JANUARY 2018 BAD FAITH CASES: TRIAL COURT ERRS IN DECIDING BAD FAITH PREMATURELY AS BASIS NOT TO MOLD VERDICT TO POLICY LIMITS (New Jersey Appellate Division)

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This appeal stems from an underlying UIM action that involved a 2012 automobile accident. The insured settled with the underinsured-tortfeasor for $15,000 and filed a UIM claim with the insurer. After settlement negotiations failed, the insured filed suit against the insurer, and each party then filed an offer of judgment. The insurer offered $30,000 and the insured’s offer of judgment amounted to $85,000. Policy limits were $100,000.

The jury ultimately returned a verdict for $375,000. The trial court entered judgment on the verdict for $360,000 plus interest after subtracting the initial $15,000 settlement without prejudice to either party’s right to file a post-judgment motion for molding or other relief. The insurer filed a motion to mold the verdict to the policy limits. The insured filed a motion to amend the complaint to add a bad faith claim and for counsel fees.

The trial court denied the insured’s motion to amend, but allowed her to file a new complaint asserting a bad faith claim. As to the insurer’s motion to mold to the $100,000 policy limit, the trial court stated that it had discretion not to mold the verdict because the insurer engaged in “scorched earth” settlement practices. Lastly, the trial court awarded the insured counsel fees on the non-molded verdict, per the offer of judgment rule.

On appeal, the Appellate Division ruled that the trial court erred in declining to mold the verdict. The Court primarily relied upon case law that commands molding the verdict, because “UIM cases are first-party contract claims against insurers, but they are generally tried as if they were third-party tort actions with the insurer standing in for the uninsured or underinsured tortfeasor . . . . Thus, courts have appropriately recognized the need to mold jury verdicts in these cases to reflect the rights and duties of the parties under the insurance policy.”

The Appellate Division added that the trial court erred in molding the verdict based upon the insurer’s alleged bad faith, when the issue of bad faith had never been pleaded or adjudicated. It rejected the idea of deciding the bad faith issue without giving both parties the opportunity to litigate the issue.

The Appellate Division did affirm the insured’s right to counsel fees under the offer of judgment rule, however, the sum awarded was in error because the fee application submitted to the trial court was deficient. The Appellate Division stated that “a fee application must ‘be supported by an affidavit of services addressing the factors enumerated by RPC 1.5(a)’ and must include a specific enumeration of the services performed and the hours spent.”

The Appellate Division remanded the action back to the trial court for the various reasons articulated.

Date of Decision: December 14, 2017

Seamon v. State Farm Ins. Co., DOCKET NO. A-0293-16T3, 2017 N.J. Super. Unpub. LEXIS 3069 (New Jersey Appellate Division Dec. 14, 2017) (Reisner and Gilson, JJ.)

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