1

SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the 

convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the 

interest of brevity, portions of any opinion may not have been summarized.)

Augustine W. Badiali v. New Jersey Manufacturer’s Insurance Group (A-48-12) (071931)

Argued September 9, 2014 -- Decided February 18, 2015

FERNANDEZ-VINA, J., writing for a unanimous Court.

In this appeal, the Court considers whether an insurer’s rejection of an arbitration award in an uninsured 

motorist (UM) claim was “fairly debatable,” thereby barring an insured from recovering counsel fees and other 

consequential damages under a theory of bad faith.

In August 2006, plaintiff Augustine W. Badiali was injured when his car was rear-ended by an uninsured 

motorist. Plaintiff was insured for UM coverage under his personal policy with defendant, New Jersey 

Manufacturer’s Insurance Group (NJM), as well as his employer’s policy with Harleysville Insurance Company. 

Plaintiff filed a UM claim, which proceeded to arbitration and resulted in an award of $29,148.62 in plaintiff’s 

favor. Since NJM and Harleysville were contractually and statutorily obligated to share this award equally, they 

each owed $14,574.31. Harleysville paid its half, but NJM rejected the award and demanded a trial de novo. NJM 

asserted that the language of its personal policy allowed either party to dispute an arbitration award in which the 

total amount exceeded $15,000. 

The trial court affirmed the award, finding NJM liable for $14,574.31. In an unpublished decision, the 

Appellate Division affirmed, relying on its holding in D’Antonio v. State Farm Mut. Auto. Ins. Co., 262 N.J. Super.

247, 249-50 (App. Div. 1993), an underinsured motorist (UIM) action, in which it found that the question of whether 

a case is of sufficient magnitude to justify a trial rests on the extent of the carrier’s liability, rather than that of the 

tortfeasor. NJM subsequently paid the award in full.

In March 2011, plaintiff commenced a second action against NJM, asserting claims for breach of contract, 

bad faith, and consumer fraud. NJM moved for summary judgment, relying on a 2004 unpublished Appellate 

Division decision, which held, under essentially the same circumstances, that the insurer (also NJM) was entitled to 

reject the arbitration award at issue and demand a trial de novo. Geiger v. N.J. Mfrs. Ins. Co., No. A-5135-02 (App. 

Div. Mar. 22, 2004). NJM conceded that Geiger lacked precedential authority, but maintained that its existence 

proved that NJM’s conduct was reasonable, fair, and honest, and that it had “fairly debatable” reasons to reject the 

arbitration award at issue and seek a trial de novo. 

The trial court granted summary judgment in favor of NJM on all counts, although discovery had not been 

completed. Plaintiff appealed, and the Appellate Division affirmed. Declining to address whether it was improper 

for the trial court to grant summary judgment prior to the completion of discovery, the panel held that, as a matter of 

law, the mere existence of unpublished case law supporting NJM’s rejection of the arbitration award precluded a 

finding of bad faith against NJM, regardless of whether NJM relied on or was aware of that unpublished case. 

Badiali v. N.J. Mfrs. Ins. Grp., 429 N.J. Super. 121, 126 (App. Div. 2012). This Court granted plaintiff’s petition for 

certification. 213 N.J. 387 (2013). 

HELD: NJM’s rejection of the arbitration award in plaintiff’s UM action was “fairly debatable,” thereby barring 

plaintiff from recovering counsel fees and other consequential damages under a theory of bad faith. 

1. Contracts impose an implied obligation of good faith and fair dealing in their performance and enforcement. 

Among the business practices that the New Jersey Legislature considers unfair or deceptive in the context of 

insurance claims settlements is failure “to negotiate in good faith to effectuate prompt, fair and equitable settlements 

of claims in which liability has become reasonably clear.” N.J.S.A. 17:29B-4(9)(f). An insurer’s breach of good 

faith may be found upon a showing that it has breached its fiduciary obligations, including its duty to settle claims. 

Whether an insurer has acted in bad faith by breaching its fiduciary duty depends on the circumstances of the 
2

particular case. In order to establish a bad faith claim for denial of benefits in New Jersey, a plaintiff must show that 

no debatable reasons existed for the denial. (pp. 10-12) 

2. Summary judgment is granted where there is no genuine issue of material fact, such that the moving party is 

entitled to a judgment as a matter of law. Purely legal questions, such as the interpretation of insurance contracts, 

are particularly suited for summary judgment. New Jersey’s public policy favors arbitration as a means of settling 

disputes that otherwise would be litigated in a court. In the area of insurance claims settlement, arbitration is often 

used to expedite resolution of UM claims, with the duty to arbitrate and the scope of the arbitration dependent on the 

provisions of the parties’ agreement. Although this Court has consistently upheld an insurer’s right to reject an 

arbitration award pursuant to the express terms and conditions of its policy language, our appellate courts have 

limited attempts to reject an award and proceed de novo where the policy wording is ambiguous. For example, in 

D’Antonio, supra, 262 N.J. Super. at 249, a UIM case, the Appellate Division rejected a plaintiff’s attempt to seek a 

new trial on damages where the phrase “amount of damages” was ambiguous. The panel noted that it is the extent 

of the carrier’s UIM liability that should determine whether the case is of sufficient magnitude to justify a trial. (pp. 

12-17)

3. In deciding whether NJM had “fairly debatable” reasons for rejecting the arbitration award, the Court first 

considers whether the existence of the unpublished Geiger decision reasonably supports NJM’s position. There, the 

Appellate Division permitted NJM to move to reject the arbitration award and request a trial de novo based on the 

total amount of the arbitration award ($27,000), rather than NJM’s share ($13,500), and the policy provision 

allowing either party to dispute an arbitration award in which the total amount exceeded $15,000. In accordance 

with Rule 1:36-3, Geiger has no legal precedential value. However, in the limited in-house, business context of this 

case, the Court finds that the mere existence of this unpublished opinion allows NJM to avoid a finding of bad faith 

for actions take in accordance with its holding. It is illogical to suggest that NJM, or any corporation, cannot rely on 

previous unpublished opinions - especially those in which they were involved - in making business decisions. Thus, 

having pursued a similar course of action in Geiger with the approval of the Appellate Division, NJM had fair 

reason to believe that it was making a legitimate legal and business decision by rejecting the arbitration award and 

seeking trial. Rule 1:36-3 is inapplicable in this context, where NJM referenced Geiger not for its legal precedential 

value, but rather to prove that NJM acted in good faith. Under the circumstances here, the existence of the 

unpublished Geiger decision precludes a finding of bad faith against NJM. (pp. 17-21) 

4. Even without reliance on Geiger, the language of NJM’s policy provided a rational, valid reason for NJM to seek 

a trial by jury on the disputed claim. Giving the policy terms their plain, ordinary meaning, the $29,148.62 

arbitration award was clearly in excess of the policy’s $15,000 threshold, notwithstanding the fact that NJM only 

needed to contribute $14,574.31. NJM’s position was, at the very least, fairly debatable based on a reasonable and 

principled reading of the applicable policy language. Moreover, plaintiff’s reliance on D’Antonio, a UIM case, is 

misplaced. Special rules exist for the calculation of UIM benefits, requiring exhaustion of all available coverages 

and the offsetting of any recoveries received as a precondition to payment. Consequently, in D’Antonio, the amount 

of the carrier’s liability was less than the total award since the plaintiff had settled with the tortfeasor for a portion of

the total award. Conversely, here, the disposition of plaintiff’s UM claim was not influenced or reduced by the 

tortfeasor’s own liability insurance limits. Thus, it was reasonable for NJM to conclude that D’Antonio applied only 

in the UIM setting. However, the Court holds that, going forward, any reference in a policy of insurance to the 

statutory $15,000 policy limit as the basis for rejecting an arbitration award applies only to the amount that the 

insurance company is required to pay, and not to the total amount of the award. To hold otherwise would frustrate 

the legislative intent of expediting resolution of smaller cases in the least costly manner, easing congestion in our 

courts, and limiting jury trials to larger cases. (pp. 21-25)

5. In light of its disposition of the bad faith cause of action in this matter, the Court declines to address the 

entitlement of an insured to attorney’s fees in the uninsured/underinsured context. The Court also declines to 

address the issue of discovery, which it deems irrelevant to the instant case.

The judgment of the Appellate Division is AFFIRMED.

CHIEF JUSTICE RABNER, JUSTICES ALBIN and SOLOMON, and JUDGE CUFF (temporarily 

assigned) join in JUSTICE FERNANDEZ-VINA’s opinion. JUSTICES LaVECCHIA and PATTERSON did 

not participate. 
1

SUPREME COURT OF NEW JERSEY

A-48 September Term 2012

071931

AUGUSTINE W. BADIALI,

Plaintiff-Appellant,

v.

NEW JERSEY MANUFACTURERS 

INSURANCE GROUP,

Defendant-Respondent.

Argued September 9, 2014 – Decided February 18, 2015

On certification to the Superior Court, 

Appellate Division, whose opinion is 

reported at 429 N.J. Super. 121 (2012).

Richard J. Hollawell argued the cause for 

appellant (Console & Hollawell, attorneys).

Richard J. Williams, Jr. argued the cause 

for respondent (McElroy, Deutsch, Mulvaney & 

Carpenter, attorneys; Mr. Williams and 

Joseph G. Fuoco, on the briefs).

Amos Gern argued the cause for amicus curiae

New Jersey Association for Justice (Starr, 

Gern, Davison & Rubin, attorneys; John J. 

Ratkowitz, on the brief).

Carl A. Salisbury argued the cause for 

amicus curiae United Policyholders 

(Kilpatrick Townsend & Stockton, attorneys).

JUSTICE FERNANDEZ-VINA delivered the opinion of the Court.

The issue this Court must decide on appeal is whether an 

insurer’s rejection of an arbitration award in an uninsured 

motorist (UM) claim was “fairly debatable,” thereby barring an 
2

insured from recovering counsel fees and other consequential 

damages under a theory of bad faith.

Plaintiff, Augustine W. Badiali, was injured when his motor 

vehicle was rear-ended by an uninsured motorist. Plaintiff 

filed a UM claim, which proceeded to arbitration and resulted in 

an award in plaintiff’s favor. Plaintiff filed suit against his 

insurer, defendant New Jersey Manufacturers Insurance Group

(“NJM”), after NJM rejected the arbitration award and refused to 

pay its share. The trial court confirmed the arbitration award 

in a summary action and found NJM liable for its share of the

award. In a subsequent action, plaintiff asserted that NJM 

litigated in bad faith by advocating that its policy language 

allowed for a rejection of the arbitration award at issue. The 

trial court granted summary judgment in favor of NJM. The court 

agreed that the case was ripe for summary judgment although 

discovery had not been completed. The court was further 

persuaded that NJM’s position was “fairly debatable” based on

its policy language and on the existence of an unpublished

Appellate Division decision involving nearly identical facts, in 

which NJM was also a party. 

The Appellate Division affirmed, holding that NJM’s 

position was “fairly debatable” under Pickett v. Lloyd’s, 131

N.J. 457 (1993), because it was supported by a prior, 
3

unpublished opinion of the court. Plaintiff was thereby barred 

from recovering counsel fees or any other consequential damages. 

For the reasons set forth in this opinion, we affirm the 

judgment of the Appellate Division.

I.

On August 1, 2006, plaintiff was injured when his motor 

vehicle was rear-ended by an uninsured motorist. Plaintiff was 

insured for UM coverage under his personal policy with 

defendant, NJM, and also under his employer’s insurance carrier, 

Harleysville Insurance Company (“Harleysville”). Plaintiff 

filed a UM claim, which proceeded to arbitration and resulted in 

an award of $29,148.62 in plaintiff’s favor. NJM and 

Harleysville were contractually and statutorily obligated to 

share this award equally. See N.J.S.A. 17:28-1.1(c). 

Harleysville paid its half, $14,574.31. However NJM rejected 

the award and demanded a trial de novo. NJM asserted that the 

language of its personal auto policy allowed either party to 

dispute an arbitration award in which the total amount exceeded 

$15,000. Plaintiff filed suit against NJM to enforce the award.

In a summary action pursuant to N.J.S.A. 2A:24-7, on April 

16, 2010, the trial court confirmed the arbitration award and 

found NJM liable for $14,574.31, notwithstanding the fact that 

the total arbitration award was in excess of the $15,000 

threshold provided for in its personal auto policy as grounds to 
4

reject the award. The Appellate Division in an unpublished 

opinion affirmed (Badiali I), relying on its holding in 

D’Antonio v. State Farm Mut. Auto. Ins. Co., 262 N.J. Super.

247, 249-50 (App. Div. 1993), that “‘the extent of the carrier’s 

[underinsured motorist] liability . . . not the tortfeasor’s 

liability . . . should determine whether the case is of 

sufficient magnitude to justify a trial.’” NJM thereafter paid

the arbitration award in full.

On March 29, 2011, plaintiff commenced a second action 

against NJM, asserting claims for breach of contract, bad faith, 

and consumer fraud. Regarding bad faith, plaintiff argued that 

NJM expended more than $28,000 to avoid paying its portion of 

the arbitration award in Badiali I. Plaintiff further asserted 

that NJM caused him to incur substantial expense, years of 

delay, and undue aggravation as a result of its handling of his

UM claim, which entitled him to treble and punitive damages, as 

well as attorney’s fees and costs. 

NJM moved for summary judgment, maintaining that there was 

no genuine issue of material fact whether its actions in Badiali 

I constitutes bad faith. In arguing that it did not act in bad 

faith, NJM relied on a 2004 unpublished decision in which the 

Appellate Division held, under essentially the same 

circumstances, that the insurer (also NJM) was entitled to 

reject the arbitration award at issue and demand a trial de 
5

novo. Geiger v. N.J. Mfrs. Ins. Co., No. A-5135-02 (App. Div. 

Mar. 22, 2004)1. Although NJM conceded that Geiger lacked any 

precedential authority, it asserted that its mere existence 

proved that NJM’s conduct was reasonable, fair, and honest, and 

that it had “fairly debatable” reasons to reject the arbitration 

award at issue and seek a trial de novo as a result. Put 

differently, NJM maintained that its position and reasoning in 

rejecting the arbitration award in Badiali I were identical to 

its position and reasoning in rejecting the arbitration award in 

Geiger. Thus, because the Appellate Division expressly 

vindicated that position and reasoning in Geiger, NJM asserted 

that it would be inconsistent and illogical to find that they 

acted in bad faith under nearly identical circumstances in 

Badiali I.

The trial court heard oral argument on January 20, 2012,

and subsequently granted summary judgment in favor of NJM on all 

counts, despite the fact that discovery had not yet been 

completed. The trial court found that plaintiff failed to

demonstrate how further discovery would supply the missing 

elements of his cause of action, or change the material facts or 

outcome of his case. As such, the court deemed the case ripe 

for summary judgment.

 

1 We cite but do not rely on this unpublished opinion for reasons 

explained in Section VI below. See R. 1:36-3.
6

Plaintiff appealed and the Appellate Division affirmed. 

Badiali v. N.J. Mfrs. Ins. Grp., 429 N.J. Super. 121 (App. Div. 

2012) [hereinafter “Badiali II”]. The panel held that, as a 

matter of law, the mere existence of unpublished case law 

supporting NJM’s rejection of the arbitration award precluded a 

finding of bad faith against NJM, regardless of whether NJM 

relied on or was aware of that unpublished case. Id. at 126. 

The Appellate Division declined, however, to address whether it 

was improper for the trial court to grant summary judgment prior 

to the completion of discovery. The panel found “it does not 

matter whether NJM actually based its position in Badiali I on 

[Geiger], it also does not matter that plaintiff was deprived of 

the opportunity to explore the formulation of NJM’s strategy in 

the prior suit in pretrial discovery in this suit.” Id. at n.5.

This Court granted plaintiff’s petition for certification. 

Badiali v. N.J. Mfrs. Ins. Grp., 213 N.J. 387 (2013). 

Thereafter the Court granted leave to appear as amici curiae to

New Jersey Association for Justice (“NJAJ”) and to United 

Policyholders (“United”).

II.

Plaintiff asserts three arguments. Plaintiff first argues 

that the trial and appellate courts erroneously concluded that 

NJM had “fairly debatable” reasons to reject the arbitration 

award at issue, based upon the existence of the unpublished 
7

Geiger opinion. Plaintiff contends that NJM failed to establish 

that it actually relied on Geiger at the time it rejected the 

arbitration award at issue, and that NJM’s decision was contrary 

to other published legal authority in D’Antonio, which was 

binding on plaintiff. 

Plaintiff additionally argues that the appellate court 

erroneously upheld the trial court’s grant of summary judgment 

when discovery had not yet been completed. He contends that 

when certain facts are solely within the knowledge of the moving 

party, such as the information relied upon by an insurer when 

making its decisions, it is especially inappropriate to grant 

summary judgment without allowing the completion of all 

scheduled depositions or requested written discovery.

Finally, plaintiff contends that he is statutorily entitled 

to all counsel fees incurred while seeking to enforce the 

benefits of the policy and arbitration award to which he was 

entitled. R. 4:42-9(a)(6). 

NJM, on the other hand, argues that the trial and appellate 

courts properly found that NJM acted in good faith as a matter 

of law. NJM contends that its reasons for rejecting the 

arbitration award and demanding a jury trial were based on a 

sound, reasonable, and legally supportable interpretation of its 

policy language. In addition to its policy language, NJM also 

contends that it had “fairly debatable” reasons to reject the 
8

arbitration award based on the existence of Geiger, which 

although unpublished, was issued prior to the underlying matter 

and fully supported the position taken by NJM in Badiali I. NJM 

asserts that it was aware of Geiger at all times and disputes 

plaintiff’s argument that NJM’s failure to cite Geiger during 

the initial litigation evidenced a lack of awareness as to its 

essential holding. 

Furthermore, NJM disputes plaintiff’s contention that 

summary judgment may not be granted until discovery is complete. 

Rather, NJM contends that discovery need not be taken if it will 

not patently change the outcome of the case. On this issue, NJM 

further argues that the underlying case is particularly suited 

for disposition on summary judgment because the underlying 

dispute deals with the interpretation of an arbitration clause, 

which is an issue of law.

NJM’s final argument is that plaintiff is not entitled to 

attorney’s fees because Rule 4:42-9(a)(6) does not apply to 

first-party insurers providing uninsured/underinsured coverage

and, even if it did, plaintiff is unable to receive attorney’s 

fees because it’s conduct was reasonable and not instituted in 

bad faith.

NJAJ, appearing as amicus curiae, supports the arguments 

advanced by plaintiff. NJAJ contends that a lack of procedural 

guidance exists regarding the preservation of first-party bad 
9

faith claims. This, NJAJ maintains, has resulted in such claims 

being disposed of on the merits in what amounts to a 

“post-verdict motion for summary judgment.” NJAJ asserts that, 

in analyzing allegations of first-party bad faith, courts should 

be required to engage in a more exhaustive examination of 

claims-handling practices. This includes reviewing the actual 

conduct of the defendant insurance carrier with respect to the 

investigation, evaluation, and processing of a plaintiff’s 

claim, as well as the information actually considered at the 

point in time that a decision was made. Noting the prevailing 

judicial attitude that presumes reasonableness on the part of 

the insurer against other evidence to the contrary, NJAJ thus 

urges this Court to depart from its rigid adherence to Pickett’s 

“fairly debatable” approach so as to allow for a determination 

of bad faith where an insurer acts intentionally or recklessly 

in a manner contrary to its role as fiduciary.

Furthermore, NJAJ joins plaintiff in asserting that summary 

judgment was premature and inappropriate, as discovery had not 

yet been completed. NJAJ also joins plaintiff in arguing for 

the applicability of counsel fees, providing two additional 

theories for awarding such fees in first-party bad faith claims. 

First, NJAJ contends that since first-party bad faith causes of 

action sound primarily in contract, all compensatory, punitive, 

and other foreseeable damages should be available as 
10

consequential damages for breach of contract. NJAJ also

suggests that plaintiff be awarded attorney’s fees based on the 

prohibition of frivolous litigation. N.J.S.A. 2A:15-59.1.

United, appearing as amicus curiae, also supports the 

arguments advanced by plaintiff. United contends that the 

Appellate Division’s decision in Badiali II improperly insulates 

and protects insurance carriers from bad faith causes of action, 

even where such carriers act with subjective malice in handling 

claims. United stresses the need for guidance and uniform 

standards to be applied in judging whether an insurer has 

handled a claim in bad faith. 

III.

All contracts impose an implied obligation of good faith 

and fair dealing in their performance and enforcement. Sears 

Mortg. Corp. v. Rose, 134 N.J. 326, 347 (1993); Pickett, supra,

131 N.J. at 467. The New Jersey Legislature has attempted to 

codify these principles, particularly in the insurance industry, 

by defining what is considered to be unfair or deceptive 

business practices in the area of insurance claims settlement. 

See N.J.S.A. 17:29B-4(9). Such practices include: “[r]efusing 

to pay claims without conducting a reasonable investigation 

based upon all available information[,]” N.J.S.A. 17:29B4(9)(d); “[f]ailing to affirm or deny coverage of claims within 

a reasonable time after proof of loss statements have been 
11

completed[,]” N.J.S.A. 17:29B-4(9)(e); “[c]ompelling insureds to 

institute litigation to recover amounts due under an insurance 

policy by offering substantially less than the amounts 

ultimately recovered in actions brought by such insureds[,]” 

N.J.S.A. 17:29B-4(9)(g); and, finally, “[n]ot attempting to 

negotiate in good faith to effectuate prompt, fair and equitable 

settlements of claims in which liability has become reasonably 

clear[,]” N.J.S.A. 17:29B-4(9)(f) (emphasis added). 

Good faith is generally defined as “honesty in fact in the 

conduct or transaction concerned.” N.J.S.A. 12A:1-201(19). The 

good faith obligations of an insurer to its insured run deeper 

than those in a typical commercial contract. Unlike with a 

typical commercial contract, in which “[p]roof of bad motive or 

intention” is vital to an action for breach of good faith, 

Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Center

Assocs., 182 N.J. 210, 225 (2005) (internal quotations omitted), 

an insurer’s breach of good faith may be found upon a showing 

that it has breached its fiduciary obligations, regardless of 

any malice or will, see Bowers v. Camden Fire Ins. Ass’n, 51 

N.J. 62, 79 (1968).

One inherent fiduciary obligation of every insurer is the 

duty to settle claims. See Lieberman v. Empl’rs Ins. of Wausau, 

84 N.J. 325, 336 (1980). Whether an insurer has acted in bad 

faith and thereby breached its fiduciary obligation in 
12

connection with the settlement of claims “must depend upon the 

circumstances of the particular case.” Am. Home Assurance Co. 

v. Hermann’s Warehouse Corp., 117 N.J. 1, 7 (1989) (internal 

quotations omitted). 

A finding of bad faith against an insurer in denying an 

insurance claim cannot be established through simple negligence. 

Pickett, supra, 131 N.J. at 481. Moreover, mere failure to 

settle a debatable claim does not constitute bad faith. Id. at 

473 (citing Chester v. State Farm Ins. Co., 789 P.2d 534, 537 

(Idaho Ct. App. 1990)). Rather, to establish a first-party bad 

faith claim for denial of benefits in New Jersey, a plaintiff 

must show “that no debatable reasons existed for denial of the 

benefits.” Id. at 481. 

Under the salutary “fairly debatable” standard enunciated 

in Pickett, “a claimant who could not have established as a 

matter of law a right to summary judgment on the substantive 

claim would not be entitled to assert a claim for an insurer’s 

bad faith refusal to pay the claim.” Id. at 473 (citing 

Chester, supra, 789 P.2d at 537).

IV.

A trial court shall grant summary judgment if “the 

pleadings, depositions, answers to interrogatories and 

admissions on file, together with affidavits, if any, show that 

there is no genuine issue of material fact challenged and that 
13

the moving party is entitled to a judgment or order as a matter 

of law.” R. 4:46-2(c). A motion for summary judgment is not 

premature merely because discovery has not been completed, 

unless plaintiff is able to “‘demonstrate with some degree of 

particularity the likelihood that further discovery will supply 

the missing elements of the cause of action.’” See Wellington

v. Estate of Wellington, 359 N.J. Super. 484, 496 (App. Div.) 

(quoting Auster v. Kinoian, 153 N.J. Super. 52, 56 (App. Div. 

1997), certif. denied, 177 N.J. 493 (2003)).

In considering whether there exists a genuine issue of 

material fact, the motion judge “must consider whether the 

competent evidential materials presented, when viewed in the 

light most favorable to the non-moving party, are sufficient to 

permit a rational fact finder to resolve the alleged disputed 

issue in favor of the non-moving party.” Brill v. Guardian Life 

Ins. Co. of Am., 142 N.J. 520, 540 (1995).

Purely legal questions, such as the interpretation of 

insurance contracts, are questions of law particularly suited 

for summary judgment. See Selective Ins. Co. of Am. v. Hudson 

E. Pain Mgmt. Osteopathic Med. & Physical Therapy, 210 N.J. 597, 

605 (2012).

V.

The public policy of this State favors arbitration as a 

means of settling disputes that otherwise would be litigated in 
14

a court. Cty. Coll. of Morris Staff v. Cty. Coll. of Morris

Staff Ass’n, 100 N.J. 383, 390 (1985). Indeed, in the area of 

insurance claims settlement, “the use of arbitration to expedite 

resolution of UM claims is widespread and UM coverage provisions 

in automobile liability policies characteristically authorize 

arbitration of disputes at the option of either party.” United 

Servs. Auto. Ass’n v. Turck, 156 N.J. 480, 485 (1998). The 

scope of the arbitration is dependent solely on the provisions 

and conditions mutually agreed upon in the parties’ agreement. 

In re Arbitration Between Grover & Universal Underwriters Ins. 

Co., 80 N.J. 221, 229 (1979). Stated another way,

the duty to arbitrate, and the scope of the 

arbitration, are dependent solely on the 

parties’ agreement. The parties may shape 

their arbitration in any form they choose and 

may include whatever provisions they wish to 

limit its scope. The parties have the right to 

stand upon the precise terms of their 

contract; the court may not rewrite the 

contract to broaden the scope of arbitration 

or otherwise make it more effective. It is 

also significant that, although the 

legislature has mandated binding arbitration 

of PIP claims at the option of the insured 

(N.J.S.A. 39:6A-5c) and has required nonbinding arbitration of certain automobile tort 

claims (N.J.S.A. 39:6A-31), it has not 

required arbitration of UM claims at all. Thus 

the ascertainable public policy here is to 

encourage resort to arbitration while 

preserving full flexibility to the parties to 

elect or reject, and to structure and limit, 

that process as they choose.

[Turck, supra, 156 N.J. at 486 (quoting Cohen v. 

Allstate Ins. Co., 231 N.J. Super. 97, 100-01 (App. 
15

Div. 1989) (internal citations omitted), certif. 

denied, 117 N.J. 39 (1989)).]

This Court has consistently upheld an insurer’s right to 

reject an arbitration award pursuant to the express terms and 

conditions articulated in its policy language. See, e.g., 

Rutgers Cas. Ins. Co. v. Vassas, 139 N.J. 163, 175 (1995) 

(affirming insurer’s right to reject arbitration award because 

insured had failed to make an underinsured motorist (UIM) claim 

until after the statute of limitations on the underlying tort 

action had run). 

However, where an arbitration clause or the wording of a 

policy is ambiguous, our appellate courts have limited attempts 

to reject an arbitration award and proceed de novo. See, e.g., 

Derfuss v. N.J. Mfrs. Ins. Co., 285 N.J. Super. 125, 130 (App. 

Div. 1995) (limiting UIM insurer’s request for trial de novo to 

damages only because its policy language created ambiguity that 

cast doubt as to whether parties also intended liability to be 

an issue). Specifically, in a case central to plaintiff’s 

argument, D’Antonio, supra, 262 N.J. Super. at 249, the 

Appellate Division rejected a UIM plaintiff’s attempt to seek a 

new trial on damages where the phrase “amount of damages” was 

ambiguous.

In D’Antonio, the plaintiff was injured when an 

underinsured motorist struck her vehicle. The plaintiff settled 
16

with the other driver for the maximum of that driver’s liability 

policy, $25,000. Id. at 248. Thereafter, the plaintiff brought 

a claim against her own insurance carrier for UIM coverage. 

Ibid. In arbitration, she was awarded $40,000 in damages. 

Ibid. After offsetting the $25,000 recovery received from the 

underinsured motorist, the portion owed by the plaintiff’s 

insurer was only $15,000. Id. at 249. The plaintiff 

subsequently filed a demand for a trial de novo, arguing that, 

based on the policy’s arbitration provision, she was entitled to 

a jury trial because the “amount of damages” exceeded $15,000, 

the statutory minimum limit imposed by N.J.S.A. 17:28-1.1a. The 

insurer opposed the plaintiff’s demand for a trial de novo, 

arguing that the amount of the insurer’s liability did not 

exceed $15,000 and, thus, the award was binding. Id. at 249. 

Interpreting the policy language, the Appellate Division found 

that the term “amount of damages” was ambiguous. Ibid. The 

Appellate Division therefore focused its inquiry on the intent 

of the parties, which it determined was “to permit a postarbitration trial only in cases of a certain magnitude, i.e., 

only where the ‘amount of damages’ fixed by the arbitrators 

exceeds $15,000.” Ibid. The panel reasoned further that,

the arbitration is conducted to determine the 

carrier’s liability for UIM payments. If a 

trial is available, it too will determine only 

the carrier’s UIM obligation. It follows that 

the extent of the carrier’s UIM liability --
17

not the tortfeasor’s liability -- should 

determine whether the case is of sufficient 

magnitude 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.

[Id. at 249-50.]

The Appellate Division thus held that the plaintiff was not 

entitled to reject the award.

VI.

Having discussed the legal framework for this appeal, we 

now turn to the facts of this case and consider whether NJM had 

“fairly debatable” reasons for rejecting the arbitration award 

in Badiali I.

A.

NJM maintains that its reasoning for rejecting the 

arbitration award in Badiali I was “fairly debatable” under 

Pickett, supra, 131 N.J. 457, because it was supported by a 

prior, unpublished opinion of the Appellate Division, see

Geiger, supra. In Geiger, the plaintiff was injured when his 

automobile collided with an uninsured motorist. Plaintiff filed 

an arbitration proceeding against NJM for UM coverage. The 

arbitration resulted in an award in favor of plaintiff for 

$27,000. The award was shared equally between NJM and another 

insurer. Thus, NJM’s share of the liability was $13,500 –- an 

amount less than the $15,000 statutory minimum limit for 
18

liability imposed by N.J.S.A. 17:28-1.1a. Nevertheless, NJM 

filed a motion to reject the award and to request a trial de 

novo, arguing that the total “arbitration award” was greater 

than $15,000. NJM relied upon the terms and conditions of its 

policy’s arbitration provision, which provided: “If the 

arbitration award exceeds [the minimum limit for liability, 

$15,000,] either party may demand the right to a trial by jury 

on all issues.” NJM’s arbitration provision was the same in 

Badiali I as it was in Geiger. Thus, NJM contends that it had a 

perfectly adequate basis for rejecting the arbitration award in 

Badiali I, as such action was previously sanctioned by the 

Appellate Division in Geiger.

NJM argues for de facto reliance on Geiger based on the 

simple premise that litigants are presumed to know the outcome 

of cases in which they are a party. We recognize NJAJ’s 

suggestion that Pickett’s “fairly debatable” standard should 

include at least some focus on the individual investigation and 

valuation performed by the claims handler responsible for the 

case, however, we express reservation about the potential 

discovery complications associated with such an approach and 

thus do not adopt such an approach at this time. We do not find 

it necessary here to alter the salutary test set forth by the 

Pickett Court, as the issue before us does not require such 

action. Rather, the important consideration in this case is 
19

whether the existence of the unpublished Geiger decision serves 

as a reasonable basis to support the position taken by NJM in 

the instant case. 

In accordance with the well-established jurisprudence and 

court rules of this State, Geiger has no legal precedential 

value due to its unpublished nature. The use and authority of 

unpublished opinions is governed by Rule 1:36-3. That rule 

provides:

No unpublished opinion shall constitute 

precedent or be binding upon any court. Except 

for appellate opinions not approved for 

publication that have been reported in an 

authorized administrative law reporter, and 

except to the extent required by res judicata, 

collateral estoppel, the single controversy 

doctrine or any other similar principle of 

law, no unpublished opinion shall be cited by 

any court. No unpublished opinion shall be 

cited to any court by counsel unless the court 

and all other parties are served with a copy 

of the opinion and of all contrary unpublished 

opinions known to counsel.

[R. 1:36-3.]

This rule has been affirmed time and again by this Court. See

Guido v. Duane Morris LLP, 202 N.J. 79, 91 n.4 (2010); Mount

Holly Twp. Bd. of Educ. v. Mount Holly Twp. Educ. Ass’n, 199 

N.J. 319, 332 n.2 (2009); In re Alleged Improper Practice, 194

N.J. 314, 330 n.10 cert. denied, 555 U.S. 1069, 129 S. Ct. 754, 

172 L. Ed. 2d 726 (2008). 
20

Still, this Court has never considered whether the mere 

existence of an unpublished opinion will allow a party to avoid 

a finding of bad faith for actions taken in accordance with its 

holding. In the context of the case before us, we find that it 

does; however we limit our holding to the in-house, business 

context present here. In our view, it is illogical to suggest

that NJM, or any corporation, cannot rely on previous 

unpublished opinions -- especially those in which they were 

specifically involved -- in forming their business decisions. 

Having pursued a similar course of action in Geiger with the 

approval and endorsement of the Appellate Division, we find it 

was reasonable for NJM to maintain that same position, under 

nearly identical facts, in rejecting the arbitration award in 

the instant litigation. To clarify, NJM had adequate reason to 

believe that its conduct was consistent with judicially accepted

contract interpretation, corporate policies and practices. 

Thus, we find the existence of the Geiger opinion establishes 

that NJM had, at the very least, fair reason to believe that it 

was making a legitimate legal and business decision by rejecting 

the arbitration award in Badiali I and seeking trial. 

As such, we find that NJM’s citation to the Appellate 

Division’s unpublished decision in Geiger before this Court was 

acceptable because it was referenced not for its legal 

precedential value, but rather to prove that NJM acted in good 
21

faith in conducting its business as an insurance claims handler. 

We accordingly find that Rule 1:36-3 is inapplicable to this 

matter and expressly hold that the existence of the unpublished 

Geiger decision precludes a finding of bad faith against NJM.

B.

Even without reliance on Geiger, we find that NJM is able 

to show fairly debatable reasons based on both a reasonable 

interpretation of its policy language, and the fact that the 

case here, a UM action, is distinguishable from D’Antonio, a UIM 

case.

As a threshold matter, the language of the policy itself 

provided a rational, and indeed valid, reason to seek a trial by 

jury on the disputed claim. The NJM policy states:

A decision agreed to by two of the arbitrators 

will be binding unless the arbitration award 

exceeds the minimum limit [$15,000] for 

liability specified by the Financial 

Responsibility Law of New Jersey. If the 

arbitration award exceeds that limit, either 

party may demand the right to a trial by jury 

on all issues.

[Emphasis added.]

The terms of the NJM policy must be given their plain, ordinary 

meaning. Turck, supra, 156 N.J. at 486. The arbitration award 

in this case was $29,148.62, clearly in excess of the policy’s 

$15,000 threshold, notwithstanding the fact that NJM needed only 

to contribute half of that amount, $14,574.31. Therefore, NJM 
22

had reason to believe that the policy language gave it the right 

to reject the arbitration award and demand a jury trial. In our 

view, NJM’s position was thus, at the very least, fairly 

debatable and based on a reasonable and principled reading of 

the applicable policy language.

Although plaintiff relies heavily on D’Antonio to support 

its position, we find that case distinguishable and inapplicable 

here. First and foremost, D’Antonio involved a UIM case rather 

than a UM case, as present here. The differences between these 

insurance coverages are significant. UM coverage is mandatory 

first-party coverage insuring the policy holder, and others, 

against the possibility of injury or property damage caused by 

the negligent operation of a motor vehicle by an individual 

without liability insurance coverage. See N.J.S.A. 17:28-1.4. 

UM coverage exists to compensate victims injured by an 

“uninsured motor vehicle.” See N.J.S.A. 17:28-1.1e(2). UM 

insurance extends protection to the injured victim. Riccio v. 

Prudential Prop. & Cas. Ins. Co., 108 N.J. 493, 498 (1987). One 

of the stated purposes of UM coverage is “to provide maximum 

remedial protection to the innocent victims of financially 

irresponsible motorists[.]” Id. at 504. UM coverage is 

designed to “fill gaps in compulsory insurance plans.” Id. at 

499 (citations omitted).
23

UIM coverage, by contrast, is optional first-party coverage 

insuring the policy holder, and others, against the possibility 

of injury or property damage caused by the negligent operation 

of a motor vehicle whose liability insurance coverage is 

insufficient to pay for all losses suffered. See French v. N.J. 

Sch. Bd. Ass’n Ins. Grp., 149 N.J. 478 (1997). UIM coverage is 

defined by N.J.S.A. 17:28-1.1(e)(1), as

insurance for damages because of bodily injury 

and property damage resulting from an accident 

arising out of the ownership, maintenance, 

operation or use of an underinsured motor 

vehicle. Underinsured motorist coverage shall 

not apply to an uninsured motor vehicle. A 

motor vehicle is underinsured when the sum of 

the limits of liability under all bodily 

injury and property damage liability bonds and 

insurance policies available to a person 

against whom recovery is sought for bodily 

injury or property damage is, at the time of 

the accident, less than the applicable limits 

for underinsured motorist coverage afforded 

under the motor vehicle insurance policy held 

by the person seeking that recovery.

The most important distinguishing characteristics of UIM 

insurance are the special rules for calculating UIM benefits. 

These rules require exhaustion of all available coverages and 

the offsetting of any recoveries received as a precondition to 

payment. Vassas, supra, 139 N.J. at 171-72 (citing Longworth v. 

Van Houten, 223 N.J. Super. 174 (App. Div. 1988)).

In D’Antonio, supra, the Appellate Division held that, in 

the context of a UIM arbitration, it is the extent of the UIM 
24

carrier’s liability determined by the arbitrators, rather than 

the total tortfeasor liability, that should be measured against

the $15,000 minimum liability limit to determine the right to 

demand a trial de novo. 262 N.J. Super. at 249-50. The 

plaintiff in that case had settled with the tortfeasor for 

$25,000, and the insurance carrier therefore received the 

benefit of a $25,000 credit. The arbitration award of a gross 

sum of $40,000, then, translated to UIM damages of $15,000. 

Thus, “the amount of damages” within the meaning of the UIM 

arbitration provision, was $15,000, not the $40,000 gross 

damages. The UIM arbitration provision in the insurance policy

gave either party the right to request a trial de novo only if 

the “amount of damages” exceeded the statutory minimum limit for 

liability. Because the UIM exposure there did not exceed that 

limit, the Appellate Division affirmed the trial judge’s denial 

of the plaintiff’s request for a trial. Conversely, here, the 

disposition of plaintiff’s UM claim was not influenced or 

reduced by a tortfeasor’s own liability insurance limits. Thus, 

it was not unreasonable for NJM to conclude that D’Antonio

applied only in the UIM setting and not to UM arbitration.

We hold that NJM’s position in rejecting the award was at 

least fairly debatable and based on a reasonable and principled 

reading of its policy language. In light of this holding, we 
25

find that reliance on Geiger is not necessary because NJM’s

policy language gave rise to the same result.

However, we now hold that any reference in a policy of 

insurance to the statutory $15,000 policy limit as the basis for 

rejecting an arbitration award applies only to the amount that 

the insurance company is required to pay, not to the total 

amount of the award. To allow the total amount of the award to 

be the determining factor for rejecting an arbitration award, 

even though the insurance company’s share is less than the 

statutory policy limit, would frustrate the legislative intent 

of expediting resolution of smaller cases in the least costly 

manner, easing the congestion in our courts, and limiting jury 

trials to the larger cases.

C.

In light of our disposition of the bad faith cause of 

action in this matter, we see no present need to address the 

entitlement of an insured to attorney’s fees in the 

uninsured/underinsured context. We further decline to address 

the issue of discovery, as we find such issue irrelevant to the 

instant case.

For the reasons stated herein, we affirm the judgment of 

the Appellate Division.

CHIEF JUSTICE RABNER; JUSTICES ALBIN and SOLOMON; and JUDGE 

CUFF (temporarily assigned) join in JUSTICE FERNANDEZ-VINA’s 

opinion. JUSTICES LaVECCHIA and PATTERSON did not participate.
1

SUPREME COURT OF NEW JERSEY

NO. A-48 SEPTEMBER TERM 2012

ON CERTIFICATION TO Appellate Division, Superior Court

AUGUSTINE W. BADIALI,

Plaintiff-Appellant,

v.

NEW JERSEY MANUFACTURERS

INSURANCE GROUP,

Defendant-Respondent.

DECIDED February 18, 2015

Chief Justice Rabner PRESIDING

OPINION BY Justice Fernandez-Vina

CONCURRING/DISSENTING OPINIONS BY

DISSENTING OPINION BY 

CHECKLIST AFFIRM

CHIEF JUSTICE RABNER X

JUSTICE LaVECCHIA ---------------------- ---------------------

JUSTICE ALBIN X

JUSTICE PATTERSON ---------------------- ----------------------

JUSTICE FERNANDEZ-VINA X

JUSTICE SOLOMON X

JUDGE CUFF (t/a) X

TOTALS 5