Court Opinion

ID: 7323283
Source: CourtListenerOpinion
Date Created: 2022-07-25 21:26:06.767106+00
Date Added: 2024-06-11T09:04:48.460070
License: Public Domain

STERN, P.J.A.D.
(concurring).
After the Supreme Court held “that when a public entity creates or suffers a dangerous condition on public property that leads ineluctably and foreseeably to injury, it is not insulated from liability under N.J.S.A. 59:4-2 even if the ultimate injury takes place off the public site at a point at which the public premises is no longer dangerous,” and held that the municipality can be liable *296to plaintiff for the explosion of the fireworks and reinstated the verdict of liability against Deptford Township, Smith v. Fireworks by Girone, Inc., 180 N.J. 199, 217, 850 A.2d 456 (2004), the Supreme Court remanded to us for consideration of “the issues raised by defendant Lexington Insurance Company but not reached” by us in our original opinion. Smith v. Fireworks by Girone, Inc., 182 N.J. 138, 861 A.2d 843 (2004). Plaintiff had settled with Fireworks by Girone and Lexington for $977,300 under its general accident policy before the trial against Deptford which resulted in a $1,600,000 verdict (apportioned 56% against Deptford, 33% against Girone and 11% against the plaintiff).
On this appeal, Lexington argues that “the trial court erred in ruling that the pre-trial payment of $952,300 to plaintiff, Brendan Wasniewski was paid on behalf of defendant Township of Dept-ford” and in ruling “that Lexington breached its duty of good faith to protect the Township of Deptford, leaving ‘Deptford out to dry’ that “the Lexington policy was not, by operation of law, converted into a separate bond with an additional limit of liability of one million dollars, thereby increasing the limits from $1 million to $2 million,” and that “the single satisfaction doctrine bars any further claims against Lexington, either as an insurer or a surety.” In essence, Lexington asserts that it has satisfied its obligation resulting from Brendan’s tragic injury.
Plaintiff as cross-appellant contends that “the trial court erred in vacating the settlement between plaintiffs and defendants Girone and Lexington,” that “defendant Deptford is not entitled to use the pretrial payment from Lexington to plaintiffs as a credit towards its portion of the verdict,” and that “any disputes regarding insurance coverage are between Deptford and Lexington and do not affect plaintiffs’ settlement with Girone and Lexington or plaintiffs’ judgment against Deptford”. Plaintiffs seek entry of a judgment of $896,000 plus post-judgment interest against Dept-ford, Harleysville Insurance Company (Deptford’s carrier), or Lexington in their favor (in addition to the settlement of $977,300).
*297Girone claims it received no notice of any intent to vacate the settlement, and asserts the matter was settled as to it and that its obligation has been satisfied by its carrier, Lexington. Deptford similarly argues that its obligation has been properly satisfied because the trial judge was correct in ruling that Lexington’s payment must be deemed to have been made in satisfaction of plaintiffs judgment against the Township — a view which Harleysville shares.
The trial judge’s view that the settlement had to be vacated based on a “mistake of fact” has some appeal, but no party before us supports that conclusion. Given the policy favoring settlements, as articulated by the majority, and the fact that no party to the settlement seeks its vacation, which would require yet another trial, I join my colleagues in reversing the order vacating the settlement.
My colleagues’ position, which requires Lexington to honor the judgment against Deptford, is reasonable. Lexington was fully aware of Deptford’s contention that Lexington had an obligation to defend and indemnify it on the plaintiffs claim (because Lexington was surety and, independently, because Deptford was an “additional insured” on the Lexington policy), but settled in disregard and breach of that obligation, and therefore assumed the risk of any recovery by plaintiff against Deptford. But plaintiff also understood the legal issues flowing from N.J.S.A. 21:3-5 as well as the Tort Claims Act, and nevertheless released Lexington in accepting a settlement with it.1 Thus, I am concerned that in settling with Girone and Lexington, plaintiff — also aware or charged with knowledge of the surety statute and the law concerning the surety’s obligation — can be said to have released Lexing*298ton, and discharged it from its obligation as carrier and surety with respect to plaintiffs claims.2
The trial court held that Lexington was liable under the surety bond to protect Deptford (on its obligation to plaintiff) prior to protecting Girone on its liability to plaintiff. As a result, the judge voided the settlement as a “mistake of fact,” ordered Lexington to pay the $896,000 portion of the judgment allocated to Deptford (leaving no balance to that judgment), and entered judgment against Girone for its allocated amount of $528,000 plus interest (ultimately amended to $659,000), minus the $104,000 balance on the policy which was given as a credit to Girone. The judge also found that the bond, required by N.J.S.A. 21:3-5, did not replace Girone’s liability policy,3 and directed Lexington to reimburse Harleysville for the costs of defending Deptford. In essence, the judge treated the plaintiff as protected by Lexington’s liability policy issued to Girone and to Deptford as “additional insured,” and separately under a surety bond issued pursuant to statute.
But while the statute requires issuance of the bond or other coverage to protect an injured person, it expressly permits — as Cruz-Mendez v. ISU/Insurance Services of San Francisco, 156 N.J. 556, 722 A.2d 515 (1999), recognizes — that the liability policy can serve as the surety bond, so long as the required statutory *299coverage is provided. Cruz-Mendez, supra, 156 N.J. at 568, 572-73, 722 A.2d 515. Here, there is no genuine dispute that the liability policy, which included Deptford as an “additional insured,” provided that protection, and that the policy was issued for the specific Deptford exhibition on display. I find it significant that there is no contention that Lexington did not deliver to Deptford a surety bond, or policy, satisfying its statutory obligation of “not less than twenty-five hundred dollars ($2,500.00),” N.J.S.A. 21:3-5, and no contention by Deptford, or plaintiff as third party beneficiary, that Girone did not satisfy its contractual obligation to provide the coverage it contracted to provide. Nevertheless, the trial court treated Lexington as having issued a policy and separate surety bond, each giving the plaintiff $1,000,000 in protection, as opposed to a policy with $1,000,000 in coverage for “each occurrence,” which provided the protection the statute was designed to assure. In this regard, I believe the trial court was in error.
I join the majority in reversing the order vacating the settlement and in remanding for entry of judgment requiring Lexington to pay the judgment against Deptford as well as the settlement. The majority does so because of Lexington’s conduct as surety when it “failed to act in good faith to protect the parties for whose benefit the surety was created.” Op. at 295, 881 A.2d at 1256. The majority thus finds that by accepting “a release in its own favor and in favor of its named insured, without first protecting Deptford, [Lexington] violated its duty as surety and thereby exposed itself to a risk arguably greater than it originally undertook.” Op. at 295, 881 A.2d at 1256. I need not go that far or necessarily find a breach of Lexington’s duty as surety obligated to protect the injured member of the public. I would hold, substantially for the reasons stated by the majority, that Lexington breached the fiduciary duty it owed to Deptford as an “additional insured.”
Cruz-Mendez permits injured persons to bring direct actions against the surety. Cruz-Mendez, supra, 156 N.J. at 567-68, 722 *300A.2d 515. It held “that plaintiff may maintain a direct cause of action under the policy against the Insurers.” Id. at 566, 722 A.2d 515. See also 156 N.J. at 570, 722 A.2d 515 (“conclud[ing] that N.J.S.A. 21:3-5 requires an exhibitor applying for a permit to conduct a fireworks display to obtain a surety instrument providing for action against the insurer”). The carrier is not required to issue a bond separate from an insurance policy which satisfies the statute. Id. at 567-68, 722 A.2d 515. Among its claims plaintiff brought a direct claim against Lexington, and released Lexington knowing it was a surety when it settled with Lexington and its insured, Girone, under the policy. Thus, as a direct defendant, Lexington could satisfy its statutory obligation by settling the action on behalf of itself as surety and its insured.
The question is really whether the plaintiff’s release of the surety ends Lexington’s contractual and legal obligations in this case.
There is some basis for ruling that plaintiff understood the impact of the statute when she voluntarily settled her claims against Girone and Lexington, as surety, and thereby effectively released Deptford, which the statute was also designed to protect. But the settlement proceedings seemed to make clear that the direct claims remained for resolution against Deptford, and no one suggested at the time of settlement that the complaint would be dismissed against the Township. To the contrary, when the settlement was placed on the record in the presence of all the parties, plaintiff was told that while she could not recover anything further from Girone and Lexington, she “may” or “may not” collect from Deptford depending on the result of a possible “settlement” or “trial.”
We might also consider holding that Deptford and its carrier, Harleysville, should be liable for the judgment against Deptford because neither affirmatively asked that the settlement be rejected if it did not include Deptford, thereby affecting the available balance of the $1,000,000 coverage for the single occurrence (and because Deptford did not contend that the statute or its contract were not satisfied by the policy issued). But the record does not *301suggest that either Deptford or Harleysville acquiesced in the settlement to the detriment of the municipality in the event of an adverse judgment.
I join the majority in holding that Lexington must both honor the settlement and pay the judgment against Deptford, aggregating $1,873,000, which plaintiff obtained through negotiations and trial, notwithstanding the settlement with Lexington. I do so because Deptford was made an “additional insured” to which its carrier still owed a fiduciary obligation and not because the surety could not otherwise settle directly with plaintiff.
I am satisfied to concur in the judgment of my colleagues because the policy in question served to both insure Girone and provide the surety obligation under N.J.S.A. 21:3-5. Whether it had to do so or not, the policy named Deptford as an “additional insured.” And while the settlement may well have been made to protect Girone from being exposed to a verdict above the policy limits, Lexington had the same obligation to protect Deptford as its “additional insured.” 4 See Rova Farms Resort, Inc. v. Investors Ins. Co. of America, 65 N.J. 474, 489-93, 323 A.2d 495 (1974) (imposing on insurer “the most urgent duty to act in good faith and with diligence in attempting to arrange a possible settlement” given the factors of the case). See also Webb v. Witt, 379 N.J.Super. 18, 24, 876 A.2d 858 (App.Div.2005) (“[i]n discussing insurers’ duties to their insureds, the case law does not distinguish between named insureds and additional insureds”). This it did not do. Simply stated, Lexington left its “additional insured” without coverage, as the policy limits had almost been exhausted as a result of the settlement. By settling with plaintiff on behalf of itself and Girone, Lexington knew, or should have known, the risks it was taking in light of its obligation to Deptford as an “additional insured.”
I therefore concur in the judgment.

 I recognize that plaintiff apparently did not receive copies of Harleysville's letters, as Deptford’s liability carrier, objecting to the settlement. In fact, Harleysville sought a defense from Lexington and a declaration that Lexington was obligated to pay the limits of the bond on behalf of Deptford before satisfying the liability of Girone.

 In the briefs before us no party suggested a factual dispute as to the intent of the settlement or the need for a plenary hearing, although the question was considered at argument.

 The judge stated that Lexington "put up Deptford’s money” and that the settlement proceeds were "paid by Lexington on behalf of Girone, when really it was paid by Lexington for Deptford, unbeknownst to Deptford and Lexington." The judge also found that, "by making Deptford an additional insured, it created an additional/million dollars surety bond ... to conform to the statute.” The parties disagree as to whether Lexington was ordered to pay the excess above the $104,000 balance on the policy, in light of the conclusion that Lexington’s bond did not affect its obligation to Girone as its insured. In no event can judgment be entered against Girone for an amount determined at a trial in which it did not participate due to the settlement.

 Lexington did protect Deptford to the extent plaintiff agreed that it would not seek to collect above Deptford's coverage through Harleysville.