Breen v. New Jersey Manufacturers Indemnity Insurance
Court: New Jersey Superior Court Appellate Division; April 2, 1969; New Jersey; State Appellate Court
The court is considering a motion for summary judgment by the defendant insurance company, asserting that the plaintiff's claim is barred by the statute of limitations, specifically N. J. S. 2A:14-1. The case stems from an automobile accident on February 21, 1957, where attorney John J. Breen was injured due to the negligence of Milton Stern, who had a valid automobile insurance policy with New Jersey Manufacturers Indemnity Insurance Company. After the accident, Stern notified the insurance company both orally and in writing, with Breen later indicating that his injuries were more severe than initially thought. A year after the accident, the insurance company examined Breen and then informed Stern that it intended to deny coverage due to late notice. Breen filed a lawsuit against Stern in 1959, resulting in a $9,000 judgment in his favor, which remains unpaid.
Breen subsequently filed suit against the insurance company on November 15, 1968, nearly eight years after the judgment against Stern. The key legal issue is whether the statute of limitations applies in this situation. Breen argues that the applicable statute is N. J. S. 2A:14-5, allowing a 20-year limit, claiming that the insurance company is obligated to cover judgments against its insured for this duration. Alternatively, if the 6-year contract statute of limitations is deemed applicable, Breen contends that the cause of action arose on October 1, 1968, when the insurance company refused to pay the judgment, asserting that he was justified in exhausting all options against Stern before pursuing the insurance company for payment. No evidence was presented regarding the refusal of payment on October 1, 1968. Breen references legal precedent suggesting that the statute of limitations for a guarantor's claim does not begin until the principal debtor fails to pay.
Plaintiff argues that rights under the insurance policy for the injured party, Breen, do not accrue until after an execution on the judgment against the insured is returned unsatisfied. Citing Suydam v. Public Indemnity Co. and N.J.S.A. 17:28-2, plaintiff asserts that an injured party can only sue the insurer after this condition is met. Although plaintiff sought a continuance to present proof of an unsatisfied execution from 1968, the court deemed it unnecessary, noting that the defendant did not claim more than six years had passed since that return.
The defendant insurance company contends that a claim from a judgment creditor against it is barred by a six-year statute of limitations for contracts not under seal, as dictated by N.J.S. 2A:14-1. The defendant argues that because the cause of action accrued on December 6, 1960, when judgment was rendered against the insured, the plaintiff's suit, filed on November 15, 1968, is time-barred. The defendant further claims that N.J.S.A. 17:28-2, which sets minimal requirements for insurance policies, is not relevant here, asserting compliance with the statute and providing greater rights under the policy. The policy states that no action can be taken unless the insured fulfills all terms and the amount owed is determined by judgment or agreement. It also clarifies that the insurer's obligations are unaffected by the insured's bankruptcy. The defendant references Kindervater v. Motorist Casualty Insurance Co. to support its position that N.J.S.A. 17:28-2 does not apply.
The court determined that the carrier's challenge to the sufficiency of the unsatisfied writ of execution was unnecessary because the insurance policy involved did not require proof of the insured's insolvency. The court supported the plaintiff's claim, stating that under New Jersey law (N.J.S.A. 17:28-2), the defendant’s argument was irrelevant. By assuming the truth of the allegations in the complaint, the court acknowledged that the insurance policy was designed to cover the insured, allowing an injured party to recover a judgment from the insurer.
New Jersey statute (N.J.S.A. 2A:14-1) mandates that actions for tortious injury or contractual claims must be initiated within six years of the cause of action. The defendant argued that the claim against it based on the insurance policy was contractual and thus barred by this statute. However, another statute (N.J.S.A. 2A:14-5) allows the revival of a judgment within 20 years. The plaintiff contended that the insurer's obligation to satisfy judgments against the insured should extend for 20 years, aligning with the judgment's lifespan.
The court reiterated that judgment creditors have derivative rights under indemnity insurance policies, meaning they can only assert rights the insured could assert. Breen, the plaintiff, was in a position to claim only the rights associated with the insured's policy with the insurer. Generally, statutes of limitation applicable to contracts govern actions on insurance policies, as demonstrated in various cases where courts applied contract statutes rather than tort statutes in similar contexts.
In Melloan v. Southern Fire and Casualty Co., the Supreme Court of Tennessee ruled that a judgment creditor's action against an automobile liability insurer, initiated after a judgment against the insured was returned nulla bona, is classified as a third-party contract action. The court determined that this action is barred by a six-year statute of limitations applicable to contract actions, rather than the ten-year statute for judgments. In the current case, the plaintiff's cause of action arose on December 6, 1960, when judgment was entered against the insured, Milton Stern. Since the plaintiff delayed filing the suit for nearly eight years, the claim is time-barred under N. J. S. 2A:14-1. Consequently, the court granted the defendant's motion for summary judgment.
