In Badiali v. New Jersey Manufacturers Ins. Grp., the New Jersey Superior Court, Appellate Division, in an published decision, held that an uninsured motorist (UM) carrier is precluded from issuing a trial de novo where the share of the UM arbitration award apportioned against them is less than $15,000, even when the gross award exceeds $15,000. The court clarified a provision of the insurer’s policy stating that “the arbitrators’ [decision] will be binding unless the arbitration award exceeds the minimum limit for liability specified by the Financial Responsibility Law of New Jersey[1]. If the arbitration award exceeds that limit, either party may demand the right to a trial by jury on all issues.” The court’s decision also resolved a conflict between panels of the Appellate Division on this issue. See Badiali v. N.J. Manufacturers Ins. Grp., A-4870-09 (App. Div. Feb. 28, 2011)(Badiali I) and Geiger v. N.J. Manufacturers Ins. Co., A-5135-02 (App.Div. Marc. 22, 2004).
In holding that the insurer was precluded from filing an appeal when the amount it actually had to pay was less than $15,000, the court reasoned:
We considered a similar argument in D’Antonio [v. State Farm Mut. Auto. Ins. Co., 262 N.J. Super. 257 (App. Div. 1993)] where plaintiff was injured in an automobile accident, settled with the tortfeasor for $25,000, which was the limit of the tortfeasor’s insurance coverage, and then made a claim against her own insurer for UIM benefits. 262 N.J. Super. at 248. The arbitrators “found defendant ‘100% liable’ and awarded plaintiff ‘the gross sum of $40,000.’ ” Ibid. Because the parties agreed the award “contemplated that the $25,000 recovered from [the tortfeasor] was to be credited against the $40,000 ‘gross sum,’ ” Id. at 249, the insurer was ultimately liable for only $15,000 in UIM benefits—
an amount which did not exceed the minimum for rejecting the award. As a result, we concluded that the insurer did not have the right to reject the award because its liability for UIM payments was determinative. Id. at 250.
NJM argues that D’Antonio is distinguishable because it concerned a UIM arbitration award rather than a UM arbitration award and because the phrasing of the UIM policy provision in question there differs from the phrasing of the UM policy provision in question here. Those circumstances are true, but they do not prompt a different result here.
In ascertaining the parties’ intent in D’Antonio, we recognized that the UIM provision’s phrase—“amount of damages”—was not defined by the policy and that “its meaning must be drawn from the setting in which it is used.” Id. at 249. Reason that arbitration “is conducted to determine the carrier’s liability for UIM payments,” and “[i]f a trial is available, it too will determine only the carrier’s UIM obligation,” ibid., Judge Gaulkin explained for this court that the extent of the carrier’s UIM liability—not the tortfeasor’s liability—should determine whether the case is sufficient to justify a trial. The parties’ purpose in foreclosing trials in modest cases would be substantially frustrated if the right to demand a trial turned on the damages attributable to the underinsured tortfeasor.[***]
Even though the policy here utilized a different phrase in fixing the threshold for preserving a right to trial, the parties purpose was unmistakably the same as in D’Antonio, and we can find no principled reason to adopt NJM’s request for an alternative approach—based solely on minor difference in the policy language—to govern the same essential circumstances.
Thus, the court ruled that it was not the gross award that was determinative of whether the carrier was entitled to appeal; but instead, it was whether the carrier was liable for an amount in excess of the statutory minimum, $15,000.
Incidentally, the court also found that New Jersey Manufacturers was not acting in bad faith by attempting to appeal the arbitration award because there was a split in authority on whether an appeal was permissible. This was true regardless of whether New Jersey Manufacturers actually relied on the other authority in making its decision because the mere existence of a split in authority precluded a finding that its position was instituted or pursued in bad faith.
[1]This monetary threshold is $15,000. See N.J.S.A. 39:6A-3.
What It Means to You
If you are a carrier or a claimant, a UM or UIM arbitration award will bind the carrier if the carrier is ultimately liable for less than the statutory minimum liability coverage, regardless of the gross amount of the award.