February 2, 2010
TO THE COMPANIES IN INTEREST:
Re: Bad Faith Litigation
In Taddei v. State Farm Indemnity Company, 2010 WL 183900, the Superior
Court of New Jersey, Appellate Division addressed whether a plaintiff
whose uninsured motorist (“UM”) claim proceeds to verdict against a
tortfeasor is barred on entire controversy1 grounds from filing a
subsequent complaint against the insurer alleging its bad faith in not
settling plaintiff’s UM claim and forcing him to trial.
Mr. Taddei was injured in an accident involving an uninsured motorist.
He had purchased an insurance policy from State Farm that had a $100,000
UM limit. Mr. Taddei’s claim proceeded to contractual UM arbitration and
he was awarded $92,500. State Farm rejected the arbitration award and
tendered $50,000 to plaintiff. Mr. Taddei rejected the $50,000
settlement offer and filed a lawsuit against State Farm in the Superior
Court of New Jersey alleging he had sustained injuries as a result of
the uninsured tortfeasor. The complaint sought first party damages from
State Farm. The complaint did not allege bad faith on the part of State
Farm in its handling of the settlement negotiations or its evaluation of
his UM claim.
A mandatory, non-binding court ordered arbitration was conducted and
plaintiff was awarded $87,500. State Farm rejected the arbitration award
and exercised its right to a jury trial. Shortly before trial, plaintiff
expressed a willingness to settle for $87,500. State Farm offered an
additional $25,000, which brought its offer to $75,000. Plaintiff
rejected the settlement offer. The case proceeded to a jury trial and
the jury returned a verdict of $2,500,000.
Following the verdict, Mr. Taddei filed a subsequent lawsuit seeking
damages from State Farm based on its alleged bad faith handling of the
claim. The Appellate Division held that Mr. Taddei was barred from
asserting the bad faith claim because it should have been brought at the
same time he filed suit against State Farm for UM benefits. The court
noted that “with a first party claim, the insurer is in the litigation
from the outset, and any claims of bad faith can be asserted in the same
litigation. If not initially pled, but events occur during the pendency
of the litigation which give rise to the plaintiff’s belief that the
carrier has acted in bad faith, a motion can be made to amend the
pleadings, which would preserve the issue for plaintiff by either
including it in the present litigation or reserving it for later
litigation if the court so orders.”
The court also determined a cause of action for bad faith existed before
the jury verdict, in light of State Farm’s “alleged stonewalling even in
the face of two sets of arbitrators’ recommendations.” Accordingly, the
court concluded the plaintiff’s bad faith claim accrued either before
the UM complaint was filed or during the pendency of the UM action and
should have been joined in that action.
The court observed the goals of the entire controversy doctrine include
“encouraging comprehensive and conclusive litigation determinations” and
that “promoting the settlement of litigation plays a large role in
accomplishing that goal.” The court then noted “we have no doubt that
the inclusion of a bad faith count in a first-party complaint against
the insurer for UM benefits - especially when the bad faith count is
meritorious - will enhance the likelihood of settlement. An insurer who
has been put on notice of a bad faith claim has a considerable incentive
to review its claims posture before the UM claim proceeds to trial
against the tortfeasor, and thereby avoid the risk that the plaintiff’s
bad faith claim will be strengthened by a verdict well in excess of the
insurer’s last offer. So viewed, the inclusion of a bad faith count in a
plaintiff’s original UM complaint has the capacity to promote
settlement.”
Based on Taddei, claimants will now routinely add a count for bad faith
when filing a lawsuit for UM benefits.
If you should have any questions or would like a copy of Taddei, please
do not hesitate to contact me at (856) 673-3463 or by e-mail at
danks@bbs-law.com.
Very truly yours,
Glendon E. Danks
1 Generally, New Jersey’s entire controversy doctrine requires a party to assert in the same action all claims arising out of the same transaction or be barred from doing so.
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