SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION DOCKET NO. A-2322- 21 CHERYL SAUSELEIN-RACZ, Plaintiff-Appellant,

v. NEW JERSEY MANUFACTURERS INSURANCE COMPANY, Defendant-Respondent.

_______________________________ _

Argued September 20, 2023

– Decided November 17, 2023 Before Judges Vernoia and Walcott-Henderson. On appeal from the Superior Court of New Jersey, Law Division, Cape May County, Docket No. L- 0121

- 20. Robert Alan Berns argued the cause for appellant (Kaufman Dolowich & Voluck, LLP, attorneys; Robert Alan Berns and Timothy Mark Ortolani, of counsel an d on the brief s)

. Glenn Thomas Dye r argued the cause for the respondent (Dyer & Peterson, PC, attorneys ; Glen Thomas Dyer, on the brief).

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court. " Although it is posted on the internet, this opinion is binding only on the parti es in the case and its use in other cases is limite d. R. 1:36- 3.2 A- 2322

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PER CURIAM In this insurance dispute over Underinsured Motoris t (U IM ) coverage , plaintiff Cheryl Sauselein-Racz appeals from an ord er granting defendant New Jersey Manufacturer's Insurance Company (NJM) summa ry judgment dismissing plaintiff's declaratory judgment action. H av ing consider ed whether plaintiff 's obligation to notify NJM about her personal injury law suit under Ferrante v. New Jersey Mfrs. Ins. Grp. , 232 N.J. 460 (2018) , was obviated by NJM's rescission of plaintiff's polic y, we conclude plaintiff's actions resulted in the irretrievable loss of NJM's subrogation rights and forfeiture of her UIM coverage. We therefore affirm. The relevant facts are undisputed. On March 27, 2018, while driving her husband and son , plaintiff w as involved in a head-on collision automobile accident with Mary Waddell's vehicle. Following the accident, pl aintiff and her family were transported to Cape Regional Medical Ce nter, where they were treated for injuries of varying degrees of severity

. Meanwhile, at the scene of the accident, Waddell ad mitted to officers that she was operating her vehicle after taking Methadon e, and she subsequently failed a sobriety test. Waddell was ticketed for r eckless driving in violation of N.J.S.A. 39:4-96, among other offenses.3 A- 2322

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At the time of the accident, plaintiff and her husb and, having carried insurance with NJM since at least 2013, were insure d under a one -year NJM policy , eff ective July 15, 2017 , through July 15, 2018

. According to plaintiff, that one-year NJM policy provided $300,000.00 in un insured/underinsured motorist coverage (UM/UIM), as well as $250,000.00 in personal injury protection (PIP) benefits. Notably, the UM/UIM endorsement section of the poli cy provides that a UIM claimant must "promptly . . . send [NJM] copies of the legal papers if a suit is brought, " and "notify [NJM] in writing of a tentative settlem ent" with the carrier for the underinsured motor vehicle and perm it NJM thirty days to pay th e amount "equal to the tentative settlement" in order "to preserve [it s] rights against the insurer, owner or operator of such unde rinsured motor vehicle." The "General Provisions" section of the policy states that if NJM makes a payment under the policy to a claimant who has the right to recover damages from another, NJM shall be subrogated to that right . In that case, the policy requires the claimant to do "[w]hatever is necessary to enable [NJM] to exercise [its] rights" and "[n]othing after loss to prejudice them." The subrogation rights outlined in that section do not apply if NJM has be en given "prompt written notice of a tentative settlement" between the insur ed and the underinsured4 A- 2322

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tortfeasor's carrier and NJM "failed to advance pay ment to the insured in an amount equal to the tentative settlement within [th irty] days" after receiving such notification.
On June 21, 2018, approximately three months after the accident, plaintiff and her husband filed a personal injury suit agains t Waddell in Cape May County. Waddell filed an answer to that complaint on July 24, 2018. After exchanging discovery, plaintiff and her husband lea rned that Waddell's automobile liability coverage limit was $100,000.00

. On October 18, 2018, plaintiff filed a declaratory judgment against NJM in Atlantic County

— rather than Cape May

— seeking payment of PIP benefits for all past and future medical bills related to th e accident. Plaintiff's filing made no reference to her pending personal injury ac tion in Cape May County against Waddell.
On December 11, 2018, plaintiff's counsel filed a $100 ,000.00 offer of judgment against Waddell. Shortly thereafter, on J anuary 29, 2019, the personal injury lawsuit settled for $95,000.00

— nearly the full amount of coverage under the policy held by Waddell at the time of the motor vehicle accident. Contrary to the UM/UIM endorsement and General Provi sions sections of her NJM policy, plaintiff did not notify NJM that s he had filed a personal injury5 A- 2322

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action against Waddell and did not provide NJM with a copy of the complaint. Plaintiff also did not advise NJM of Waddell's liab ility coverage limits, that the Waddell's liability coverage was insufficient to sa tisfy her personal injury claims, or of the impending settlement. On December 10, 2018, NJM notified plaintiff and her husband, via letter, of the retroactive rescission of their automobile p olicy. Specifically, NJM advised that it rescinded the policy because of pla intiff's failure to report that her son was a New Jersey licensed driver residing i n their home. NJM informed plaintiff of the following:

The Personal Automobile Policy is hereby rescinded. Accordingly, all coverage under the contract is considered null and void, effective July 15, 2013. This action has been influenced by information obtained through the investigation of the accident that occurred on March 27, 2018. Our Special Investigat ion Unit has determined that a material misrepresentati on has been committed surrounding your failure to disclose, at the appropriate time, that Christopher Sauselein was a licensed resident of your household [.] As a result of the rescission, you have not been provided automobile insurance with [NJM] since July 15, 2013. You must make other insurance arrangements immediately. Our Claims Department will be advised of the rescission by copy of this letter.6 A- 2322

- 21 Any return premium will be refunded to you under separate cover. NJM sent another letter dated December 12, 2018, ad vising plaintiff and her husband what its investigation revealed, confir ming its recission of the policy , and explaining that:

[they had] engaged in activity that has resulted in [NJM's] rescinding [their] personal auto policy. T he rescission has an effective date of July 5, 2013. Accordingly, the NJM policy at issue was not in force on the March 27, 2018 date of loss. As such, a ny coverage potentially available to you is void.

. . . .

Furthermore, the grounds for our coverage position set forth in this letter are not intended to limit NJM' s right to assert additional grounds for disclaiming covera ge or all or part of the claim. NJM issued a $14,548.43 check to plaintiff and her husband, as a refund of plaintiff's annual premium payments made from 20 13 to 2018. The period covered by the retroactive rescission of plaintiff' s automobile insurance policy included the date of plaintiff's automobile acciden t with Waddell, the effect of which voided "any coverage available to [plaintiff] " for that accident. As part of her settlement of her lawsuit against Wa ddell, o n January 8 , 2019, plaintiff executed a general release of claim s against Waddell and a stipulation of dismissal with prejudice. On January 29, 20 19, the court filed the7 A- 2322

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stipulation of dismissal concluding plaintiff's per sonal injury action against Waddell, who died one year later. Prior to the settlement of her claims against Waddell and delivery of the general release in Wadd ell's favor, plaintiff had never advised NJM about that lawsuit, settlement, o r general release of claims.
On February 15, 2019, NJM filed an answer , counterclaim and third-party complaint for declaratory judgment and Insurance Fr aud Prevention Act relief in the Atlantic County PIP action. Thereafter, the parties exchanged discovery.
On November 22, 2019, NJM filed a motion for summary judgment, which was denied on December 18, 2019. On February 19, 2020, the parties advised the court that plaintiff's claims and complaint against NJM had settled. Thereafter, in a stipulation finalized on May 28, 2020, the parties laid out the material ter ms of the settlement , agreeing
in pertinent part that : "NJM shall adjust claims for unpaid PIP . . . for treatment related to injuries sustained in an accident of Mar ch 27, 2018, including any bills paid by a medical insurance company subject to $250 ,000.00 policy limits, deductible, co-payment, and any and all other defen ses not raised in this lawsuit." Furthermore, under the stipulation, plaintiff was p ermitted to seek up to $200,000.00 in UIM benefits under the policy that NJM had rescinde d in December 2018. The stipulation effectively cancele d the rescission and restored8 A- 2322

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the policy that was in effect at the time of the ac cident, and plaintiff returne d to NJM the premium refund check they had issued at the time of the recission in December 2018. Critically, under the settlement , NJM maintained its right to "assert any and all defenses to the UIM claim of [plaintiff] in cluding but not limited to whether she properly protected NJM's subrogation ri ghts and afforded required notice and/or whether she abided by the mandates se t forth in Zirger, 1 Longwor th 2 and other decisional authority; in connection with her claim." Within days of signing the stipulation of settlemen t, on June 1, 2020, plaintiff filed a second action seeking a declarator y judgment that she is entitled to UIM coverage under the policy NJM had rescinded in 2018.
On February 4, 2022, the parties appeared before Judge Michael Winkelstein for oral argument on plaintiff's motion and NJM's cross-motion for summary judgment

. O n February 17, 2022, J udge Winkelstein, in an oral decision, grant ed summary judgment to NJM, finding plaintiff's failu re to notify her insurance carrier of her personal injury lawsui t and settlement violated the terms of NJM's insurance policy and the principles established in Longworth.

1 Zirger v. Gen. Accident Ins. Co., 144 N.J. 327 (1 996).

2 Longworth v. Van Houten, 223 N.J. Super. 174 (App . Div. 1988).9 A- 2322

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In a well-reasoned analysis of the law and facts, t he court concluded that "it was the insured's duty . . . to notify [NJM] in sufficient time to allow [it] to take action in the personal injury lawsuit" and tha t [NJM's] actions were in complete accord "with the Supreme Court's directive s" in Ferrante. The court further found "plaintiff's actions . . . caused NJM to forfeit its subrogation rights" and NJM was "entitled to summary judgment preclud ing [p]laintiff from receiving UIM benefits under the policy." On the i ssue of whether NJM was prejudiced by plaintiff's failure to provide it wit h notice of the lawsuit against Waddell, the court concluded that, consistent with the Court's holding in Ferrante, a showing of "prejudice upon the loss of subrogation rights is not a prerequisite" to void a claim for UIM benefits. This appeal followed.
I. We review a grant of summary judgment de novo, Bran ch v. Cream-OLand Dairy, 244 N.J. 567, 582 (2021), "under the sa me standard that govern[ed] the court's determination," Goldhagen v. Pasmowitz, 247 N.J. 580, 593 (2021).
We "must 'consider whether the competent evidential mate rials presented, when viewed in the light most favorable to the non-movin g party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the10 A- 2322

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non -moving party.'" Meade v. Twp. of Livingston, 249 N.J. 310, 327 (2021) (quoting Brill v. Guardian Life Ins. Co. of Am., 14 2 N.J. 520, 540 (1995)). "Summary judgment should be granted . . . 'against a party who fails to make a showing sufficient to establish the existenc e of an element essential to that party's case, and on which that party will bear the burden of proof at trial.'" Friedman v. Martinez, 242 N.J. 449, 472 (2020) (quo ting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). However, we give no deference to a trial court's le gal determinations when no issue of fact exist. Templo Fuente De Vida Corp . v. National Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189, 199 (2016) (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)). The relationship between an insured and an insuranc e carrier is contractual; the obligation to offer UIM coverage, however , is statutory. Zirger v. Gen. Accident Ins. Co., 144 N.J. at 333. Insurance carriers are required to offer each insured the option of purchasing UM/UIM coverage up to the limits of liability coverage, but not exceeding $250,000.0 0 per person and $500,000.00 per accident against the risk of injury caused by u nderinsured tortfeasors. N.J.S.A. 17:28-1.1(b). An individual against whom recovery is sought after an accident is considered "underinsured" when his or h er liability limits are "at the11 A- 2322

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time of the accident, less than the applicable limi ts for underinsured motorist coverage afforded under the motor vehicle insurance policy held by the person seeking that recovery." N.J.S.A. 17:28-1.1(e)(1). A UIM carrier who pays benefits to an insured has t he right to subrogate the insured's claim against the tortfeasor to permi t the carrier to recover from the tortfeasor the UIM benefits paid to its insured . To effectuate this right, " a UIM carrier may intervene in an insured's trial against a tortfeasor" to avoid "relitigating the insured's claim, and to bind the tortfeasor to the issues decided at trial." Zirger, 144 N.J. at 340- 42. In Longworth, we announced a notification procedure for insureds and insurers to follow when making UIM claims

. 223 N.J. Super. at 185. The court observed: [A]n insured receiving an acceptable settlement off er from the tortfeasor should notify his UIM carrier. The carrier may then promptly offer its insured that su m in exchange for assignment to it by the insured of the claim against the tortfeasor. While promptness is to be ultimately determined by the circumstances, [thirty ] days should be regarded as the presumptive time per iod if the insured notices his carrier prior to assignm ent of a trial date. [Id. at 194.]12 A- 2322

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Subsequently, our Supreme Court endorsed that procedure in Rutgers Cas. Ins. Co. v. Vassas, 139 N.J. 163, 169 (1995)

. In Vassas, the insured pursued a claim against his insurer for UIM benefits three ye ars after an accident. Id. at 166. By that time, the insured had sued the tortfe asor, gone to arbitration, accepted an arbitration award significantly below t he UIM limits, reduced the award to judgment, and executed a warrant of satisf action to the tortfeasor. Ibid. As the limitations period for a subrogation action against the tortfeasor was the same two-year period that governed the insured's suit aga inst the tortfeasor, any possible subrogation action taken by the insurer was time-bar red. Id. at 169-70. Addressing our holding in Longworth, the Court iden tified th ree occasions when the insured must notify the UIM carrier:

(1) when [an insured under an automobile insurance policy providing UIM benefits is involved in an accident and undertakes] legal action against the tortfeasor; (2) [i]f, during the pendency of the cl aim, the tortfeasor's insurance coverage proves insuffic ient to satisfy the insured's damages; and (3) if the in sured is seeking UIM benefits because he or she "receive[ d] a settlement offer or arbitration award that does n ot completely satisfy the claim, because the tortfeaso r is underinsured." [Ferrante , 232 N.J. at 471 (quoting Vassas , 139 N.J. at 174 ). ]13 A- 2322

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In Ferrante, our Supreme Court also considered whether a finding of prejudice was required to void a UIM claim where th e insurer's subrogation rights were totally nullified by the insured's cond uct. 232 N.J. at 471. There, the insured failed to notify his insurer that he wa s prosecuting a personal injury lawsuit against the tortfeasor until after the insu rer waived its subrogation rights.
I d. at 463. By that time, the insured had participate d in arbitration, gone to trial , executed a high-low agreement for $100,000.00, and obtained a jury award of $250,000.00. Id. at 465-66. The insurer subsequen tly moved to bar the plaintiff's UIM claim because he effectively forfei ted the insurer's subrogation rights and failed to comply with the notification r equirements under his policy. Ibid. Although the Vassas Court held the insured's failure to com ply with the provisions of his insurance contract "bar[red] his action to recover UIM benefits from [his insurer]" and the insured "unfairly preju diced [the insurer's] subrogation right against [the tortfeasor]" contrar y to the requirements of his insurance policy, 139 N.J. at 165, 176, Ferrante he ld that prejudice to the UIM carrier need not be weighed in the analysis of whet her a UIM claim is barred where an insured "could have, should have, but did not" notify the carrier as required under Longworth. 232 N.J. at 474

. The Court reasoned that an14 A- 2322

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insured's "duty to notify in the UIM context is int ended to protect a carrier's right of subrogation." Ibid. The Court concluded the plaintiff violated that duty by failing to notify his UIM carrier of the lawsuit , the high-low agreement, and the jury trial. Id. at 473. In Rivers v. Allstate Ins. Co., 312 N.J. Super. 379 (App. Div. 1998) , we addressed the consequences of the insured's failure to fol low Vassas. In Rivers, th e insured notified her UIM ca rrier that she had filed suit against the tortfeaso r, which satisfied the first two notice requirements e stablished in Vassas, but she

execut ed a general release in favor of the tortfeasor without sending her UIM carrier a Longworth notice or securing the carrier' s permission to do so. Id. at 381, 383-84. The insured also sent a letter to the carrier falsely stat ing the tortfeasor had offered to settle the matter and it was the insured's "intention" to accept the settlement, when the insured had already signed a release and received the settlement proceeds. Id. at 384. The court determined plaintiff's notice to the carrier failed to comport with the re quirements set forth in Longworth, an d the insured's failure to disclose necessary infor mation regarding the general release effectively extinguished the in surer's subrogation rights. Ibid. The court also determined that, as a result, the in sured was barred from pursuing her UIM claim.15 A- 2322

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Measured against the foregoing principles, we concl ude that plaintiff's UIM claim is barred because of her failure to infor m NJM of the commencement of her suit against Waddell prior to NJM 's recission of the policy, and plaintiff's failure to notify NJM of the subsequent settlement and execution of the general release in Waddell's favor because plaintiff's acti ons resulted in the irretrievable loss of NJM's subrogation rights.
II. Racz argues her duty to inform NJM of her claim and settlement were extinguished by NJM's rescission of her policy; ren dering her insurance policy void ab initio and thus relieving her of any Longwo rth duty . In support of the contention, plaintiff relies on the general contrac t law principle that "[r]escission voids [a] contract ab initio ," meaning that it is considered "null from the beginning" and it is treated as if it does not exis t for any purpose. First Am. Title Ins. Co. v. Lawson, 177 N.J. 125, 137 (2003). NJM contends that "plaintiff's claim for UIM benefi ts is barred as a matter of law by virtue of her failure to abide by both th e policy provisions and common law . . . ." Relying upon Ferrante, NJM maintains that "[w]hat plaintiff was surely required to do was simply notify [it] of her pending lawsuit, her intention to pursue UIM coverage, the settlement offer and he r intent to accept the offer16 A- 2322

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before signing the general release, dismissing that action and pursuing this action." We reject plaintiff's claim because her obligation to inform NJM of her pending lawsuit against the tortfeasor arose prior to NJM's putative recission of the policy by over five months. More particularly, plaintiff filed her lawsu it against Waddell in June 2018, but failed to inform NJM she had done so. In October 2018, plaintiff filed her action against NJ M seeking enforcement of what she claimed was NJM's obligation under the pol icy to pay PIP. That is, plaintiff's claim against NJM was based on her cont ention she had enforceable contract rights under the NJM policy

. During the pendency of that litigation, in which pl aintiff prosecuted her claim the NJM policy was valid and binding, plainti ff never inform ed NJM of the pendency of the Waddell lawsuit. Also, during the pendency of her lawsuit against NJM, plaintiff made an offer of judgment to Waddell, settled her claims against Waddell, and executed a release in favor of Waddell that ended any potential rights of subrogation NJM would have enjo yed had plaintiff provided a proper Longworth notice to it. Plaintiff's prosecution of her claims against NJM f or PIP benefits is inconsistent with her contention that NJM's Decembe r 2018 attempt at17 A- 2322

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rescinding the insurance policy relieved her of the obligation to comply with her obligations under Longworth

. Plaintiff cannot logically claim she relied on NJM's recission letter as the basis for her failure to comply with Longworth's requirements when her position at all times, includ ing after she received the notice of rescission, was that the policy was in fu ll force and effect at the time of her accident with Waddell and, as such, NJM was obligated under the policy to pay her PIP benefits. Under those circumstances, it is incongruous for pl aintiff to argue, as she does here, that despite NJM's effort to retroactive ly rescind the policy, she was entitled to coverage under it when the Waddell acci dent occurred but she was relieved of her legal duty under Longworth to notif y NJM of her pending lawsuit against Waddell and its settlement. And, plaintiff proved to be correct about NJM's effort to retroactively rescind the policy

— the resolution of her lawsuit against NJM allowed her to recover PIP benefits und er the policy and to pursue her claims against NJM for UIM coverage. For those reasons, we are convinced plaintiff's reliance on NJM's effort to rescind the policy provides no refuge from her failure to comply with her Longworth obligation s.18 A- 2322

- 21 III. Plaintiff also contends the Court's holding in Ferrante inherently includes a "prejudice[-] to [-] the [-]insurer" analysis and that the court erred in no t considering the tortfeasor's destitute status in th is case. Plaintiff argues the lack of notice to NJM of the personal injury lawsuit and settlement was thus an immaterial breach, and the court committed reversab le error in not finding NJM's missed opportunity to determine subrogation w as in fact illusory. On this, the parties dispute whether Ferrante creat ed a bright-line rule requiring an insured to advise the insurer of a lia bility claim settlement offer and intention to pursue UIM coverage claims, and if as NJM suggested in Ferrante , stands for the proposition that the presumption of prejudice is rebuttable in every

case. Given our earlier interpretation of Ferrante , we are unpersuaded by plaintiff's argument that NJM's ability to collect from the tortfeasor was a "key issue" the court failed to consider. NJM was not o bliged to show it suffered prejudice, and the fact that it failed to do so is of no consequence. As ratified by Ferrante Court:

If . . . the insured, regardless of his state of mind , fails to give the UIM carrier any notice of the UIM claim until after the final resolution of the underlying tort action, thereby causing the irretrievable loss of t he19 A- 2322

- 21 carrier's rights to subrogation and intervention be fore the carrier has ever learned of the existence of th e claim, coverage is forfeited. [Ferrante , 232 N.J. at 474.] We therefore conclude plaintiff's action, in failin g to notify NJM of any aspect of her legal action against the tortfeasor

— its filing and eventual settlement

— contrary to the requirements of her policy and lega l precedent , caused the irretrievable loss of NJM's subrogation rights. Ibid. ; see also Longworth, 223 N.J. Super. at 194

– 95. Consequently, we need not address whether Sauselein -Racz established a lack of prejudice, based on her contention that a s ubrogation action, would have yielded de minimis results. See R. 2:11

- 3( e)(1 )( E ). Affirm.