In Citizens United Reciprocal Exch. v. Espinoza, the Appellate Division of the Superior Court reversed and remanded a trial court’s dismissal of an insured’s counterclaim against its insurer alleging bad faith, breach of the duty of good faith and fair dealing, and other claims in a declaratory judgment action. Plaintiff, the insurer, issued a personal auto insurance policy to defendant. The policy required the insurer to pay damages for bodily injury or property damage for which any insured became legally responsible because of an auto accident. Defendant had only one vehicle listed on the Declaration page of the policy, a 2004 Volvo sedan.
The accident in question occurred when Defendant rented a U-Haul, but then allowed a friend to drive the vehicle. The friend was in an accident, and the other driver brought suit against both Defendant and the friend. Defendant’s insurer, Plaintiff, initially provided coverage under a reservation of rights, but ultimately denied coverage, stating the friend was not an insured under the policy. Plaintiff then brought a declaratory judgment action against Defendant. Defendant then brought counterclaims alleging bad faith and related claims. Prior to the beginning of trial, Plaintiff changed its position to allege it denied coverage not because of the friend’s status as an insured, but because Defendant did not meet the definition of insured provided in the policy, because he was not using the vehicle at the time of the accident.
In relation to his bad faith claims, Defendant intended produce evidence of Plaintiff’s failure to provide him with an attorney at his deposition, as well as testimony from the claims manager regarding the denial of coverage. Although the case was set for jury trial, prior to seating a jury the parties agreed to instead conduct a bench trial. However, during the bench trial, the judge treated the case as a motion hearing rather than a trial, disallowing Defendant from present its evidence regarding the bad faith claim, including barring the presentation of any witness testimony by either party. The judge treated the case as a summary judgment proceeding, entertained oral argument, and rendered a brief opinion finding the policy provided no coverage to Defendant. Defendant then appealed this ruling.
On appeal, the Appellate Division cited many problems with the judge’s approach. First, Defendant was not provided notice that, instead of a trial, the matter would be resolved without testimony or documentary evidence. Furthermore, no exhibits were marked for identification, none were formally accepted into evidence, and no testimony was permitted. Thus, the judge made his decision based on the stipulated facts presented by the parties in their prior motions for summary judgment, despite the ruling denying summary judgment on those motions due to remaining disputed material facts. The judge made no specific findings of fact, and merely stated his conclusion that no coverage existed. The Appellate Division thus found it impossible to give meaningful appellate review absent the trial court judge’s reasoning for his opinion, particularly given the evidentiary shortcomings of the trial. Thus, the Appellate Division reversed the trial court’s finding, and remanded for further proceedings to allow Defendant the opportunity to present relevant testimony and documents in support of his claim for coverage.
Date of Decision: Jan. 23, 2015
Citizens United Reciprocal Exch. v. Espinoza, Docket No. A-5841-12T4, 2015 N.J. Super. Unpub. LEXIS 133 (N.J. Super. Ct. App. Div. Jan. 23, 2015) (Haas, J. and Higbee, J.).