Court Opinion

ID: 2779884
Source: CourtListenerOpinion
Date Created: 2015-02-18 15:05:37.742929+00
Date Added: 2024-06-11T10:55:53.685386
License: Public Domain

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).

                            Kwabena Wadeer v. N.J. Mfrs. Ins. Co. (A-54-12) (072010)

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

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

          In this appeal, the Court considers whether a plaintiff’s claim alleging his insurer acted in bad faith by
failing to settle his uninsured motorist (UM) claim is barred by the entire controversy doctrine or the doctrine of res
judicata.

          Plaintiff, Kwabena Wadeer, suffered injuries in a motor vehicle accident that occurred while he was
attempting to avoid an unidentified vehicle. Plaintiff pursued a UM claim against New Jersey Manufacturers
Insurance Company (NJM), with whom he had an insurance policy that provided $100,000 in UM and UIM
coverage. NJM made no offers to attempt to settle plaintiff’s UM claim and the parties proceeded to private
arbitration pursuant to the terms of the insurance policy. The panel determined that plaintiff was 30% liable for the
accident, the phantom vehicle was 70% liable, and plaintiff was entitled to a net award of $87,500. NJM rejected
the $87,500 arbitration award and demanded a trial. By letter dated April 21, 2005, plaintiff’s attorney
acknowledged NJM’s rejection of the arbitration award and notified NJM that he believed it was acting in bad faith
by rejecting that award.

          On April 28, 2005, plaintiff filed a complaint against NJM seeking UM benefits. Plaintiff’s complaint
made no explicit allegations of bad faith or breach of duties. After mandatory, non-binding arbitration resulted in a
50/50 liability finding and a net award of $162,500 to plaintiff, NJM again refused the award and opted for a jury
trial. On April 7, 2006, pursuant to Rule 4:58-2, plaintiff submitted an Offer of Judgment to NJM in the amount of
$95,000 and reiterated his belief that defendant’s conduct was in bad faith. NJM rejected the offer and the case
proceeded to trial. The jury determined that the phantom vehicle was 100% liable for the underlying accident and
awarded plaintiff $210,000 for pain and suffering and $12,175 in lost wages. Plaintiff thereafter moved to enter
judgment for the full amount of the verdict, notwithstanding the $100,000 policy limit, as well as for prejudgment
interest on the verdict and attorneys’ fees. During argument on the motion, plaintiff’s counsel raised the issue of bad
faith, contending that defendant was on notice of the claim. In response, NJM argued that plaintiff failed to plead
bad faith in his complaint. The trial judge entered an order on September 17, 2007, reducing and molding the jury
verdict to conform to the insurance policy limit of $100,000 and awarding plaintiff attorneys’ fees and prejudgment
interest. In his accompanying statement of reasons, the trial judge found that NJM’s actions did not constitute bad
faith because NJM had fairly debatable reasons for denying the benefits of the policy. Plaintiff and NJM filed cross-
appeals. Plaintiff contended the trial court should not have molded the verdict to the policy limits because NJM
acted in bad faith. The Appellate Division affirmed the trial judge’s modified jury verdict, but reversed the award of
attorneys’ fees and expenses.

          Subsequently, on July 8, 2009, plaintiff filed a separate complaint alleging that NJM breached its duty of
good faith and fair dealing. Plaintiff asserted that NJM acted in bad faith by failing to make a settlement offer to
plaintiff and by failing to settle the claim in a timely manner. NJM moved for summary judgment, arguing that
plaintiff’s complaint was barred by the entire controversy doctrine, res judicata, and/or collateral estoppel. On
January 21, 2011, the trial judge granted NJM’s motion for summary judgment, finding that the entire controversy
doctrine barred plaintiff’s bad faith claim. The trial judge also determined that the doctrine of res judicata applied.
The Appellate Division affirmed on the basis of the entire controversy doctrine. This Court granted plaintiff’s
petition for certification. 213 N.J. 534 (2013).

HELD: Plaintiff’s bad faith claim is barred in this action under the principle of res judicata because it was raised,
fairly litigated, and determined by the trial court in the first litigation.

                                                           1
1. “[A]n insurance company owes a duty of good faith to its insured in processing a first-party claim.” Pickett v.
Lloydʼs, 131 N.J. 457, 467 (1993). In order to make a showing of bad faith in a first-party claim based on a denial
of benefits, “[a] plaintiff must show the absence of a reasonable basis for denying benefits of the policy and the
defendant’s knowledge or reckless disregard of the lack of a reasonable basis for denying the claim.” Id. at 473
(quoting Bibeault v. Hanover Ins. Co., 417 A.2d 313, 319 (R.I. 1980)). “Under the ‘fairly debatable’ standard, 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.” Ibid. (pp. 14-15)

2. The entire controversy doctrine, codified in Rule 4:30A, “embodies the principle that the adjudication of a legal
controversy should occur in one litigation in only one court; accordingly, all parties involved in a litigation should at
the very least present in that proceeding all of their claims and defenses that are related to the underlying
controversy.” Highland Lakes Country Club & Cmty. Ass’n v. Nicastro, 201 N.J. 123, 125 (2009). In determining
whether a subsequent claim should be barred under this doctrine, “the central consideration is whether the claims
against the different parties arise from related facts or the same transaction or series of transactions.” DiTrolio v.
Antiles, 142 N.J. 253, 267 (1995). Because a plaintiff should have “a fair and reasonable opportunity to have fully
litigated that claim in the original action,” the doctrine “does not apply to unknown or unaccrued claims.” Id. at
274. Put simply, “[f]airness in the application of the entire controversy doctrine focuses on the litigation posture of
the respective parties and whether all of their claims and defenses could be most soundly and appropriately litigated
and disposed of in a single comprehensive adjudication.” Id. at 277. (pp. 15-17)

3. Res judicata “contemplates that when a controversy between parties is once fairly litigated and determined it is no
longer open to relitigation.” Lubliner v. Bd. of Alcoholic Beverage Control, 33 N.J. 428, 435 (1960). Application
of res judicata “requires substantially similar or identical causes of action and issues, parties, and relief sought,” as
well as a final judgment. Culver v. Ins. Co. of North America, 115 N.J. 451, 463 (1989). To decide if two causes of
action are the same, the court must determine: “(1) whether the acts complained of and the demand for relief are the
same (that is, whether the wrong for which redress is sought is the same in both actions); (2) whether the theory of
recovery is the same; (3) whether the witnesses and documents necessary at trial are the same (that is, whether the
same evidence necessary to maintain the second action would have been sufficient to support the first); and (4)
whether the material facts alleged are the same.” Id. at 461-62. In Culver, the Court applied the doctrine of res
judicata to bar a second action filed by insureds against their insurer alleging misrepresentations and breach of
fiduciary duties because, in a prior subrogation action with the insurer, the insureds filed a cross motion, which the
trial court ruled upon, raising the same claims of misconduct, the same material facts that would be established with
the same evidence, and seeking similar relief. Id. at 454, 462. Here, like in Culver, plaintiff raised his bad faith
claim in the first action, and the trial court addressed and disposed of that claim in its September 17, 2007 order and
statement of reasons. Plaintiff’s second action involves the same alleged wrongs, the same theories of recovery
(NJM’s alleged breach of its duty of good faith and fair dealing, warranting both consequential and punitive
damages), the same evidence (the “fact” that NJM refused to settle, “forcing” plaintiff to take his case to trial
because its liability would not exceed the UM policy limit regardless of the verdict), and the same material facts as
in the first litigation. Thus, res judicata bars plaintiff’s bad faith claim from relitigation. (pp. 17-22)

4. Despite the Court’s disposition of plaintiff’s bad faith claim, it separately addresses the entire controversy
doctrine. Because acts of first-party bad faith in the UM context can, and often will, continue throughout the course
of the underlying proceedings, the nature of first-party bad faith claims warrants exemption from a harsh application
of the entire controversy doctrine. Rather than forcing a plaintiff to amend the initial complaint to add and reflect
each incident of bad faith, viewing bad faith claims as separate and distinct actions promotes judicial efficiency and
economy. The Court refers this matter to the Civil Practice Committee to consider whether our court rules should be
modified to permit an insured to bring a first-party bad faith claim against an insurer after resolution of an
underlying, interrelated UM action. The Court also refers the Offer of Judgment Rule, Rule 4:58-2, to the Civil
Practice Committee to recommend an amendment addressing issues that arise in applying that rule to a monetary
judgment molded to the policy limits in a UM/UIM action. Finally, the Court refers Rule 4:42-9(a)(6) to the Civil
Practice Committee to consider whether that rule should be extended to authorize a fee award to an insured who
brings direct suit against his insurer to enforce any direct coverage, including UM/UIM coverage. (pp. 23-26)

         The judgment of the Appellate Division is AFFIRMED.

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

                                                           2
assigned) join in JUSTICE FERNANDEZ-VINA’s opinion. JUSTICES LaVECCHIA and PATTERSON did
not participate.

                                           3
                                     SUPREME COURT OF NEW JERSEY
                                        A-54 September Term 2012
                                                 072010

KWABENA WADEER and OFELIA
WADEER,

    Plaintiffs-Appellants,

         v.

NEW JERSEY MANUFACTURERS
INSURANCE COMPANY,

    Defendant-Respondent.

         Argued September 9, 2014 – Decided February 18, 2015

         On certification to the Superior Court,
         Appellate Division.

         E. Drew Britcher and Donald A. Caminiti
         argued the cause for appellants (Britcher,
         Leone & Roth, attorneys for Kwabena Wadeer
         and Breslin and Breslin, attorneys for
         Ofelia Wadeer; Mr. Britcher, Mr. Caminiti,
         and Kristen B. Miller, on the brief).

         Daniel J. Pomeroy argued the cause for
         respondent (Pomeroy, Heller & Ley,
         attorneys; Mr. Pomeroy and Karen E. Heller,
         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).

         Hugh P. Francis argued the cause for amici
         curiae Insurance Council of New Jersey,
         Property Casualty Insurers Association of
         America, and National Association of Mutual
         Insurance Companies (Francis & Berry,
         attorneys; Mr. Francis and Joanna Huc, on
         the brief).

                               1
         David F. Swerdlow submitted a brief on
         behalf of amicus curiae New Jersey Lawsuit
         Reform Alliance (Windels Marx Lane &
         Mittendorf, attorneys).

    JUSTICE FERNANDEZ-VINA delivered the opinion of the Court.

    The issue on appeal is whether a plaintiff’s claim alleging

his insurer acted in bad faith by failing to settle his

uninsured motorist (UM) claim is barred by the entire

controversy doctrine or the doctrine of res judicata.

    Plaintiff1, Kwabena Wadeer, suffered injuries as a result of

a motor vehicle accident.   At the time of the accident,

plaintiff was insured under a policy issued by defendant, New

Jersey Manufacturers Insurance Company (NJM).   Plaintiff

notified NJM of his UM claim and demanded that NJM pay its

policy limits to settle his claim.   NJM did not offer the full

limits of its policy and made no offers to settle the UM claim.

Rather, NJM rejected two arbitration awards, one within its

policy limits and one in excess of its policy limits.      NJM also

rejected an offer of judgment submitted by plaintiff in the

amount of $95,000, thereby forcing the action to proceed to

trial.

    After a jury verdict was rendered in plaintiff’s favor in

the amount of $255,175, the trial court molded the verdict to

1 Ofelia Wadeer also filed a consortium claim in this case but
plaintiff refers to Kwabena Wadeer.
                                 2
NJM’s $100,000 policy limits, added attorneysʼ fees, costs, and

pre-judgment interest, and reduced the total amount to a

judgment in favor of plaintiff.       Plaintiff and NJM filed cross-

appeals.

    Plaintiff contended the trial court should not have molded

the verdict to NJM’s policy limits because NJM had acted in bad

faith.   Plaintiff further argued that “as a result of NJM’s

failure to act in good faith towards resolving [the] claim

within their policy limits,” NJM must be held accountable for

both consequential damages as well as punitive damages to deter

NJM from engaging in such conduct in the future.

    The Appellate Division issued an unpublished opinion

affirming the portion of the order that molded the verdict to

the policy limits and reversing the portion of the order that

awarded fees and expenses pursuant to the Offer of Judgment

Rule, Rule 4:58-2.   The panel specifically rejected plaintiff’s

arguments disputing the trial court’s molding of the verdict to

the insurance policy limits following Taddei v. State Farm

Indem. Co., 401 N.J. Super. 449 (App. Div. 2008), and affirmed

the trial court’s ruling finding an absence of bad faith on the

part of NJM.   The Appellate Division held that application of

Rule 4:58-2 is triggered by measuring the amount of the offer of

judgment filed by plaintiff against the amount of the eventual

judgment for compensatory damages entered by the court, not the

                                  3
amount of the full damages verdict, and therefore plaintiff had

not obtained a judgment in an amount sufficient to trigger the

rule.

    Thereafter, plaintiff filed a separate complaint against

NJM alleging that NJM breached its duty of good faith and fair

dealing by failing to make a settlement offer to plaintiff and

to settle the claim in a timely manner.   NJM moved for summary

judgment, arguing that the claim was barred by the entire

controversy doctrine, res judicata, and collateral estoppel.

The trial court granted NJM’s motion, determining that res

judicata and the entire controversy doctrine barred plaintiff’s

bad faith claim.

    Plaintiff appealed, arguing that his bad faith action did

not ripen until the jury returned its verdict and that barring

his bad faith action under the entire controversy doctrine was

fundamentally unfair.   The Appellate Division affirmed in an

unpublished opinion, finding NJM’s pretrial actions were

sufficient to establish the basis for a bad faith claim, that

plaintiff had a fair opportunity to assert and litigate his bad

faith action, and that there was nothing unfair about requiring

plaintiff to pursue the bad faith claim in the first trial,

since he had threatened a bad faith claim before filing the UM

action.

                                4
    For the reasons set forth in this opinion, we affirm the

judgment of the Appellate Division.   Although we concur with the

panelʼs ultimate conclusion that plaintiff’s bad faith claim was

barred, we find the principle of res judicata to be controlling,

not the entire controversy doctrine, because plaintiff raised

his bad faith claims during the first trial.   However, we hereby

refer to the Civil Practice Committee, for review and study the

entire controversy doctrine, Rule 4:30A, to consider whether to

allow first-party bad faith claims to be asserted and decided

after resolution of an underlying, interrelated UM action.     We

refer the Offer of Judgment Rule, Rule 4:58-2, to determine

whether in the   UM (uninsured motorist)/UIM (underinsured

motorist) context, application of the rule should be triggered

by measuring the amount of the offer of judgment filed by the

plaintiff against the full damages verdict, rather than against

the molded judgment entered by the court.   We also refer Rule

4:42-9(a)(6) which allows for counsel fees to be awarded “in an

action upon a liability or indemnity policy of insurance, in

favor of a successful claimant,” but not with respect to

first-party insurance claims such as UM/UIM, to determine

whether Rule 4:42-9(a)(6) should be extended to authorize a fee

award to an insured who brings direct suit against his insurer

to enforce any direct coverage, including UM/UIM coverage.

                                I.

                                 5
    On August 15, 2003, plaintiff, Kwabena Wadeer, was injured

in an automobile accident.   According to the police report,

plaintiff was cut off by an unidentified white minivan, causing

plaintiff to cross a grass median and lose control of his car.

Plaintiff’s vehicle collided with an automobile and was

subsequently hit by a tractor trailer.    Plaintiff suffered

several fractures to his leg as a result of the accident, and

sustained approximately $12,000 in lost wages.

    At the time of the accident, plaintiff and his wife, Ofelia

Wadeer, were insured under a policy issued by defendant NJM.

The policy insured plaintiffs with UM and UIM in the amount of

$100,000.   Because neither plaintiff, nor any other witness to

the accident, could identify the vehicle that caused plaintiff

to veer into the other side of the highway, he pursued a UM

claim.

    On October 8, 2003, plaintiff notified NJM of his UM claim,

and, shortly thereafter, sent medical records to support that

claim.   NJM did not offer the full limits of the policy and made

no offers to attempt to settle plaintiff’s UM claim.    The

parties proceeded to private arbitration pursuant to the terms

of the arbitration provision contained in the insurance policy.

    On February 25, 2005, the parties appeared for arbitration

before a panel of three UM arbitrators.   The panel determined

that plaintiff was 30% liable for the accident, and the phantom

                                 6
vehicle was 70% liable.   As a result, the arbitrators found that

plaintiff was entitled to a gross award of $125,000.   After

reducing the award to account for plaintiff’s comparative

negligence, the arbitrators determined plaintiff was entitled to

a net award of $87,500.

    NJM rejected the $87,500 arbitration award, which was

within the limits of its insurance policy, and demanded a trial.

Plaintiff’s attorney acknowledged NJM’s rejection of the

arbitration award by letter dated April 21, 2005, and notified

NJM that he believed NJM was acting in bad faith by rejecting

that award:

         This letter shall also confirm that during our
         telephone conversation on April 19, 2005 you
         advised that the arbitration award [was] so
         close to my client’s policy limits that New
         Jersey Manufacturers felt they would just [as
         soon] try this case without fear that they
         would ever have to pay more than the policy
         limits of $100,000.00. It was apparent to me
         from our conversation that NJM feels they have
         nothing to lose by trying this case. I feel
         this is bad faith by NJM and I am troubled by
         their approach, especially in a case where the
         defense arbitrator even agreed my clientʼs
         damages are worth well in excess of the policy
         limits.

    Thereafter, on April 28, 2005, plaintiff filed a four-count

complaint against NJM seeking UM benefits.   Plaintiff’s

complaint made no explicit allegations against NJM regarding any

purported bad faith or alleged breach of any duties by NJM to

its insured.   Defendant filed an answer on June 21, 2005.   The

                                 7
matter was thereafter submitted to mandatory, non-binding

arbitration pursuant to Rule 4:21A, which resulted in a 50/50

liability finding, and a net award of $162,500 to plaintiff on a

gross award of $325,000.     NJM again refused the award and opted

for a jury trial.

    On April 7, 2006, pursuant to Rule 4:58-2, plaintiff

submitted an Offer of Judgment to NJM in the amount of $95,000,

reiterated his belief that defendant’s conduct was in bad faith

and warned that, if the case proceeded to trial, plaintiff would

pursue the full amount of a jury verdict even if it was in

excess of the UM policy limits.     NJM rejected this offer and the

case proceeded to trial.

    A jury trial was conducted from July 16, 2007 through July

18, 2007.   At the conclusion of trial, the jury determined that

the phantom vehicle was 100% liable for the underlying accident.

The jury awarded plaintiff $210,000 for pain and suffering and

$12,175 in lost wages.     The jury also awarded plaintiff’s wife

$33,000 in damages for her consortium claim.     Plaintiff

thereafter moved to enter judgment for the full amount of the

verdict, notwithstanding the $100,000 policy limit, as well as

for prejudgment interest on the verdict in the amount of

$27,278.23, and attorneys’ fees of $93,586.51.

    Oral argument for that motion was held on September 7,

2007.   During argument, plaintiff’s counsel raised the issue of

                                   8
bad faith, contending that defendant was on notice of the claim.

In response, counsel for NJM argued, among other things, that

plaintiff failed to plead bad faith in his complaint.

      By order entered September 17, 2007, the trial judge

reduced and modified the jury verdict to conform to the

insurance policy limit of $100,000.   The judge also awarded

plaintiff attorneys’ fees and prejudgment interest.    In his

accompanying statement of reasons, the trial judge noted that

NJM’s actions did not constitute bad faith because NJM had

fairly debatable reasons for denying the benefits of the policy.

      On March 31, 2008, the trial judge issued a Final Order

Entering Judgment that reaffirmed his September 17, 2007 order.

The March 31, 2008 order (1) molded the jury verdict to conform

with the $100,000 policy limit; (2) awarded $93,586.51 to

plaintiff for attorneys’ and court fees pursuant to the Offer of

Judgment Rule, Rule 4:58-2, (3) awarded $15,652 in prejudgment

interest; and (4) denied plaintiff’s motion for reconsideration.

      Plaintiff and NJM filed cross-appeals.   Plaintiff contended

the trial court should not have molded the verdict to NJMʼs

policy limits because NJM had acted in bad faith.     The Appellate

Division concurred with the trial judge’s modified jury verdict,

but reversed the award of attorneys’ fees and expenses (Wadeer

I).

                                 9
       Subsequently, on July 8, 2009, plaintiff filed a complaint

in the Superior Court, Law Division, alleging that NJM breached

its duty of good faith and fair dealing, as well as the New

Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -195, and the

Unfair Claims Settlement Practices Act, N.J.S.A. 17:29B-1 to

-19.   As a factual basis for those contentions, plaintiff

asserted that NJM acted in bad faith by failing to make a

settlement offer to plaintiff and by failing to settle the claim

in a timely manner.     NJM moved for summary judgment, arguing

that plaintiff’s complaint was barred by the entire controversy

doctrine, res judicata, and/or collateral estoppel.

       On January 21, 2011, the trial judge granted NJM’s motion

for summary judgment, finding that the entire controversy

doctrine barred plaintiff’s bad faith claim.     The trial judge

further determined that the doctrine of res judicata applied

under the principles of Culver v. Ins. Co. of North America, 115

N.J. 451, 463 (1989).     Plaintiff appealed.

       The Appellate Division, relying on Taddei, supra, 401 N.J.

Super. at 465, affirmed on the basis of the entire controversy

doctrine, which it stated generally requires that a claim of bad

faith be raised in the initial UM action (Wadeer II).     The

appellate panel rejected plaintiff’s claim that his bad faith

cause of action did not ripen until the jury returned its

verdict.   Rather, the panel found that plaintiff’s bad faith

                                  10
action accrued prior to the verdict and that plaintiff had a

fair opportunity to assert and litigate that action.

Accordingly, the panel held that there was nothing unfair or

inequitable about requiring a plaintiff to pursue a bad faith

claim in an UM action where 1) plaintiff recognized and

threatened a bad faith claim before filing the UM action, 2) the

carrier made no settlement offer despite an arbitration panelʼs

evaluation of damages in excess of the policy, and 3) the

carrier represented that it intended to proceed to trial solely

because it would not have to pay more.   Plaintiffʼs remaining

arguments were determined to be meritless under Rule 2:11-

3(e)(1)(E).

    This Court granted plaintiff’s petition for certification.

Wadeer v. N.J. Mfrs. Ins. Co., 213 N.J. 534 (2013).    Thereafter,

we granted leave to appear as amici curiae to New Jersey

Association for Justice (“NJAJ”) and to Insurance Council of New

Jersey, Property Casualty Insurers Association of America, and

National Association of Mutual Insurance Companies, together.

                               II.

    Plaintiff argues that the Appellate Division erred both in

finding that his bad faith cause of action accrued before he

filed the UM lawsuit and in applying the entire controversy

doctrine to bar his claim as a result.

                               11
    Plaintiff asserts that the legal injuries complained of in

his bad faith action did not arise until after the jury verdict

when the trial judge reduced the excess award to comport with

the $100,000 policy limit.   Plaintiff argues that it is

illogical to require plaintiff to bring a bad faith claim before

the conclusion of the underlying case because acts of bad faith

will often continue until the verdict is rendered.

    Further, plaintiff specifically notes that there is no

commonality of legal issues between plaintiff’s UM bodily injury

claim and his bad faith action.    Plaintiff maintains that the

factual circumstances of a personal injury claim arising from a

motor vehicle accident do not give rise to a bad faith action.

Rather, plaintiff argues that the bad faith cause of action is a

separate and distinct claim solely relating to the conduct and

actions of NJM throughout the course of the legal proceedings in

the UM lawsuit.   Emphasizing that the entire controversy

doctrine is an equitable concept predicated upon judicial

fairness, plaintiff contends that the result below renders null

any concept of fundamental fairness and equity by requiring that

a bad faith claim be brought prior to the conclusion of the

underlying action.

    Finally, plaintiff asserts that his bad faith claim against

NJM was dismissed without adequate discovery and that it is

“highly questionable” to permit a trial court to determine the

                                  12
viability of such a claim on post-trial motion.   As such,

plaintiff argues that it is entitled to conduct appropriate

discovery to support its bad faith claim, and requests that this

Court clarify the procedural and substantive law addressing the

prosecution of first-party bad faith claims.

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

Appellate Division correctly applied the entire controversy

doctrine to bar plaintiff’s bad faith claim.   NJM maintains

that, although plaintiff expressed his opinion that NJM’s

failure to settle the UM claim was in bad faith, he failed to

allege bad faith in his first complaint.    As such, NJM argues

that the circumstances establishing the basis for plaintiff’s

bad faith claim existed for more than two years during the

pendency of the first action, and thus plaintiff’s failure to

plead the claim during that time barred its inclusion in the

instant litigation.   NJM additionally asserts that such a

conclusion is also amply supported by the doctrines of res

judicata and collateral estoppel, given that plaintiff was

permitted to seek an adjudication of the bad faith claim before

the trial judge, despite shortcomings in his pleadings.

    NJM additionally disputes plaintiff’s contention regarding

the lack of commonality between plaintiff’s UM bodily injury

claim and plaintiff’s bad faith action.    NJM cites to DiTrolio

v. Antiles, 142 N.J. 253, 267 (1995), to support its contention

                                13
that the core set of underlying facts here provides the

necessary link between the claims and triggers the requirement

that they be determined in one proceeding.

    Finally, NJM disputes plaintiff’s contention that there is

a pressing need for this Court to provide other first-party

litigants with procedural guidance regarding the timing of bad

faith claims.   NJM contends that such litigants would be well-

served to follow established principles of claim preclusion and

assert their claims prior to the resolution of their UM

litigation, with discovery regarding such claims being held in

abeyance until the claim for first-party benefits concludes.

    NJAJ, appearing as amicus curiae, supports the arguments

advanced by plaintiff.   NJAJ argues that insurance companies

“have approached uninsured motorists and underinsured motorists

bodily injury claims in a fashion that bespeaks arbitrary and

capricious behavior.”    On the merits, NJAJ contends that the

entire controversy doctrine does not bar plaintiff’s claim in

the instant case.   In addition, and more generally, NJAJ seeks

clarification of the standards applicable in resolving first-

party bad faith claims against insurers.

    Insurance Council of New Jersey, Property Casualty Insurers

Association of America, and National Association of Mutual

Insurance Companies, appearing together as amici curiae, support

the arguments advanced by NJM.   Amici contend that the “fairly

                                 14
debatable” standard should not be revisited and further endorse

the Appellate Division’s application of the entire controversy

doctrine to bar plaintiff’s bad faith claim.

                                 III.

     “[I]t is well-settled that, in New Jersey, ‘every insurance

contract contains an implied covenant of good faith and fair

dealing.’”    Wood v. N.J. Mfrs. Ins. Co., 206 N.J. 562, 577

(2011) (quoting Price v. N.J. Mfrs. Ins. Co., 182 N.J. 519, 526

(2005)).     As an extension, “an insurance company owes a duty of

good faith to its insured in processing a first-party claim.”

Pickett v. Lloydʼs, 131 N.J. 457, 467 (1993).     In order to make

a showing of bad faith in a first-party claim based on a denial

of benefits2,

           “[a] plaintiff must show the absence of a
           reasonable basis for denying benefits of the
           policy and the defendantʼs knowledge or
           reckless disregard of the lack of a reasonable
           basis for denying the claim. It is apparent,
           then, that the tort of bad faith is an
           intentional one . . . implicit in that test is
           our conclusion that the knowledge of the lack
           of a reasonable basis may be inferred and
           imputed to an insurance company where there is
           a reckless . . . indifference to facts or to
           proofs submitted by the insured.”

           [Id. at 473 (quoting Bibeault v. Hanover Ins.
           Co., supra, 417 A.2d 313, 319 (R.I. 1980)).]

2 The test is “essentially the same” when showing bad faith based
on “inattention to payment of a valid, uncontested claim.”
Pickett, supra, 131 N.J. at 473-74.
                                  15
    “Under the ‘fairly debatable’ standard, 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.”   Ibid.

                                IV.

    The entire controversy doctrine, codified in Rule 4:30A,

provides in pertinent part:

          Non-joinder of claims required to be joined by
          the entire controversy doctrine shall result
          in the preclusion of the omitted claims to the
          extent required by the entire controversy
          doctrine, except as otherwise provided by R.
          4:64-5 (foreclosure actions) and R. 4:67-4(a)
          (leave required for counterclaims or cross-
          claims in summary actions).

    This doctrine “‘embodies the principle that the

adjudication of a legal controversy should occur in one

litigation in only one court; accordingly, all parties involved

in a litigation should at the very least present in that

proceeding all of their claims and defenses that are related to

the underlying controversy.’”   Highland Lakes Country Club &

Cmty. Ass’n v. Nicastro, 201 N.J. 123, 125 (2009) (quoting

Cogdell v. Hosp. Ctr. at Orange, 116 N.J. 7, 15 (1989)).     We

have previously expressed that the purpose of the entire

controversy doctrine “are threefold: (1) the need for complete

and final disposition through the avoidance of piecemeal

                                16
decisions; (2) fairness to parties to the action and those with

a material interest in the action; and (3) efficiency and the

avoidance of waste and the reduction of delay.”     DiTrolio,

supra, 142 N.J. at 267 (citing Cogdell, supra, 116 N.J. at 15).

    In determining whether a subsequent claim should be barred

under this doctrine, “the central consideration is whether the

claims against the different parties arise from related facts or

the same transaction or series of transactions.”     Id. at 268.

“‘It is the core set of facts that provides the link between

distinct claims against the same parties . . . and triggers the

requirement that they be determined in one proceeding.’”      Id. at

267-68.   There is no requirement that there be a “commonality of

legal issues.”   Id. at 271.

    The “polestar of the application of the rule is judicial

‘fairness.’”   Id. at 272 (1995) (quoting Reno Auto Sales, Inc.

v. Prospect Park Sav. and Loan Ass’n, 243 N.J. Super. 624, 630

(App. Div. 1990)).   In considering whether application of the

doctrine is fair, courts should consider fairness to the court

system as a whole, as well as to all parties.     Id. at 273-74.

    Because plaintiff should have “‘a fair and reasonable

opportunity to have fully litigated that claim in the original

action,’” id. at 274 (quoting Cafferate v. Peyser, 251 N.J.

Super. 256, 261 (App. Div. 1991)), the doctrine “does not apply

to unknown or unaccrued claims.”     Ibid.   Put simply, “[f]airness

                                17
in the application of the entire controversy doctrine focuses on

the litigation posture of the respective parties and whether all

of their claims and defenses could be most soundly and

appropriately litigated and disposed of in a single

comprehensive adjudication.”    Id. at 277.

                                 V.

    Res judicata, like the entire controversy doctrine, serves

the purpose of providing “‘finality and repose; prevention of

needless litigation; avoidance of duplication; reduction of

unnecessary burdens of time and expenses; elimination of

conflicts, confusion and uncertainty; and basic fairness[.]’”

First Union Nat. Bank v. Penn Salem Marin, Inc., 190 N.J. 342,

352 (2007) (quoting Hackensack v. Winner, 82 N.J. 1, 32-33,

(1980)).   The principle “contemplates that when a controversy

between parties is once fairly litigated and determined it is no

longer open to relitigation.”   Lubliner v. Bd. of Alcoholic

Beverage Control, 33 N.J. 428, 435 (1960).    Application of res

judicata “requires substantially similar or identical causes of

action and issues, parties, and relief sought,” as well as a

final judgment.   Culver, supra, 115 N.J. at 460.   Thus, “[w]here

the second action is no more than a repetition of the first, the

first lawsuit stands as a barrier to the second.”     Ibid.

                                 18
    The test for identity of a cause of action is the most

difficult to determine.    Id. at 461.   To decide if two causes of

action are the same, the court must determine:

           (1) whether the acts complained of and the
           demand for relief are the same (that is,
           whether the wrong for which redress is sought
           is the same in both actions); (2) whether the
           theory of recovery is the same; (3) whether
           the witnesses and documents necessary at trial
           are the same (that is, whether the same
           evidence necessary to maintain the second
           action would have been sufficient to support
           the first); and (4) whether the material facts
           alleged are the same.

           [Id. at 461-62 (quoting United States v.
           Athlone Indus. Inc., 746 F.2d 977, 984 (3d
           Cir. 1984)) (citations omitted).]

                                 VI.

    We find the procedural posture of the case before us to be

identical to Culver, supra, 115 N.J. 451.     In Culver, plaintiffs

sustained a fire loss to their home caused by a faulty gas

stove.    Their homeowners’ coverage was insufficient to fully

compensate them for their loss.    The plaintiffs entered into an

agreement with their insurance carrier under which they would

proceed jointly in an action against the tortfeasors responsible

for the fire (the manufacturer, seller and installer of the

stove).   Under the subrogation agreement, the carrier would bear

all costs of the litigation, would be entitled to legal fees,

and any recovery would be divided with the carrier receiving

eighty percent (80%) and the insureds receiving twenty percent

                                  19
(20%).   Id. at 453.   However, upon settlement of the action

against the tortfeasors, the plaintiffs refused to accept their

share of the proceeds, and the carrier moved against them in a

pending subrogation action to enforce the agreement.     The

plaintiffs opposed the motion and cross-moved, proposing a

different allocation of the proceeds and alleging fraud and a

breach of fiduciary duty by the carrier and its counsel.       Id. at

454.

       The trial court rejected those defenses and granted the

carrier’s motion, ordering distribution of the settlement

proceeds to be made in accordance with the agreement entered

into by the parties.    The plaintiffs thereafter filed a new

action against the carrier, alleging, as they had in their

cross-motion that their consent to the agreement was illegally

obtained, and that the carrier made misrepresentations and

breached its fiduciary duties to them.     The new action sought

compensatory damages, attorney’s fees, interest, costs and a

“just and equitable settlement,” or more accurately, a

redistribution of the proceeds of the earlier action.     Ibid.

       The carrier moved for summary judgment on the grounds that

the issues raised in the complaint were barred under res

judicata, which the trial court granted.     On appeal, the

Appellate Division reversed.    Culver v. Ins. Co. of N. Am., 221

N.J. Super. 493 (App. Div. 1987).     Rejecting the application of

                                 20
res judicata, the Appellate Division determined that the

subrogation agreement was not enforceable and that the insureds

were entitled to be paid the full extent of their loss from the

settlement proceeds.   The carrier filed a petition for

certification, which this Court granted.     Culver v. Ins. Co. of

N. Am., 110 N.J. 305 (1988).

    This Court found that the acts complained of were the same,

since they involved conduct of the carrier allegedly amounting

to a breach of fiduciary duty, fraud, or misrepresentation

sufficient to warrant setting aside the agreement between the

parties.   The Court further concluded that the material facts

surrounding the carrier’s alleged misconduct were identical, and

the same evidence would be necessary in both actions to

establish that misconduct.     Culver, supra, 115 N.J. at 462.   We

also noted that the relief sought in both actions was similar,

with each seeking to set aside the subrogation agreement to

obtain a distribution of the settlement proceeds that was more

favorable to the insureds.     Accordingly, we determined that res

judicata applied to bar the second action against the carrier.

    The matter is substantially similar to the case before us,

as plaintiff also seeks to relitigate an issue that was placed

before the trial court during the first litigation and already

fully litigated and determined by the trial court in that first

case.

                                  21
    Plaintiff’s second action seeking damages against NJM for

its alleged bad faith handling of his claim for UM benefits

involved the same alleged wrongs, the same theories of recovery

(NJM’s alleged breach of its duty of good faith and fair

dealing, warranting both consequential and punitive damages),

the same evidence (the “fact” that NJM refused to settle,

“forcing” plaintiff to take his case to trial because its

liability would not exceed the UM policy limit regardless of the

verdict), and the same alleged material facts as in the first

litigation.   Thus, under the framework set forth in Culver, id.

at 461-62, we find the issues to be identical.

    Plaintiff raised the exact issue during oral argument for

his motion to enter judgment for the full amount of the jury

verdict on September 17, 2007.   Thereafter, the trial judge

addressed and disposed of that issue in his September 17, 2007

order and accompanying statement of reasons on that motion:

         There is a question whether the issue of bad
         faith has been properly raised since it was
         not pled in this matter.      In essence, the
         plaintiff was asking the Court sua sponte to
         make that determination based on the facts
         before it. The only real basis for the claim
         that defendants acted in bad faith is that NJM
         refused to make any offer of settlement prior
         to the trial. The jury found that the phantom
         vehicle was the sole cause of the accident.
         The arbitrators found significant liability on
         the part of the plaintiff.      Therefore, the
         question of responsibility for the accident
         must be considered as “fairly debatable,” and
         the failure to make an offer of settlement

                                 22
         does not lead to the conclusion that NJM acted
         in bad faith.

    Having already been fairly litigated and determined, we

hold plaintiff’s bad faith cause of action is barred from

relitigation under the doctrine of res judicata.

    We are not persuaded by the arguments of plaintiff and NJAJ

that bad faith claims should not be subject to motion practice

to decide the merits.   All cases regardless of type or

complexity are amenable to motion practice to dismiss or for

summary judgment if properly supported by the evidence and law.

We find no reasoned basis to exempt bad faith cases.

                               VII.

    Despite our disposition of plaintiff’s bad faith claim, we

separately consider plaintiff’s argument against application of

the entire controversy doctrine.     Plaintiff maintains that his

bad faith claim against NJM should not have been barred by the

entire controversy doctrine because, as an “equitable doctrine,”

its application was unfair because NJM’s bad faith, for the most

part, came to light during the course of the underlying

litigation surrounding plaintiff’s UM claim.     We agree that

barring such bad faith claims on the basis of the entire

controversy doctrine is inappropriate in the UM context.

    While we acknowledge and reiterate the underlying goals of

the entire controversy doctrine -- to encourage complete and

                                23
final dispositions through the avoidance of piecemeal decisions

and to promote judicial efficiency and the reduction of delay,

DiTrolio, supra, 142 N.J. at 267 –- we find that the nature of

first-party bad faith claims warrants exemption from a harsh

application of this rigid doctrine.     Acts of first-party bad

faith in the UM context can, and often will, continue throughout

the course of the underlying legal proceedings; that is, an

insurance carrier’s acts of bad faith may often not cease until

a verdict is returned, and this is only after the plaintiff has

been forced to fully litigate the matter through arbitration and

trial.   Rather than forcing a plaintiff to amend the initial

complaint to add and reflect each incident of bad faith, we

believe that viewing bad faith claims as separate and distinct

actions promotes judicial efficiency and economy.     We also note

the difficulties that will be encountered in the discovery

process by seeking information as to bad faith acts which may be

prohibited in the UM cause of action.

    The question remains, however, whether fairness requires

that our court rules be modified to permit an insured to bring a

bad faith cause of action against an insurer after the

underlying UM claim is resolved.     In our view, the goals of the

entire controversy doctrine are not served by mandating that the

plaintiff simultaneously file a first-party bad faith claim with

the underlying breach of contract/UM lawsuit.     However, to

                                24
foster debate about whether our courts should allow first-party

bad faith claims to be asserted and decided after resolution of

the underlying, interrelated UM action, we refer Rule 4:30A to

our Civil Practice Committee for review.

                              VIII.

    We further conclude that this case presents an ideal

opportunity to address the latent ambiguity that exists within

the Offer of Judgment Rule, R. 4:58.

    Rule 4:58-2 provides that when a pre-trial offer is

rejected and the monetary award exceeds 120% of the offer, in

addition to costs of suit, the offeror is entitled to:

         (1)   all   reasonable   litigation   expenses
         incurred   following    non-acceptance;    (2)
         prejudgment interest of eight percent on the
         amount of any money recovery from the date of
         the offer or the date of completion of
         discovery, whichever is later, but only to the
         extent that such prejudgment interest exceeds
         the interest prescribed by R. 4:42-11(b),
         which also shall be allowable; and (3) a
         reasonable attorney’s fee for such subsequent
         services as are compelled by the non-
         acceptance.”

         [R. 4:58-2(a).]

    Nevertheless, the rule, as currently written, does not

explicitly provide whether the jury’s verdict is the trigger for

the sanctions and remedies of Rule 4:58-2 or, conversely,

whether the molded judgment controls.

                               25
    We find that the molding of a monetary jury award is

appropriate when done to conform with and reflect allocation of

liability.   However, in the UM/UIM context, where reduction is

based not on a tortfeasor’s comparative negligence but instead

on the policy limits of a given carrier, we find that the

current construction of Rule 4:58-2 provides no incentive for

such carriers to settle.   Rather, under the current rule,

carriers are prone to take their chances at trial where the

offer of judgment is somewhat near their policy limits because

they have relatively little to lose in doing so.   Thus, the

rule’s required reduction of a monetary jury award artificially

to the policy limits renders moot any reasonable offer of

settlement by the insured below the 120% threshold; unless an

insured makes an offer of judgment that is unreasonably below

its policy limits, it is unlikely that an insurance carrier will

choose to settle the respective claim.   In light of this, we

conclude that the aims of Rule 4:58-2, “to encourage, promote

and stimulate early out-of-court settlement,” Crudup v. Marrero,

57 N.J. 353, 357 (1971), are ill-achieved in the UM/UIM context

under the rule’s current construction.

    Accordingly, we refer Rule 4:58-2 to the Civil Practice

Committee to consider and recommend an appropriate amendment

addressing this infirmity.

                                26
    Lastly, we note that New Jersey Court Rules allow for

counsel fees to be awarded “in an action upon a liability or

indemnity policy of insurance, in favor of a successful

claimant.”   R. 4:42-9(a)(6).   However, with respect to

first-party insurance, such as UM/UIM coverage, the statutory

prescription for attorney’s fees is inapplicable.    Rule 4:42-

9(a)(6) has not been extended to authorize a fee award to an

insured who brings direct suit against his insurer to enforce

any direct coverage, including UM/UIM coverage.   We refer this

issue to the Civil Practice Committee for comments and

recommendations addressing the issue.

                                IX.

    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.

                                 27
               SUPREME COURT OF NEW JERSEY

NO.   A-54                                     SEPTEMBER TERM 2012

ON CERTIFICATION TO            Appellate Division, Superior Court

KWABENA WADEER and OFELIA
WADEER,

      Plaintiffs-Appellants,

              v.

NEW JERSEY MANUFACTURERS
INSURANCE COMPANY,

      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

                                                      1