Settlements

There has been a longstanding dispute as to the amount of the attorney’s fee permitted in calculating the lien reimbursement due to the workers’ compensation insurance carrier in high third party settlements (i.e., those that exceed $500,000). This dispute was recently resolved in the reported Appellate Division decision of Liberty Mutual Insurance o/b/o Sabert Corporation v. Jose R. Rodriguez, A-0112-17T4 (App. Div. April 2, 2019), a case I argued on behalf of the workers’ compensation carrier. Click here for the article written by my partner, John H. Geaney, Esq., summarizing this case.

Plaintiff Janine Ball was injured while walking into a Rite Aid store when struck by defendant Charles Reese, who had fallen asleep at the wheel. She sued Reese based upon negligence in operating his vehicle and Rite Aid based upon a premises liability theory. Plaintiff also informed her own automobile insurance company that she intended to pursue an underinsured motorist claim (“UIM”) against her policy. In Ball v. Reese, 2018 N.J. Super. Unpub. LEXIS 1136 (App. Div. May 15, 2018), the limited issue on appeal was whether a credit should be applied against her UIM coverage for the settlement she received from the self-insured Rite Aid defendant.

The Reese vehicle apparently ran over a curb, hit plaintiff, and crashed through the Rite Aid’s glass entrance doors. Plaintiff suffered several injuries, including a partial finger amputation. She sued Reese, who deposited his $50,000 auto liability insurance policy limits with the Clerk of the Superior Court. Rite Aid, who was self-insured for claims up to $2 million, agreed to settle for $50,000. Ultimately, her claim was settled for a total of $100,000 – $50,000 from Reese and $50,000 from Rite Aid.

Plaintiff made a claim against her automobile UIM policy (“Travelers”) which provided coverage of $100,000 per person and $300,000 per accident. The policy language stated that the insurer would “subtract the amount of damages paid by or on behalf of anyone responsible for the insured’s bodily injury or property damage from the amount otherwise payable under this coverage.” Hence, Travelers contended that both the Reese settlement and the Rite Aid settlement should be combined and offset against its $100,000 UIM limits, exhausting its coverage limits.

The trial court accepted that argument, finding that both the automobile policy payment, as well as the premises liability settlement, should be offset against the Travelers UIM limit as a credit. The Appellate Division affirmed.

Upon appeal, the plaintiff conceded that that the $50,000 settlement received from defendant Reese from his auto policy was an appropriate setoff. However, she argued that the other $50,000 settlement paid by Travelers out of Rite Aid’s self-insurance should not count as a set off against her UIM coverage.

However, the Court found that the Travelers’ language concerning the credit was broader than the statutory language. This policy language was approved by the Department of Banking and Insurance and is used by most of the insurers licensed to transact business in New Jersey. As such, the Court found it was entitled to deference.

Also, this offset would be harmonious with the policy objectives of the UIM statute which found that UIM coverage was intended as a gap filler. Here, the Rite Aid $50,000 settlement partially filled that gap in compensating her for her personal injury claim and the $100,000 UIM limit.

Finally, the Appellate Division found no difference between the car maker’s settlement in the products liability case of Vassiliu v. Daimler Chrysler Corp., 356 N.J. Super. 447 (App. Div.), affirmed in relevant part, 178 N.J. 296 (2002). In Vassiliu, the car manufacturer’s payment to the plaintiff was used as a setoff against the plaintiff’s UIM coverage.  The Court stated that there was no reason to treat Rite Aid differently in this case, in applying a set off for the settlement it paid to offset the plaintiff’s UIM policy limits. Further, it discerned no reason to distinguish a settlement paid from self-insurance versus funds paid from an insurance policy.

Hence, for multiple reasons, the Appellate Division upheld the trial court’s decision in applying the $50,000 UIM setoff for the Rite Aid settlement, leaving plaintiff with having exhausted her UIM coverage.

In the recent published Law Division decision, Hernandez v. Chekenian, 2016 N.J. Super. LEXIS 133 (Law Div. July 15, 2016), the trial court ruled that when a defendant settles with the plaintiff before the commencement of trial, the remaining defendants are not entitled to the “Settling Defendant charge.” In Hernandez, the judge considered whether it was appropriate to tell the jury that a defendant settled, when the jury has never seen the party.

The Hernandez case involved a three car accident in which the plaintiff Luiz Hernandez was injured. Plaintiff was a passenger in the middle car driven by Oswaldo Flores-Escobar. Plaintiff sued the owner and driver of the first car, Amy and Bruce Oliver, Oswaldo Flores-Escobar and Rosa Quijano (owner of the middle car), and Dennis Chekenian, the driver of the third car. Before trial, Quijano and the Olivers were dismissed.

Prior to the trial, Flores-Escobar settled for his policy limits of $15,000. That settlement and the prior dismissals left Chekenian as the only defendant at the trial. The defendant Chekenian asked the court to give the jury the settling co-defendant charge, which request was opposed by the plaintiff. The court denied the defendant’s request.

Ultimately, the case settled after opening statements and the plaintiff’s testimony. However, the court thereafter formalized its oral decision through this written opinion.

The remaining defendant had requested the “Settling Defendants” charge, Model Jury Charge 1.11G, which the judge would give at the beginning of the case to alert the jury that the plaintiff had claimed that a defendant was a cause of the accident. The charge advises the jury that the plaintiff had settled with that defendant and, for that reason, that defendant would not be involved in the trial. The charge states that the jury was not to speculate about it. They would be given more instruction at the end of the trial.

The second charge that the defendant requested was “Instructions to Jury in Cases in Which One or More Defendants Have Settled with the Plaintiff,” Model Jury Charge 1.17, which is given at the end of the case. In that charge, the judge would explain to the jury that, if the jury finds the remaining defendant negligent and that negligence was the proximate cause of the accident, the jury would next need to consider the conduct of the settling defendant and whether the settling defendant was negligent.

Defendants at trial would welcome the settling defendant charge at the beginning of the case because it conveys to the jury that someone else was at least partially responsible for the accident. The plaintiff, however, would consider the charge prejudicial for that same reason.

As the judge in Hernandez explained, even if a defendant settles before trial, if the remaining defendants establish a prima facie case against that defendant, the settling party will appear on the verdict sheet for the jury’s consideration of their negligence. However, the judge in Hernandez found that this analysis did not require the jury to be told that the settling party paid money to the plaintiff.

Hence, the trial judge found that, if the defendant settles during trial, it makes sense that the jury should be told something about why that party is no longer participating in the case. Otherwise, it makes no sense for the jury to be told that other defendants were in the case but they settled before the trial started. This information would not be relevant and would be highly prejudicial to the plaintiff. It was for these reasons that the judge denied the defendant’s request to give the Settling Defendant charge to the jury before the commencement of the case.

The judge also critiqued the language of the second charge, given at the end of the case. However, because the case settled after the plaintiff’s testimony, the court did not have to determine how, if at all, the language in that charge should modified.