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Pickett v. Lloyd''s and Peerless Insurance Agency Inc.3/15/1993
The opinion of the court was delivered by
O'HERN, J.
The question in this case is whether an insurance carrier's bad-faith failure to pay collision damage benefits to an insured over-the-road trucker for a tractor-trailer truck that was totally destroyed can be the basis of an action for damages in excess of the policy benefits for the value of the truck. We hold that our law does recognize such a cause of action when the failure to pay the policy results from a denial or a withholding of benefits for reasons that are not even debatably valid and the economic losses sustained by the policyholder are clearly within the contemplation of the insurance company.
I
Were it not for the economic consequences to all parties, this case would be thought to arise from an almost comic mixup in the handling of an insurance claim that everyone involved has described as presenting "nothing unusual." Plaintiff, Burton Pickett, of Branchville, New Jersey lost his 1983 Mack tractor-trailer truck in a highway accident on Interstate 70 in Ohio on January 13, 1987. Another truck had stopped across the lanes of the highway, and Pickett's truck collided with it. As an "owner/operator" who had been hauling freight for Superior Carriers, Inc. (Superior) out of Kenvil, New Jersey for thirty-seven years, Pickett's seniority entitled him to "choice or refusal of the day's work" and thus to the more desirable and lucrative assignments. In case of an accident, Superior usually allows owner/operators a sixty-day grace period in which to replace their damaged vehicles and resume work without losing their seniority status. In Pickett's case, it extended that period for an additional thirty days -- to April 13, 1987.
At the time of the accident, Pickett had a $30,000 physical-damage policy for his truck with defendant Lloyd's, an underwriting syndicate. The insurance policy had been placed by his and Superior's agent, Robert K. Kast Associates (Kast), through defendant Peerless Insurance Agency, Inc. (Peerless), an agent of Lloyd's. The policy provided in part:
5. PROOF OF LOSS. Within sixty (60) days after loss or damage, unless such time is extended in writing by the Underwriters, the Assured shall forward to the Underwriters a statement, signed and sworn to by the Assured, stating the place, time and cause of the loss or damage, the interest of the Assured and of all others in the property, the sound value thereof and the amount of loss or damage thereto, all encumbrances thereon and all other insurance, whether valid and collectible or not, covering said property. * * *
6. PAYMENT OF LOSS. The loss shall in no event become payable until sixty (60) days after the verified proof of loss herein required shall have been received by the Underwriters and, if appraisal is demanded, then not until sixty (60) days after an award has been made by the appraisers.
On the day after the accident, Pickett filled out an accident report and left it with Superior, which sent it to Kast. That same day Pickett telephoned Kast and spoke with Susan Lopes, a claims executive at Kast. Lopes reported the claim to Diane Pavlick of Peerless, who faxed the claim information to Lloyd's in London on January 20. On January 21, Lopez sent Pavlick additional information regarding Pickett's claim with a cover letter that stated: "Please note the insured is out of work until his vehicle is repaired. Please expedite." Lopes said that she had never learned of Superior's seniority arrangement or that Pickett could lose his seniority.
On January 23, at Lloyd's direction, Pavlick mailed the loss information to a John Easterman in Ohio, who seems to have been a non
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