• Court Rules That Rova Farms Provides A Contractual Claim At Law To Which The Right To Trial By Jury Attaches (New Jersey Supreme Court)
  • December 13, 2012
  • Law Firm: Fineman Krekstein Harris P.C. - Philadelphia Office
  • In Wood v. New Jersey Mfrs. Ins. Co., the New Jersey Supreme Court granted certification to settle an issue of first impression regarding the question of whether a claim brought under Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474 (N.J. 1974), is to be decided by judge or jury. The dispute originally arose when the assignee was attacked by the insured’s dog and suffered severe injuries.

    After the assignee commenced a personal injury suit against the insured, the insured’s carrier refused to settle. Specifically, the assignee stated that she would accept a $500,000 settlement, which represented the insured’s policy limits. However, the carrier refused, arguing that its valuation of the claim was closer to $300,000. During the underlying litigation, the assignee put the carrier on notice of the potential for a Rova Farms claim. However, the carrier remained steadfast and refused to change from its position. Eventually, the assignee won its personal injury suit, receiving a molded verdict of $1,408,320.33.

    Because of the deficiency between the judgment and the insured’s policy limits, the insured assigned all claims under the policy. The assignee then filed a declaratory judgment action, seeking a determination that the carrier was liable for this difference. The assignee also brought claims for bad faith under Rova Farms, seeking a jury trial. The assignee filed a motion for summary judgment and over the carrier’s contention that discovery was not yet completed the Court granted the assignee’s motion.

    Specifically, the trial court reasoned that the carrier had proceeded to trial without an expert witness as to economic damages and asserted a “take-it-or-leave-it” settlement offer based on assumptions that the it could not prove at trial. Moreover, the court concluded, the carrier gambled on its chances at trial, contrary to the interests of its insured.

    On appeal, the appellate court reversed the trial court’s grant of summary judgment to the assignee. Citing “countervailing factors,” the panel reasoned that the carrier justified in its finding that the assignee’s underlying personal injury claim was only worth $300,000. The panel held that there were genuine fact-sensitive determinations that needed to be made about the reasonableness of the carrier’s handling of settlement negotiations. The court also elected to have the trial court decide whether a judge or jury should decide the assignee’s Rova Farms claims against the insured’s carrier. The Supreme Court granted certification on that issue.

    The assignee argued that the right to trial by jury does not attach to Rova Farms claims because they sound in strict liability. Submitting a Rova Farms claim to a jury, it argued, would essentially require another full trial.

    However, the carrier argued that a Rova Farms claim is really a traditional contract claim for breach of the covenant of good faith and fair dealing. While this means that a jury should try the claim, the carrier qualified its argument, reasoning that the equitable nature of a bad faith claim may render a bench trial appropriate in some situations.

    Several amici filed briefs as well. One argued that, because a Rova Farms claim did not exist at common law, claimants should not be entitled to a jury. Moreover, trying a Rova Farms claim might lead to inconsistent results if it requires two full separate trials. Others argued that jury trials for Rova Farm claims are appropriate because such a claim for bad faith is really a mundane contract claim to which the right to a jury normally applies.

    Turning to the merits of these arguments, the Court stated that, regardless of how the action was styled, it was import to discern whether the suit was primarily legal and subject to trial by jury, or equitable, to which no right to a jury trial attaches. Although styled as a declaratory judgment action, the assignee’s case really addressed the carrier’s breach of fiduciary duty to its insured. As such, the assignee’s “Rova Farms bad faith claim is a garden-variety action at law.” Moreover, the Court reasoned, a “Rova Farms bad faith claim always has been a breach of contract claim, and a breach of contract claim was at common law and remains today an action triable to a jury.” Therefore, the Court affirmed the appellate court’s holding as modified and remanded the case.

    Date of Decision: June 4, 2011

    Wood v. New Jersey Mfrs. Ins. Co., 206 N.J. 562, New Jersey Supreme Court (N.J. 2011) (Rivera-Soto, J.)