Title: Frank Courvoisier v. Harley Davidson of Trenton, Inc., et al.
Citation: N/A
Docket Number: a-103-98
State: new-jersey
Issuer: new-jersey Supreme Court
Date: December 21, 1999

(This syllabus is part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the not reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). LONG, J., writing for a unanimous Court. This appeal raises the issue of whether an insurance carrier appealing a judgment in excess of its policy limits must post a bond for the full amount of the judgment or one only in the amount of its policy limits. In 1993, Frank Courvoisier was seriously injured in a motorcycle accident involving only that vehicle. At some point following the accident, Courvoisier sued Harley Davidson of Trenton, Inc. (Harley Davidson) for negligent maintenance of the motorcycle, which he claimed proximately caused the accident. Following trial, a jury returned a verdict of $1.1 million in Courvoisier's favor. The trial court entered judgment on the verdict against Harley Davidson in the amount of $1,441,357.81, which included pre-judgment interest. Subsequently, Harley Davidson appealed. At that point, American Hardware Mutual Insurance Company (American Hardware), which insured Harley Davidson at the time of the accident and which provided Harley Davidson with representation in Courvoisier's lawsuit, filed a motion, opposed by Courvoisier, for a partial stay of the judgment on the posting of a supersedeas bond in the amount of its policy limits ($500,000). Harley Davidson, which had retained independent counsel to represent its interests on the judgment in excess of the policy limits, filed a cross-motion to compel American Hardware to post a bond in the full amount of the judgment on the ground that American Hardware had failed to attempt to negotiate a settlement within the policy limits. The trial court denied American Hardware's motion for a partial stay and ordered it to post bond in the full amount of the judgment to secure the stay. In so doing, the trial court reasoned that on the basis of the evidence adduced at trial, American Hardware could be found liable for the entire judgment if it breached its duty of good faith to settle Courvoisier's claim within its policy limits. The Appellate Division denied American Hardware's motion for a stay. Thereafter, American Hardware moved for reconsideration of the trial court's prior decision, presenting certifications indicating that it had handled the claim against Harley Davidson in good faith. The trial court denied the motion, again ruling that to obtain a stay, American Hardware would be required to post a bond in the full amount of the judgment, as opposed to the policy limits. The trial court also ordered that if American Hardware indeed posted the bond, Harley Davidson not dissipate any assets pending appeal, except to the extent necessary to run its business. Thereafter, the Appellate Division denied American Hardware's motion for leave to appeal and for a stay. The Supreme Court granted American Hardware's motion for leave to appeal from that portion of the trial court's order that conditioned a stay on American Hardware's posting of a supersedeas bond in the full amount of the judgment. The Court ordered Harley Davidson's appeal on the merits to proceed in the Appellate Division and, pending disposition of the appeal, stayed the execution on the judgment on American Hardware's posting of a bond in the amount of its policy limits, together with costs and interest to be determined by the trial court as likely to accrue during the pendency of the appeals. HELD: Where an excess judgment is appealed, an insurer will qualify under the good cause exception to Rule 2:9-6 to post a bond up to the limit of its liability in exchange for a partial stay of the judgment to that extent. 1. The purpose of a supersedeas bond is to protect a party who has been successful at trial but has been forestalled from proceeding during an appeal. Rules 2:9-5 and 6 accomplish this by requiring the party seeking a stay of judgment to post bond in the full amount of the judgment plus interest and costs, unless the judge finds good cause to order otherwise. (pp. 5-6) 3. The majority of other jurisdictions allow an insurer to obtain a stay of judgment up to its policy limits by posting a bond in an amount equal to the policy limits rather than the full judgment. This rule best reconciles the interests of the insured, the insurer and the judgment creditor. (pp. 8-14) 4. Although most jurisdictions do not allow the issue of the alleged bad faith of an insurer to be taken into account in determining the amount of a supersedeas bond, that approach does not preclude the possibility of pre-appeal execution against a judgment debtor whose insurer is later found liable for the excess on a breach of good faith theory. (pp. 14-19) 5. The Civil Practice Committee is to review the good cause provisions of Rule 2:9-5 and 6 and to suggest whether new procedures are warranted to address the concerns raised. (p. 19) 6. If the policy between Harley Davidson and American Hardware covers interest, then American Hardware should be required to bond up to the amount of its limits plus interest, and the matter is remanded to the trial court for that determination. (p. 20) The matter is REMANDED to the trial court for proceedings consistent with the Court's opinion. CHIEF JUSTICE PORITZ and JUSTICES O'HERN, GARIBALDI, STEIN, COLEMAN, and VERNIERO join in JUSTICE LONG's opinion. Plaintiffs-Respondents, v. HARLEY DAVIDSON OF TRENTON, INC., Defendant-Respondent, and HARLEY DAVIDSON, INC.; JOHN DOE(S), I-IV fictitious Defendants, ABC COMPONENT PART CORPORATION, a fictitious Defendant, DEF MANUFACTURING COMPANY a fictitious Defendant, Defendants, and AMERICAN HARDWARE MUTUAL INSURANCE COMPANY, Intervenor-Appellant. Argued September 28, 1999 -- Decided December 21, 1999 On appeal from the Superior Court, Appellate Division. John T. Coyne argued the cause for intervenor-appellant (McElroy, Deutsch &amp; Mulvaney, attorneys). David P. Corrigan argued the cause for respondents Frank Courvoisier and Linda Courvoisier (Giordano, Halleran &amp; Ciesla, attorneys; Mr. Corrigan and Michael R. Hobbie, on the brief). The opinion of the Court was delivered by LONG, J. In 1993, plaintiff Frank Courvoisier was seriously injured in a single motorcycle accident. His motorcycle was purchased from, and serviced by, defendant Harley Davidson of Trenton, Inc. (Harley Davidson). Courvoisier sued Harley Davidson for negligent maintenance of the motorcycle that, he claimed, proximately caused the accident. A jury returned a verdict of $1.1 million in his favor.See footnote 11 The trial court entered judgment on the verdict against Harley Davidson in the amount of $1,441,357.8l, which included pre-judgment interest. At the time of the accident, Harley Davidson carried a garage liability insurance policy with a limit of $500,000 per occurrence issued by American Hardware Mutual Insurance Company (American Hardware). American Hardware provided representation to Harley Davidson in connection with Courvoisier's lawsuit. When Harley Davidson appealed, American Hardware filed a motion, opposed by Courvoisier, for a partial stay of the judgment upon the posting of a supersedeas bond in the amount of its policy limit. Harley Davidson filed a cross-motion to compel American Hardware to post a bond in the full amount of the judgment on the ground that American Hardware had failed to attempt, in good faith, to negotiate a settlement within the policy limits. By this time, Harley Davidson had retained a private attorney to represent its interests with respect to the excess judgment. The trial court denied American Hardware's motion and ordered it to post a bond in the full amount of the judgment to secure a stay. In so doing, it reasoned that American Hardware could be found liable for the entire judgment if it breached its duty of good faith to settle the claim within the policy limits. The court observed that on the basis of the trial testimony, including the severity of Courvoisier's injuries and the admission of a Harley Davidson employee that Courvoisier's motorcycle had been negligently repaired, American Hardware's sole offer of $100,000 could subject it to liability for the entire judgment on a breach of fiduciary duty theory. At least, according to the court, Harley Davidson had made a preliminary showing to that effect. The Appellate Division denied American Hardware's motion for a stay.See footnote 22 Thereafter, American Hardware moved for reconsideration of the trial court's prior decision. American Hardware presented certifications indicating that it had handled the claim against Harley Davidson in good faith. Harley Davidson and Courvoisier countered with certifications of their own to the contrary. The trial court denied the motion. Among other things, the court ordered: that, if American Hardware chooses to pursue an appeal of the verdict on behalf of Harley Davidson of Trenton, Inc., then in order to obtain a stay of execution of the judgment, American Hardware must post a bond in the amount of $1.5 million; and IT IS FURTHER ORDERED that, if American Hardware does elect to pursue an appeal and post a $1.5 million bond, then Harley Davidson of Trenton, Inc. will be enjoined from dissipating its assets except as in the ordinary course of business; and IT IS FURTHER ORDERED that, should American Hardware elect not to pursue an appeal of the verdict, then it may tender its policy limits with supplementary payments and, in that event, shall not be obligated to post any bond on behalf of Harley Davidson of Trenton, Inc. Thereafter, the Appellate Division denied American Hardware's motion for leave to appeal and for a stay. We granted American Hardware's motion for leave to appeal from that portion of the trial court's order that conditioned a stay on American Hardware's posting of a supersedeas bond in the full amount of $1.5 million. We ordered Harley Davidson's appeal on the merits to proceed in the Appellate Division and, pending disposition of the appeal, stayed execution on the judgment on A judgment or order in a civil action adjudicating liability for a sum of money or the rights or liabilities of parties in respect of property which is the subject of an appeal or certification proceedings shall be stayed only upon the posting of a bond pursuant to R. 2:9-6 or a cash deposit pursuant to R. 1:13-3(c) unless the court otherwise orders on good cause shown. Such posting or deposit may be ordered by the court as a condition for the stay of any other judgment or order in a civil action. Rule 2:9-6(a) continues, in part: The rules balance the interests of litigants after trial by guaranteeing the losing party a stay pending appeal while protecting the successful party, who would otherwise be in a position to execute, from any loss occasioned by the appellate delay. The vehicle prescribed by the rules for a stay is a supersedeas bond in the full amount of the judgment plus interest and costs, unless the judge finds good cause to order otherwise. Courvoisier and Harley Davidson argue that American Hardware advanced no good cause to waive the full bond requirement. They also contend that American Hardware handled Courvoisier's case against Harley Davidson in bad faith, thus rendering the insurer liable for the excess amount of the judgment under Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474 (1974). American Hardware counters that the face amount of its policy circumscribes its obligation to Harley Davidson and establishes good cause to allow it to file a supersedeas bond in that amount; that the record underscores the reasonableness of its evaluation of the case and settlement offer; that, in any event, an insurer's bad faith is not a factor during a good cause analysis under Rule 2:9-6; and that a Rova Farms hearing after the appeal is the appropriate vehicle for making Harley Davidson whole if American Hardware is found to have breached its duty of fair dealing in the underlying case. In other words, where there is a judgment in excess of the policy limits, the insurer and the insured have separate and differing interests; the insurer may furnish a bond for the portion of the judgment within the policy limits, and the bond will be given effect pending appeal to stay execution on that portion of the judgment. [Id. at 931-32 (citations omitted).] Many other jurisdictions have reached the same conclusion. See Cansler v. Harrington, 643 P.2d 110, 114 (Kan. 1982) ( It is inequitable to require an insurance company to post a $25,000 supersedeas bond to stay a garnishment when its policy limits are only $15,000. ); Wilcox v. Board of Educ. of Warren County, 779 S.W.2d 22l, 223 (Ky. 1989) (finding that insurer can post partial supersedeas bond in its policy limit to stay enforcement of that part of judgment); Bowen v. Government Employees Ins. Co., 451 So. 2d 1196, 1198 (La. Ct. App. 1984) (citation omitted) (holding that if the insurer were to post a bond in the entire amount of the judgment it would, in effect, rewrite the policy to provide coverage beyond the contractual limits); O'Donnell v. McGann, 529 A.2d 372, 377 (Md. Ct. App. 1987) (trial court did not abuse its discretion by ruling that insurer could not be expected to post a bond in excess of the face amount of its policy plus interest on the judgment and costs ); Missouri ex rel. Brickner v. Saitz 664 S.W.2d 209, 214 (Mo. 1984) ( There is no reason to put the insurance company to the choice of paying the plaintiff the full amount of its coverage, with restitution in the event of reversal possibly in jeopardy, or of putting up a bond for the non-covered portion of the judgment so as to provide effective coverage which the insured did not buy. ).See footnote 44 Only two out-of-state cases have reached a different conclusion. One, Blackwell v. Sidwell, 126 A.2d 237 (Del. 1956), was based on a previous interpretation of a specific provision of the Delaware constitution requiring a bond in the full amount of the judgment. The other, Wentzel v. Huebner, 104 N.W.2d 476 (S.D. 1960), was based on a statute without a good cause exception. We think that the majority rule is sensible. The relationship of the insured and the insurer in these circumstances is one of contractual indemnification. Pirics v. First Russian Slavonic Greek Catholic Benevolent Soc'y, 83 N.J. Eq. 29, 33 (N.J. Ch. 1914); Kase v. Hartford Fire Ins. Co., 58 N.J.L. 34, 35-36 (N.J. Sup. Ct. 1895). The insurer has agreed, in return for a premium, to be responsible to pay a judgment against the insured up to the face amount of the insurance contract. On the appeal, both the insurer and the insured have an interest in the outcome. Where the judgment is within the insurance limits, those interests are identical. However, where there is an excess judgment, although both parties' interests coalesce insofar as challenging the judgment and obtaining a stay are concerned, they diverge when a supersedeas bond is required under Rule 2:9-6. Plainly the insurer's interest is in obtaining a stay of execution on the portion of the judgment for which it could be liable. The insured however seeks a stay of the entire judgment. Where such divergence occurs, what is good cause under Rule 2:9-6 for one is not necessarily good cause for the other. On the one hand, merely being underinsured is ordinarily not good cause to allow the insured to obtain a stay on the posting of a bond for less than the full judgment. On the other, the insurer should not be required to post a bond for the entire judgment when its contractual liability is not coextensive with that amount. Fairness requires that the insurer be permitted the option of bonding, not the entire judgment, but the entire judgment for which it could be liable and obtaining a stay to that extent. We read the good cause exception in Rule 2:9-6 as encompassing a bond by an insurer up to the limit of its liability, and authorizing a stay of execution against the insurer coextensive with the bond. So interpreted, the rule reconciles the interests of the insurer, the insured and the judgment creditor. On the filing of a partial bond by the insurer, the judgment creditor is secured up to the limit of the insurance. That does not relieve the insured of its obligations under Rule 2:9-6. In order to stay the remainder of the judgment, there are several options. The insured may bond the excess; show good cause why a full bond for the excess is not necessary to protect the judgment creditor; or be subject to supplementary proceedings including a non dissipation order and possible execution. That is a necessary corollary of the rule because an underinsured defendant should not be in a better position than an uninsured defendant who must post a full bond in order to secure a stay. Where the insurer has posted a partial bond and the insured does not have financial wherewithal to bond the excess, the judgment creditor's action to collect the excess places the insured at no more of a disadvantage than would have been the case had the insurer not obtained a partial stay. Thus, we hold that in a case in which an excess judgment is appealed, the insurer will qualify under the good cause exception to Rule 2:9-6 to post a bond up to the limit of its liability in exchange for a partial stay of the judgment to that extent. III [Rova Farms, supra, 65 N.J. at 492.] A question whether the insurer fulfilled that duty is raised where . . . any adverse verdict at trial is likely to exceed the policy limit. Id. at 493. Rova Farms set forth the standards for evaluating whether the insurer acted in good faith: [A] decision not to settle must be a thoroughly honest, intelligent and objective one. It must be a realistic one when tested by the necessarily assumed expertise of the [insurance] company. This expertise must be applied, in a given case, to a consideration of all the factors bearing upon the advisability of a settlement for the protection of the insured. While the view of the carrier or its attorney as to liability is one important factor, a good faith evaluation requires more. It includes consideration of the anticipated range of a verdict, should it be adverse; the strengths and weaknesses of all of the evidence to be presented on either side so far as known; the history of the particular geographic area in cases of similar nature; and the relative appearance, persuasiveness, and likely appeal of the claimant, the insured, and the witnesses at trial. [Id. at 489-90. (citations omitted)] Under Rova Farms, it is the insured's burden to establish bad faith on the part of the insurer in a separate trial. Yeomen v. Allstate Ins. Co., 130 N.J. Super. 48, 52 (App. Div. 1974); see also Fireman's Fund Ins. Co. v. Security Ins. Co., 72 N.J. 63, 70 (1976) (stating that insured must prove insurer's bad faith in action under Rova Farms based on insurer's failure to settle). Once the insured establishes such bad faith, a prima facie case of damages for the difference between the policy limit and the excess verdict has also been shown. It is then up to the insurer to demonstrate that settlement could not have been achieved within the policy limit or for the policy limit plus any amount the insured would have been able and willing to contribute. [Yeomen, supra, 130 N.J. Super. at 52.] Both Harley Davidson and Courvoisier allege that American Hardware's bad faith is a factor requiring it to bond the full judgment. We need not detail their claim, because its specifics do not bear on the resolution of the theoretical issue before us. It is sufficient to say that they view the trial testimony as clear evidence that American Hardware's $100,000 offer was a breach of fiduciary duty. Their legal point is that if the court ultimately holds the insurer responsible for the excess judgment as a result of its bad faith, to have subjected the insured to pre-appeal execution and not to have better protected the judgment creditor is unfair. That argument is not only intuitively persuasive, but legally so. If the basis for allowing an insurer to post a partial bond is the limit of its liability, it follows that if the insurer is responsible for the excess, its bond should be coextensive therewith. Unfortunately, the devil is in the details. There is simply no practical way to dispose of the Rova Farms case in time to fully factor it into a Rule 2:9-6 analysis. Thus, the most that could be accomplished would be some kind of a preliminary hearing, for example, a summary proceeding devolving upon the insured a prima facie burden of proof, or a judicial determination of substantial likelihood of the insured's success on the merits. Such a proceeding could result only in a conditional bond of the excess judgment, not collectable by the judgment creditor until the Rova Farms issue was resolved, regardless of how the appeal turned out. That procedure, in turn, could prompt the judgment creditor to take action against the judgment debtor despite the existence of the bond, as a hedge against an unfavorable Rova Farms verdict, although execution pending appeal is what the suggested procedure was intended to avoid in the first place. Given that a judgment-proof debtor would not be affected at all by the spectre of pre-appeal execution, that a debtor with assets might well be able to bond the excess and charge back the cost of the bond to the insurer in a successful Rova Farms proceeding, and that, in most cases, requiring such a bond from a solvent insurer would be redundant, we have doubts about how effective such a procedure would be. That is, most likely, the reason why our sister states have nearly uniformly adopted the view that a Rova Farms type issue cannot be part of a supersedeas bond inquiry. See Fitzgerald v. Addison, 287 So. 2d 151, 154 (Fla. Dist. Ct. App. 1973) ( [W]e are not passing on the question of whether in this instance [the insurer] may have been guilty of bad faith to its insured for failure to settle within the limits prior to judgment . . . . These contentions would have to be resolved in a trial . . . and this has not occurred. ); Wilcox, supra, 779 S.W.2d at 223-24 ( [Plaintiffs] ask if [the insurer's] bad faith failure to settle within the $500,000 claimed policy limits obligates it to supersede the full amount of the judgment. This [] is a question we cannot answer on appeal. It is an issue that must be determined by some future trial proceeding which should include [the insurer] as a party. ); State ex rel. Kissell v. Clark, 848 S.W.2d 44, 45 (Mo. Ct. App. 1983) ( The respondent asserts . . . the insurance company is, or may be, liable for the full amount of the judgment because of its bad faith, or negligent failure to settle plaintiff's claim within the policy limits . . . . [T]hat remains to be established in another proceeding. The possibility of the establishment of such a claim has nothing to do with the present case. ). We agree with that approach, at least for now, although we are still troubled, as was the trial court, by the possibility of pre-appeal execution against a judgment debtor whose insurer is later found liable for the excess on a breach of good faith theory. To say that such an insured can be made whole after the fact at a Rova Farms hearing is unrealistic. An insured who, as a result of bad faith actions by the insurer, loses a home or business, can not be made whole after the fact. In this case, execution has been forestalled by the combination of the insurer's bond and the non-dissipation order. We nevertheless leave open the possibility of developing a procedure that could better fulfill the purposes of protecting all parties during a stay pending appeal. Toward that end, we request the Civil Practice Committee to review the good cause provisions of Rule 2:9-5 and 6 and suggest whether new procedures are warranted to address our concerns. NO. A-103 FRANK COURVOISIER and LINDA COURVOISIER, husband and wife, Plaintiffs-Respondents, v. HARLEY DAVIDSON OF TRENTON, INC., Defendant-Respondent, and HARLEY DAVIDSON, INC.; JOHN DOE(S), I-IV fictitious Defendants, ABC COMPONENT PART CORPORATION, a fictitious Defendant, DEF MANUFACTURING COMPANY a fictitious Defendant, Defendants, and AMERICAN HARDWARE MUTUAL INSURANCE COMPANY, Intervenor-Appellant. DECIDED December 21, 1999 Chief Justice Poritz