Court Opinion

ID: 9750810
Source: CourtListenerOpinion
Date Created: 2023-08-28 15:34:00.267695+00
Date Added: 2024-06-11T07:26:22.542398
License: Public Domain

PASHMAN, J.,
dissenting.
I dissent substantially for the reasons set forth by Judge Pressler writing for a unanimous Appellate Division. Kotzian v. Barr, 152 N.J.Super. 561 (App.Div.1977). I also wish to address directly what I consider to be the flaws in the Court’s analysis.
The majority agrees with the Appellate Division that the policies of complete compensation and encouragement of settlements should govern the decision to suspend prejudgment interest. See ante at 363-364; ; 152 N.J.Super. at 566; see also Busik v. Levine, 63 N.J. 351, 358-360 (1973), app. dism., 414 U.S. 1106, 94 S.Ct. 831, 38 L.Ed.2d 733 (1973). What the majority *368fails to realize is that in order to further those policies in situations like that before us today, it is necessary to impose prejudgment interest on an insurance carrier which has assumed the defense of a tortfeasor.
Both “issues projected,” ante at 363, are misconceived by the majority. It describes the “ultimate question before us” as whether Barr should be liable for prejudgment interest on the $15,000 paid by GEICO. See ante at 363. It is difficult to perceive how the majority can construe R. 4:42-ll(b) to hold that the sum actually recovered by plaintiff is the pertinent basis for calculating prejudgment interest. The rule clearly states that the court shall calculate prejudgment interest “on the amount of the award ” (emphasis supplied). If the ultimate issue were Barr’s liability for interest, it would concern liability for interest on the entire award, regardless of his present inability to pay more than a portion.
Even when properly conceived, Barr’s liability is not the ultimate issue. It was not litigated at trial and the Appellate Division gave it only brief consideration.1 The central question in this case—whether GEICO is subject to the prejudgment interest rule when the resulting payment would exceed its policy limitations—is dismissed by the majority in a single paragraph.
The majority takes great pains to emphasize that early in the litigation GEICO offered to settle the suit for $15,000, the full amount of its liability under the insurance policy. At the time of that settlement proposal, GEICO could, and should, have tolled the running of prejudgment interest by depositing the offered $15,000 with the court. See R. 4:57. Each day of delay in payment was a day in which “the carrier [received] income *369from a portion of the premiums on hand set aside as a reserve for pending claims.” Busik, 63 N.J. at 359. The prejudgment interest rule, R. 4:42-ll(b), reflects the recognition that the income GEICO earned rightfully belongs to the injured plaintiffs “to indemnify [them] for the loss of what the moneys due [them] would presumably have earned if payment had not been delayed.” Busik, 63 N.J. at 358. Requiring GEICO to pay interest would not constitute unjust punishment for acting under contractual “restraints.” The payment of prejudgment interest is not a “penalty,” nor would its imposition on the carrier be an act of punishment. It would simply place GEICO in the same position in which it would have been had it acted properly and complied with R. 4:57 early in the litigation.
The majority begs the question before the Court when it characterizes the policy limit as a “restraint” justifying GEICO’s refusal to offer its fair share of prejudgment interest. See ante at 363-364. The issue before us is the application of a Rule of Court, not the interpretation of an insurance policy. If the rule applies to insurance carriers, its provisions govern the contractual relationship between insurer and insured whether or not the policy explicitly so provides.2 See, e. g., Motor Club Fire & Cas. Co. v. N. J. Manu. Ins. Co., 73 N.J. 425, 432 (1977); Hollin v. Essex Mut. Benefit Ass’n of Newark, 88 N.J.L. 204, 205-206 (E & A 1915); Foster v. Washington Nat. Ins. Co., 118 N.J.L. 228, 230-231 (Sup.Ct.1937). The insurer “must expect that its policy will be construed in accordance with the law as it exists at the time its terms are before a court.” Allstate Ins. Co. v. Campbell, 95 N.J.Super. 142, 151 (Ch.Div.1967). If the carrier may be liable for prejudgment interest, it should adapt its negotiation strategy to reflect the application of R. 4:42-ll(b).3
*370By providing counsel for defendant and controlling his defense, the insurance company has consented to participate in the. controversy. This consent establishes the court’s jurisdiction over the insurer even though it has not been served with process and is not a named party.4 See Battle v. General Cellulose Co., 23 N.J. 538, 546 (1957). In this case, the insurance company controlled the assured’s defense. It made the decisions regarding negotiation tactics and settlement offers. It earned income on unpaid funds. It should therefore share responsibility for the consequences of a delayed settlement.
Applying R. 4:42-ll(b) to insurance companies defending tortfeasors is justified not only because it will further the purposes underlying the rule, but it is also consistent with the duty of the insurance industry to maintain the integrity of the civil adjudicatory process. No one would dispute that “the insurance business is strongly affected with a public interest,” Sheeran v. Nationwide Mut. Ins. Co., Inc., 80 N.J. 548, 559 (1979); see, e. g., Saffore v. Atlantic Cas. Ins. Co., 21 N.J. 300, 310 (1956); McCarter v. Firemen’s Ins. Co., 74 N.J.Eq. 372, 376-383 (E & A 1909). This interest extends beyond the contractual relationship between insurer and insured. “Liability policies are matters of obvious State concern, not only with respect to the security of the insured but also with respect to the compensation of the injured claimants.” Howell v. Rosecliff Realty Co., Inc., 52 N.J. 313, 326 (1968). The conduct of insurers has a substantial *371impact upon the fairness and promptness of recoveries by tort victims. This power of the industry must be governed by the same prudent and public-spirited concern for justice that is the fundamental canon of the professional conduct of the Bench and Bar. See generally “Preamble,” A.B.A. Code of Professional Responsibility (1976).
The case before the Court provides an example of how that concern should be implemented. The liability of the assured was undisputed. The controversy no doubt initially focused on his ability to satisfy excess liability. An insurer would be discharging its public responsibilities properly if it affirmatively endeavored to determine the extent of the insured’s personal assets. Should it find its insured impecunious, disclosure to the victim would make settlement negotiations potentially more fruitful. If the only point of dispute is a collateral issue like the application of R. 4:42-ll(b), the insurer should take whatever reasonable measures are necessary to obtain a prompt determination by the trial court and expeditious appellate review.
Instead of affirming the responsibilities of insurance companies to the legal system, the majority has accorded them a preferred position among civil litigants. Although carriers control the defense of tort actions and earn income from funds set aside to pay tort judgments, the majority today holds that they will be liable for prejudgment interest only if they contract with their insureds to assume that responsibility. This ruling will discourage prompt settlements in all future cases in which it is relatively certain that a plaintiff’s recovery will exceed the limits of an insurance policy. This is so because in all such cases, the carrier will profit from each day it refuses to pay that policy limit to plaintiff. Such a state of affairs will undermine the policies sought to be furthered by R. 4:42-11.
Today’s decision will permit windfalls to insurance companies and will serve to increase the number of cases that our already overburdened trial courts must resolve. It is a decision which *372fails to recognize the role of insurance companies in the fair and expeditious resolution of tort claims.
I would hold that GEICO should pay interest on the $15,000 from the date the complaint was filed until it deposited the monies into court. I therefore respectfully dissent.
Chief Justice HUGHES and Justice HANDLER join in this dissent.
For affirmance:—Chief Justice HUGHES and Justices PASHMAN and HANDLER—3.
For reversal-.—Justices MOUNTAIN, SULLIVAN, CLIFFORD and SCHREIBER—4.

The Appellate Division ruled that since defendant Barr was impecunious and had relinquished control of his defense to GEICO, imposing interest on him would not serve the purposes underlying R. 4:42-11(b) and was therefore unwarranted. See 152 N.J.Super. at 567-568. With this holding I agree.

This is the reasoning expressly adopted by the Michigan Court of Appeals in Denham v. Bedford, 82 Mich.App. 107, 266 N.W.2d 682 (Mich.Ct.App. 1977), a case cited by the majority in support of its position. See ante at 364.

The majority’s dictum interpreting our Notice to the Bar, 95 N.J.L.J. Index Page 341 (1972), see ante at 365-366 is erroneous. That announcement *370simply observed that a judge should not add prejudgment interest to the amount of a negotiated settlement, since the parties had already agreed on the sum of current dollars that would release plaintiffs claims. The likelihood of prejudgment interest following a trial is one of a multitude of factors to consider during settlement negotiations.

In this case there is no problem regarding the court’s jurisdiction. As both the Appellate Division and the majority point out, GEICO was willing to submit to jurisdiction. Such a stipulation is not only “entirely appropriate and consistent with the true interests here involved,” Kotzian v. Barr, 152 N.J.Super. at 566 n.2, it is unnecessary precisely because of the insurer’s “true interests.”