or that it took the judgment sum with it satisfied own, in- losing or asset of its from bank account money on Investors imposed no interest be thereby, might terest the court.11 in in awarding court has discretion While equity Busik, J. dis (Mountain, 63 N. J. at 395 (see supra, terest senting)), requires of that discretion exercise proper him for con alternatives open aware judge he believed that to have Here, judge appears sideration. interest impose prejudgment power did not have prove literally did not because plaintiff at hand the case on We reverse this on money paid. interest or lost gave is a mistaken one. a view feel that such we issue, since correct, findings argument are court’s that the trial 11We assume $35,000 was although all but facts indicates that our review of the mortgage through a on its assets. Rova obtained 50G *27 At least in the ease of sum, liquidated in prejudgment (cid:127)—
terest has been our regarded by courts as compensatory indemnify the plaintiff the loss of what the monies due him would presumably have earned if payment had not been Busik, refused. See 63 supra, 356, N. J. at is 358. The issue not whether the can plaintiff prove loss by virtue having had to pay interest get or money lost in having from a terest bank account or investment removal of through the sum therefrom. loss, rather, is assumed. See Jer sey City 41 O’Callaghan, 349, N. J. L. 354 & A. (E. 1879); 554 544, Kamens v. 108 N. J. Div. Super. (Ch. Fortugno, defendant has had consideration that the 1970). The basic use, has not, and the plaintiff the amount in question; and the factor interest value simply covers the of the sum awarded for prejudgment period which the during de fendant had the benefit of monies to which the plaintiff is Schuncke, found to been have earlier entitled. See Small v. Busik, 42 J. 416 359, N. N. J. at (1964); supra, 360. This consideration has controlled, and interest has been imposed where, even here, as the defendant had in contested the Kamens v. For validity Thus, the claim. tugno, supra, 552-553, N. J. Super, it was held that pre-judgment claim, interest on a the amount which is as certained, is not avoided honest over lia disputation legal bility. The court observed that “defendants had the use money and presumably interest, earned such dividends other benefits therefrom available,” were whereas the plain tiff was deprived any such J. enjoyment. N. Super. at 554 [emphasis supplied].
In us, the case before the trial court found that Investors ought have settled the action or McLaughlin satisfied the entire judgment which resulted from its failure culpable do short, so. In it determined that Rova was entitled to re- imbursement for the amount out on 1970. paid August Thus, from that date Investors has had the use of a sum which Rova was and has deprived been able to invest for gain had continued which it would not have access $197,150.68 to full verdict. It satisfy McLaughlin its refusal to but for Rova of the monies delivered part difference makes no rather affiliated individuals contributed have been ac bank from an interest loan or corporate obtained than ex on the has Investors, money which been earning count. for inter cannot defeat Rova’s claim to pay, cess declined liabil more it could avoid its basis, on such a than est Rova helped on that others grounds for the excess itself ity analogous considerations contention satisfy ignores Such it.. tort, rule of “collateral source” to those underlying *28 of contribu claim the benefit holds that cannot wrongdoer Patusco v. Prince others. See tions to the made plaintiff Macaroni, Inc., Jeffries, Rusk v. 50 N. J. 368 365, (1967); v. Motor Eagle 110 307, N. J. L. 311 & A. Skillen (E. 1933); 2 Harper 1931); 107 N. J. L. Ct. (Sup. that Rova remains James, Torts 25.22 fact The (1956). § the denied 1970, been have, August and its donors since benefit. had the use which Investors has $197,150.68 have to re contributors Any rights plaintiff’s beyond extend recovery out imbursement of the insured’s area of the insurer’s concern. legitimate
The below full to all judgment points is affirmed in re- except the interest interest issue. The decision as to to the manded to trial according court for disposition considerations discussed of this opinion.' in Part IY all of in I not join While do J. (concurring).
Clijtoiid, result as I reach the same nevertheless reasoning, the Court’s case. feature in this of a because majority singular its action, gen- Rova and in the original fact that defendants willful with both negligence charged eral were manager, in determination large my looms and wanton misconduct its obligation discharged company whether the insurance dimen- and significant an additional It brings the insured. in the dealing and fair to the question sion exposure. over-the-limits face of
When plaintiffs amended the complaint include of willful and charge wanton negligence, Investors’ attorney and its claims manager both notified Eova that policy in question excluded coverage such conduct and that any judgment thereon based would not be carrier. paid by the They invited the at- participation personal insured’s torney, to protect Eova’s “in interests that the jury event should find that acted in a willful man- or wanton [Eova] ner” and to cooperate the defense of (note the case the personal attorney’s be- participation was suggested cause of any stated apprehension of the verdicts plaintiffs’ being returned in excess of policy limits hut because there now awas claim based on conduct excluded the policy).1
The Company’s record, vice-president and attorney who acted as claims manager, testified this cause that amendment the additional allowing issue of willful and wan- ton misconduct was significant potential exposing the insured personally to “without liability regard to the policy.”
While it is not at all clear to me that language under the of this policy and particularly in the ex- absence ante) clusion (see n. have Company covered, would not to the extent of compensatory within damages limits, an accident occasioned willful and wanton miscon- duct, Cameron, see Hanover J. Insurance N. Group *29 Prosser, Torts, 60 Super. (Ch. 1973); (4th Div. Ed. 1971), 34 posi- nevertheless that was the asserted § tion of Investors and position from which it established and conducted its relations with its insured. policy specific 1In fact contains no such as is fre exclusion quently comprehensive general liability policies. in found The insur agreement bodily injury question liability
ance for reads as follows: Injury Bodily Liability: pay To on behalf of insured all obligated legally pay sums which the insured shall become damages bodily injury, disease, including because of sickness any resulting therefrom, any person death at time sustained and caused accident.
509 Given that I think position we need no further than go hold that the cavalier Company’s the insured’s disregard interests clearly fell below the required standard of fairness good-faith with for dealing its insured this reason: undertook to incur an unreasonable risk on behalf of the in- (who, sured under Investors’ view of its obligation, would have been liable entire amount of verdict based on willful and wanton misconduct) while unto it- retaining self control of the complete ease. Put another and perhaps excusably way, it colloquial presumed its gamble insured’s money with own against dice most unattractive odds. The fact that its own risk money likewise at does blunt conflict ripened had between the relationship insured. Company
Had it sought resolution
conflict,
of that obvious
as it
done,
should
declaratory
have
judgment
technique was
available to answer the critical question:
plaintiff
were
Lawrence
due
McLaughlin’s injuries
to negligence or to will
ful and wanton misconduct on the
?
part of defendants Well
before this Court’s decision in Burd v. Sussex Mutual Insur
56
(1970),
ance
N. J. 383
Company,
decided
after
trial
claim,2
McLaughlin
there was abundant authority,
elsewhere, both
the use of
here and
the declaratory judg
procedure
questions. See, g.,
ment
decide
e.
Farm
coverage
Hammer,
Bureau Mutual Automobile Ins. Co. v.
177 F. 2d
(4
;
1949)
v.
Co.,
Cir.
Stout
Grain Dealers Mutual Ins.
(4
1962);
tentionally unintentionally is de- until this issue then or company insurer, not should and the cided between the insured do required could not so action. Indeed defend state tort to as- propriety to either or or with itself fairness satisfaction * * * impossible for interest makes The obvious conflict of sured. conscientiously of defender. company the role to fulfill the insurance 523; emphasis supplied] [307 F. at conflict, Investors, nothing did with But confronted cov- not furnish that it would beyond notifying the insured Having claim. one of the McLaughlin erage phase the conflict made the choice resolution of to seek case, Company, by per- retained control of the having — conflict, and by itself prohibited petuating exposed — its verdict liability conduct incurred least, have for- should, limits. It very gone marked vigorous with settlement particular effort ward to its Instead it chose to treat sensitivity exposure. insured’s adversary its insured’s as an and failed to personal attorney initiate a cooperative bipartisan settlement. approach Whatever took negotiations possible settlement looking — place here to have with the trial appear originated judge which, undertaking although 'here necessitated inex- cusable I for one by the have foot-dragging attorneys, always better more left to with thought appropriately lawyers, rare to the exceptions. extent that Investors’ attorney But involved in that ritual fire became dance which all too fre- (and sometimes quently precedes precludes) settlement, for him steps choreographed by the insurer were designed to dance inevitably insured, his partner, into the flames. these Under circumstances there is ample authority to sustain an affirmance of the Appellate Division on the basis faith and fair absence without dealing resort *31 some of the concepts broad employed by the such as majority, principles fiduciary relationships undifferentiated con- sumerism, which I am not this time. prepared adopt at Eurther, I am constrained to add I but respectfully emphatically disassociate myself entirely from Part III of the Court’s opinion.
Justice Mountain authorizes me to concur- express his rence with the views set forth herein. Clieeokd,
Mountain JJ., concur in result. — For and remandmenl in part Chief Justice affirmance Hugi-ibs Jacobs, Mountain, Sullivan, Justices Pash- Cliejfokd man and —6. For reversal —None.