Court: New Jersey Superior Court Appellate Division; March 13, 2013; New Jersey; State Appellate Court
The court, led by Judge Fisher, addressed the adequacy of an insurer's rejection of an arbitration award concerning uninsured motorist claims. The case involves Marleny Vega, who sought enforcement of an $87,500 arbitration award against 21st Century Insurance Company after being injured by a hit-and-run driver. The insurer's attorney sent a letter rejecting the arbitration award within the thirty-day window required for a written demand for trial, but did not explicitly state a demand for trial. Vega argued that the absence of such wording rendered the award binding, while 21st Century contended that their rejection sufficed to nullify the award.
The trial court ruled in favor of Vega, concluding that the rejection letter did not meet policy requirements for demanding a trial. 21st Century appealed, and the appellate court determined that the trial court's reliance on previous case law requiring "magic words" to trigger a demand for trial was incorrect. The court clarified that while certain circumstances might necessitate explicit wording, there is no singular mandated phrasing to nullify an arbitration award. This ruling overruled the prior case, LoBianco v. Harleysville Insurance Co., emphasizing that the insurer's rejection was sufficient to invoke the right to a trial, thus allowing for a broader interpretation of what constitutes an effective rejection of an arbitration award.
The policy in question necessitates that a carrier reject an arbitrator's decision and demand a trial. However, previous cases cited, such as Verbiest and Barnett, do not establish that only specific language can nullify an arbitration award. In Barnett, the insurer rejected the award based solely on a coverage dispute, not on the amount awarded, which differs from the current situation where 21st Century seeks to reject the award solely due to its alleged excessiveness. The discussion in Barnett about the requirement to notify the trial court and plaintiffs of the rejection and demand for a trial is not interpreted as a definitive ruling on how to nullify an award.
The case of Morag is pivotal, as it examined whether an insurer's letter rejecting the arbitration award constituted a sufficient demand for a trial. The letter referenced the Verbiest case and asked the claimant to file a complaint while waiving formal service. Although it did not explicitly state "we demand a trial," the court interpreted the correspondence as effectively demanding a damages trial, emphasizing the need to focus on the substance rather than the form of the communication. The judgment of the trial judge, which applied a strict-compliance standard, was rejected, affirming that 21st Century's letter clearly communicated a demand for a trial without ambiguity.
The rejection of the award by the insurer is interpreted as a demand for a trial, particularly given the subsequent invitation to discuss settlement. Vega could only reasonably understand the insurer's letter in this way. The trial judge, following the precedent set in LoBianco, ruled that the insurer's failure to explicitly demand a trial made the award binding, a formalism that is rejected here. The commentary from the Morag opinion suggests that parties should clearly express a demand for a trial to avoid ambiguity, but does not establish a strict standard for all cases. The failure to follow this advice may result in costly litigation, but neither Morag nor the current opinion mandates a literal demand for a trial to activate the policy provisions. The decision to reverse is supported by instances where insurers' letters were deemed insufficient to nullify arbitration awards due to lack of explicit demand for a trial. The strict compliance standard applied in LoBianco is inconsistent with Morag and the current ruling, leading to LoBianco being overruled.
