A Capehart Scatchard Blog

How to Apply Offer of Judgment Rule in an Underinsured Motorist Case

By on February 23, 2018 in Litigation with 0 Comments

Plaintiff Sharon Seamon filed a lawsuit against her insurance company State Farm Insurance Company for underinsured motorist benefits (“UIM”) for injuries she suffered in an automobile accident. At trial, the jury awarded her $375,733.36 for her injuries. The issues in Seamon v. State Farm Insurance Co., 2017 N.J. Super. Unpub. LEXIS 3069 (App. Div. Dec. 14, 2017), were whether the trial court should mold the verdict to reflect State Farm’s UIM policy limits of $100,000, in light of plaintiff’s bad faith claim against State Farm for its refusal to settle her case within its policy limits and whether the plaintiff is entitled to be paid her attorney’s fees in light of her $85,000 offer of judgment.

In Seamon, plaintiff settled with the other driver for his $15,000 policy limits and then filed a UIM claim with State Farm. The claim did not settle and, hence, plaintiff filed this lawsuit against State Farm. Utilizing the Offer of Judgment court rules, R. 4:58-1 to 6, each party filed an offer to take judgment in the case. State Farm filed an offer to take judgment in the amount of $30,000 and plaintiff filed an offer to take judgment in the amount of $85,000. Pursuant to the Offer of Judgment rule, depending on the verdict, a party filing an offer of judgment may be entitled to an award of attorney’s fees.

Neither side accepted the other’s offer of judgment. The plaintiff’s case proceeded to trial and was decided by a jury, who awarded her $375,733.36 in damages. The judge molded the verdict to reflect the underlying tortfeasor’s policy of $15,000 and entered judgment in the amount of $360,000 plus interest.

At that point, State Farm filed a motion to mold the verdict to reflect its policy limits of $100,000 (asking that the judgment be reduced to $85,000). Plaintiff filed a motion to amend the complaint to add a bad faith claim against State Farm and asked for counsel fees under the Offer of Judgment rule. State Farm contended that plaintiff’s offer of judgment must be compared to the judgment after molding which, thus, would defeat her right to obtain fees under the Rule. (To recover fees, the verdict would need to be 120% of the offer or more.) Although State Farm opposed the plaintiff’s motion to assert a bad faith claim, it conceded that plaintiff did have the right to file a new complaint asserting bad faith against State Farm.

At the trial court level, while denying the plaintiff’s motion to amend to assert a bad faith claim against State Farm, the trial court judge also held that he had discretion not to mold the verdict. Because he found that State Farm engaged in a “scorched earth” approach to settlement, he refused to mold the verdict to $85,000 and awarded attorney’s fees to plaintiff, based upon the non-molded verdict. The trial court awarded the plaintiff $37,500 in fees.

State Farm appealed both rulings.

First, as to the issue of molding, the Appellate Division reversed the trial court’s decision. It held that, based upon prior case law, the trial court was required to mold the verdict to reflect the plaintiff’s UIM policy limits. The trial court did not have discretion as to whether or not to mold the verdict. Further, as for the bad faith issue, the Court found that the trial court should not have decided this issue “without requiring plaintiff to file the complaint and without giving both sides a full and fair opportunity to litigate that issue.”

However, the Appellate Division agreed with the trial court as to the plaintiff’s entitlement to attorney’s fees under the Offer of Judgment rule. The Court noted that the Offer of Judgment rule, R. 4:58-2(b), was amended as of September 1, 2016, to state that in an uninsured or underinsured motorist case, in applying the rule,  the judgment should be molded only to adjust it for any comparative negligence of the plaintiff.

This amendment was enacted to address an ambiguity in the Offer of Judgment rule in a UM/UIM case.  Under the old version of the rule, it was not clear whether the jury’s verdict or the molded judgment was the trigger for sanctions. The amended version of the rule made clear that the right to relief would be based upon the monetary award by the jury or non-jury verdict, without first molding to reflect the plaintiff’s policy limits.

Even though this rule went into effect after the verdict was entered in this case, the Appellate Division found that the new rule applied because it was “curative” in nature and reflected a clarification of the old rule. Under the case law, “curative acts” can be applied retroactively where “they are designed to remedy a perceived imperfection in or misapplication of a statute and ‘not intended to alter the intended scope or purposes of the original act.’”

Thus, the Appellate Division agreed with the trial court as to the plaintiff’s right to a fee award, although on a different basis as found by the trial court. However, it found that the plaintiff’s fee application was deficient. It did not contain the information required to support a fee award. Hence, the Court remanded the matter back to the trial court for the plaintiff to submit a conforming fee application, upon which the trial court can make the appropriate findings in determining the award.



About the Author

About the Author:

Ms. Ramos is an Executive Committee Member and Co-Chair of the Litigation Department at Capehart Scatchard, P.A. located in Mount Laurel, New Jersey. She is an experienced litigator with over 30 years experience handling diverse matters. Practice areas include tort defense, business litigation, estate litigation, tort claims and civil rights defense, construction litigation, insurance coverage, employment litigation, shareholder disputes, and general litigation.

For the years 2020 and 2021, Ms. Ramos was selected for inclusion in The Best Lawyers in America© in the practice area of Litigation - Insurance. The attorneys on this list are selected based upon the consensus opinion of leading lawyers about the professional abilities of their colleagues within the same geographical area and legal practice area. A complete description of The Best Lawyers in America© methodology can be viewed via their website at: https://www.bestlawyers.com/methodology.

In 2021, Capehart Scatchard and Ms. Ramos received the “Best Law Firm” ranking in the area of Litigation – Insurance (Metro, Tier 3) published by U.S. News & World Report and Best Lawyers®. Law firms included on the list are recognized for professional excellence with consistently impressive ratings from clients and peers. To be eligible for a ranking, a firm must have at least one attorney who has been included in the current edition of Best Lawyers in America, which recognizes the top five percent of practicing lawyers in the United States. Betsy Ramos (Litigation – Insurance) was recognized for this prestigious award in the 2021 edition. For a description of the “Best Law Firm” selection methodology please visit: https://bestlawfirms.usnews.com/methodology.aspx.

“Best Law Firms” is published by Best Lawyers in partnership with U.S. News & World Report. For a description of the selection methodology please visit: https://bestlawfirms.usnews.com/methodology.aspx.

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