Rova Farms Resort, Inc. v. Investors Insurance Co. of America

Clijtoiid, J.

(concurring). While I do not join in all of the Court’s reasoning, nevertheless I reach the same result as the majority because of a singular feature in this case. The fact that defendants in the original action, Rova and its general manager, were charged with both negligence and willful and wanton misconduct looms large in my determination of whether the insurance company discharged its obligation to the insured. It brings an additional and significant dimension to the question of good faith and fair dealing in the face of over-the-limits exposure.

*508When plaintiffs amended the complaint to include a charge of willful and wanton negligence, Investors’ attorney and its claims manager both notified Eova that the policy in question excluded coverage for such conduct and that any judgment based thereon would not be paid by the carrier. They invited the participation of the insured’s personal attorney, to protect Eova’s interests “in the event that the jury should find that [Eova] acted in a willful or wanton manner” and to cooperate in the defense of the case (note that the personal attorney’s participation was suggested not because of any stated apprehension of the plaintiffs’ verdicts being returned in excess of the policy limits hut because there now was a claim based on conduct excluded by the policy).1

The Company’s vice-president and attorney of record, who acted as claims manager, testified in this cause that the amendment allowing the additional issue of willful and wanton misconduct was significant in its potential for exposing the insured personally to liability “without regard to the policy.”

While it is not at all clear to me that under the language of this policy and particularly in the absence of any exclusion (see n. 1 ante) the Company would not have covered, to the extent of compensatory damages within the policy limits, an accident occasioned by willful and wanton misconduct, see Hanover Insurance Group v. Cameron, 122 N. J. Super. 51, 60 (Ch. Div. 1973); Prosser, Torts, (4th Ed. 1971), § 34 at 184, nevertheless that was the asserted position of Investors and the position from which it established and conducted its relations with its insured.

*509Given that position I think we need go no further than to hold that the Company’s cavalier disregard of the insured’s interests clearly fell below the required standard of fairness and good-faith dealing with its insured for this reason: it undertook to incur an unreasonable risk on behalf of the insured (who, under Investors’ view of its obligation, would have been liable for the entire amount of any verdict based on willful and wanton misconduct) while retaining unto itself complete control of the ease. Put another and perhaps excusably colloquial way, it presumed to gamble its insured’s money with its own dice against most unattractive odds. The fact that its own money was likewise at risk does not blunt the conflict which had ripened in the relationship between the Company and the insured.

Had it sought resolution of that obvious conflict, as it should have done, the declaratory judgment technique was available to answer the critical question: were plaintiff Lawrence McLaughlin’s injuries due to negligence or to willful and wanton misconduct on the part of defendants ? Well before this Court’s decision in Burd v. Sussex Mutual Insurance Company, 56 N. J. 383 (1970), decided after the trial of the McLaughlin claim,2 there was abundant authority, both here and elsewhere, for the use of the declaratory judgment procedure to decide coverage questions. See, e. g., Farm Bureau Mutual Automobile Ins. Co. v. Hammer, 177 F. 2d 793 (4 Cir. 1949); Stout v. Grain Dealers Mutual Ins. Co., 307 F. 2d 521 (4 Cir. 1962); Merchants Indemnity Corp. v. Eggleston, 37 N. J. 114 (1962); Ohio Casualty Insurance Co. v. Flanagin, 44 N. J. 504 (1965); Condenser Service & Engineering Co. v. American Mutual Liability Insurance Co. Inc., 45 N. J. Super. 31 (App. Div. 1957); LoRocco v. New Jersey Manufacturers Indemnity Ins. Co., 82 N. J. Super. *510323 (App. Div. 1964). In Stout v. Grain Dealers Mutual Ins. Co., supra, the broad policy consideration upon which I focus was put thusly:

[S]inee there exists a genuine issue of whether the injury was intentionally or unintentionally inflicted, then until this issue is decided between the insured and the insurer, the company should not be required to defend the state tort action. Indeed it could not do so with propriety or satisfaction or fairness either to itself or the assured. The obvious conflict of interest * * * makes it impossible for the insurance company conscientiously to fulfill the role of defender. [307 F. 2d at 523; emphasis supplied]

But Investors, confronted with that conflict, did nothing beyond notifying the insured that it would not furnish coverage for the one phase of the McLaughlin claim. Having made the choice not to seek resolution of the conflict and having retained control of the case, the Company, by perpetuating the prohibited conflict, exposed itself to — and by its conduct incurred — liability for any verdict in excess of its policy limits. It should, at the very least, have gone forward with a vigorous settlement effort marked by particular sensitivity to its insured’s exposure. Instead it chose to treat its insured’s personal attorney as an adversary and failed to initiate a cooperative and bipartisan approach to settlement. Whatever negotiations looking to possible settlement took place here appear to have originated with the trial judge — an undertaking which, although 'here necessitated by inexcusable foot-dragging by the attorneys, I for one have always thought better and more appropriately left to lawyers, with rare exceptions. But to the extent that Investors’ attorney became involved in that ritual fire dance which all too frequently precedes (and sometimes precludes) settlement, the steps choreographed for him by the insurer were designed inevitably to dance his partner, the insured, into the flames.

Under these circumstances there is ample authority to sustain an affirmance of the Appellate Division on the basis of absence of good faith and fair dealing without resort to *511some of the broad concepts employed by the majority, such as principles of fiduciary relationships and undifferentiated consumerism, which I am not prepared to adopt at this time. Eurther, I am constrained to add that I respectfully but emphatically disassociate myself entirely from Part III of the Court’s opinion.

Justice Mountain authorizes me to express his concurrence with the views set forth herein.

Mountain and Clieeokd, JJ., concur in result.

For affirmance and remandmenl in part — Chief Justice Hugi-ibs and Justices Jacobs, Mountain, Sullivan, Pash-man and Cliejfokd — 6.

For reversal — None.

In fact the policy contains no such specific exclusion as is frequently found in comprehensive general liability policies. The insurance agreement for bodily injury liability in the policy in question reads as follows:

Bodily Injury Liability: To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person and caused by accident.

Ror guiding authorities since Burd, see Lyons v. Hartford Insurance Group, 125 N. J. Super. 239 (App. Div. 1973); Hanover Ins. Group v. Cameron, supra.