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Connelly v. McVeigh1/7/2005
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 5, 2004
This appeal presents a new issue arising out of the relationship between an injured party's auto negligence suit and his claim for underinsured motorist (UIM) benefits.
Defendant/Intervenor, New Jersey Manufacturers Insurance Company (NJM), appeals from two orders. One order denied NJM's motion either to require its insured, plaintiff Robert Connelly, to return $100,000 which NJM was ordered to pay him under Longworth v. Van Houten, 223 N.J. Super. 174 (App. Div. 1988), or to impress a constructive trust upon that payment. The other order denied NJM's motion to impress a constructive trust upon $100,000, the sum previously deposited with the Superior Court by Allstate Insurance Co. as an offer of settlement on behalf of its insured, defendant David McVeigh.
These are the salient background facts. Connelly was injured when the car in which he was a passenger was involved in an accident with a car driven by McVeigh. McVeigh had $100,000 coverage under a liability policy issued by Allstate, whereas plaintiff Connelly had $300,000 underinsured motorist (UIM) coverage under his own policy issued by NJM. When Allstate offered its policy limit to Connelly to settle his claim against McVeigh, Connelly notified NJM in accordance with the Longworth procedure approved by the Supreme Court in Rutgers Cas. Ins. Co. v. Vassas, 139 N.J. 163 (1995). But NJM's investigation revealed that McVeigh had substantial assets, such that a verdict in excess of $100,000 likely would be collectible against him personally without resort to Connelly's UIM coverage. NJM therefore refused to consent to the settlement with Allstate, instead choosing to preserve its subrogation rights against McVeigh. As a result, the Law Division ordered NJM to pay Connelly $100,000, the sum that he was required to forego because NJM refused consent to the Allstate settlement. The same order allowed NJM to intervene as a defendant in Connelly's negligence suit against McVeigh. During the pendency of Connelly's suit against McVeigh, Allstate was allowed to deposit its $100,000 policy into court, thereby protecting itself against an assessment of pre-judgment interest on any verdict Connelly might obtain.
The Law Division judge expressly left it to plaintiff and NJM to"work out" the procedural issues: whether UIM arbitration or a trial of Connelly's negligence complaint against McVeigh should proceed first. Considerations included the potential for a trial de novo on Connelly's UIM claim against NJM if UIM arbitration were to precede the negligence trial, as well as the potential conflict arising from NJM's participation in the negligence suit.
After numerous communications between counsel over procedure, the details of which are no longer relevant, Connelly and NJM eventually entered into a"Release and Trust Agreement" (the Agreement), whose relevant provisions are set forth below:
WHEREAS, Allstate has offered to pay $100,000.00 of the limits of the Allstate Policy in settlement of the claims made by Connelly against David McVeigh; and
WHEREAS, Connelly in the belief that his damages are greater than $100,000.00 has elected to make a claim under the terms of the underinsured motorist coverage provided in the NJM Policy and to assign to NJM all rights of recovery which he has against David McVeigh, except as herein noted; and....
WHEREAS, NJM and Connelly are desirous of avoiding any further litigation on procedural matters pertaining to the under insured claim;
NOW, THEREFORE, the parties agree as follows:
1. NJM shall pay to
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