INSURANCE COVERAGE

An Insured's Failure To Cooperate With An Insurer That Results In "Appreciable Prejudice" Provides Sufficient Grounds For The Insurer To Disclaim Coverage.

In Hager v. Gonsalves, --- A.2d ---, 2008 WL 612206 (N.J. Super. March 7, 2008), the Appellate Division addressed the issue of whether the failure of both the operator and the owner of a motor vehicle to cooperate with the vehicle's insurer, which prevented the insurer from ascertaining whether the operator was a permissive user, provided sufficient grounds for the insurer to disclaim coverage.

Defendant Rutgers Casualty Insurance Company (Rutgers Casualty) issued an automobile liability policy to defendant Edilberto Chilito insuring his vehicle. The policy contained a standard “cooperation clause” that required any person seeking coverage to “cooperate with the insurer in the investigation, settlement or defense of any claim or suit.”

On the evening of October 18, 2002, defendant Tammy Gonsalves, who was not a named insured under the policy, was operating Chilito's truck. Gonsalves, who was intoxicated, was involved in two accidents within a period of nine minutes. Gonsalves was issued summonses for driving while under the influence of alcohol, operating a vehicle without a license, driving while her license was suspended, and failing to yield at an intersection and reckless driving.

The first accident did not result in any claim. However, the second accident caused substantial damage to the other car and serious personal injuries to the other driver, Nicole Hager, which resulted in Hager filing an automobile negligence action.

Neither Gonsalves nor Chilito informed Rutgers Casualty of the accident. Rutgers Casualty became aware of the accident upon receipt of a letter from Hager's counsel more than five weeks after the accident. That same day, a Rutgers Casualty claims adjuster sent a letter to Chilito, by both certified and regular mail, which indicated that his vehicle had been involved in an accident on October 18, 2002, and reserved Rutgers Casualty's right to disclaim coverage. Chilito did not respond to this letter.

The claims adjuster then referred the matter to Rutgers Casualty's special investigation unit (SIU). The SIU investigator placed telephone calls and sent letters to Gonsalves' and Chilito’s homes. Neither responded. On March 3, 2003, the investigator again sent letters, by certified mail, return receipt requested, to Gonsalves and Chilito. In the letters, the investigator warned that, absent a response, Rutgers Casualty would consider the two uncooperative and close the case. The investigator received return receipts acknowledging receipt of both letters. However, Gonsalves and Chilito again failed to respond to Rutgers Casualty's letters.

On May 1, 2003, Rutgers Casualty notified Hager's counsel that it was denying coverage for the accident due to lack of cooperation. Hager's counsel then notified Hager's insurer, plaintiff High Point Insurance Company (High Point), that Hager would be pursuing a claim under the uninsured (UM) motorist provisions of her policy.

Thereafter, three separate actions were filed relating to the October 18, 2002 accident: Hager filed an automobile negligence action against Gonsalves and Chilito; Rutgers Casualty filed an action for a declaration that the policy it had issued to Chilito was void and that it had no obligation to provide coverage to Gonsalves or Chilito for the accident; and High Point filed an action against Gonsalves, Chilito and Rutgers Casualty that sought, among other things, a declaration that Rutgers Casualty policy provided coverage to Gonsalves and Chilito for the accident. The trial court subsequently consolidated the Hager and High Point actions.

The issue of Rutgers Casualty's obligation to provide coverage to Gonsalves and Chilito was brought before the trial court by Rutgers Casualty's and High Point's cross-motions for summary judgment. The trial court concluded that even though Gonsalves and Chilito had “utterly failed in their duty under the policy to cooperate with Rutgers [,]” Rutgers Casualty had failed to show that it suffered “appreciable prejudice” as a result of this failure. Accordingly, the court granted High Point's motion for a declaration that Rutgers Casualty must provide coverage to Gonsalves and Chilito despite their failure to cooperate.

Rutgers filed this appeal arguing that an insurer may disclaim coverage based on its insured's breach of the cooperation clause of the policy without showing that it suffered appreciable prejudice as a result of the breach. Rutgers Casualty also argued, in the alternative, that it did suffer appreciable prejudice as a result of Gonsalves' and Chilito's failure to cooperate.

The Court rejected Rutgers Casualty’s argument that the requirement of a showing of “appreciable prejudice” does not apply to an insurer’s disclaimer of coverage based on the insured’s breach of the duty to cooperate. The Court then addressed the issue of whether Rutgers Casualty made the required showing of such prejudice.

The Court provided that “two variables” should be considered in determining whether an insurer was appreciably prejudiced by a breach of the insured's duties under the policy: first, “whether substantial rights have been irretrievably lost” as a result of the insured's breach, and second, “the likelihood of success of the insurer in defending against the accident victim's claim” had there been no breach.

The Court held that “there was no basis for concluding that there would have been a ‘likelihood of success of [Rutgers Casualty] defending against [Hager's] claim” had Gonsalves and Chilito not breached the duty of cooperation.’ However, the Court also found that Gonsalves' and Chilito's total failure to respond to any of Rutgers Casualty's numerous inquiries prevented Rutgers Casualty from determining the nature of the relationship between Gonsalves and Chilito and whether Chilito had given Gonsalves permission to drive his vehicle. As such, the Court concluded that it would be unfair to impose liability upon Rutgers Casualty by simply assuming Gonsalves was a permissive user of Chilito's vehicle when, by even minimal cooperation with Rutgers Casualty, Gonsalves and Chilito could have easily provided the information necessary to resolve this issue. Therefore, Rutgers Casualty properly disclaimed coverage for the Hager claim.

PROFESSIONAL LIABILITY

The New Jersey Affidavit Of Merit Statute Mandates That If The Defendant Is A Specialist And The Care Or Treatment At Issue Involves That Specialty, The Expert Providing The Affidavit Must Practice In That Same Specialty

In Short v. Atlanticare Regional Medical Center a/k/a, d/b/a Atlantic City Medical Center, et al., --- A.2d ----, 2008 WL 782637 (N.J.Super. App. Div. March 26, 2008), Plaintiff Lawrence Short appeals from orders dismissing his medical malpractice suit against defendants, AtlantiCare Regional Medical Center (ARMC), Dr. Michael J. Savini, Atlantic Bone & Joint Surgeons, LLC (ABJS) and Dr. Lawrence Naame, for failure to satisfy the Affidavit of Merit Statute (AMS), N.J.S.A. 2A:53A-27, and denying his motion for reconsideration.

On May 31, 2005, plaintiff underwent hip replacement surgery, performed by Dr. Naame, a board-certified orthopedic surgeon employed by ABJS, at the ARMC facility. Dr. Savini, also an orthopedic surgeon employed by ARMC, assisted Dr. Naame with the procedure. On June 15, 2006, plaintiff filed a medical malpractice action against the physicians and their employers alleging the physicians were negligent while performing the hip replacement surgery.

On July 26, 2006, plaintiff filed an affidavit of merit prepared by Gregory P. Papa, D.O., a general practitioner who specializes in family practice and cardiovascular disease. Dr. Papa certified he had “particular knowledge and/or expertise in the general area of orthopedic surgery, including hip replacement surgery” and opined there existed “a reasonable probability that the care, skill and/or knowledge exercised or exhibited in the treatment, practice or work rendered to Mr. Short by Lawrence Naame, M.D. at the Atlantic Regional Medical Center, fell outside of the acceptable professional standards and treatment practices.” Defendants' counsel notified plaintiff that the affidavit was insufficient as he was a family practitioner and his affidavit did not name Dr. Savini. The court conducted a conference and extended to the deadline for plaintiff to file either a supplemental affidavit or an additional affidavit of merit to cure any deficiencies. Plaintiff did not file a supplemental or additional affidavit.

On January 17, 2007, Dr. Savini and ARMC filed a motion to dismiss the complaint for plaintiff’s failure to produce an affidavit of merit relating to Dr. Savini as required by the Affidavit of Merit Statute (AMS). On January 19, 2007, Dr. Naame and ABJS filed a motion for summary judgment based on plaintiff's failure to timely serve an appropriate affidavit of merit because Dr. Papa did not specialize in orthopedic surgery and did not have the necessary credentials mandated by the 2004 amendment to the AMS, N.J.S.A. 2A:53A-41.

On February 2, 2007, the trial court granted Dr. Savini's and ARMC's motion dismissing, with prejudice, plaintiff's complaint against them for plaintiff's failure to comply with the statutory requirements of the AMS. The court found plaintiff's reliance upon the “substantial compliance” doctrine to be misplaced, noting that plaintiff did not comply with the statute at all.

On March 2, 2007, the court granted summary judgment in favor of Dr. Naame and ABJS. The court found that Dr. Papa’s affidavit of merit against Dr. Naame, a board-certified orthopedic surgeon, did not meet the heightened requirements of the 2004 amendment to the AMS because he did not specialize in orthopedics and was not credentialed by a hospital to perform hip replacement surgery or board-certified as an orthopedic surgeon as mandated by N.J.S.A. 2A:53A-41a(1) and (2). The court rejected Plaintiff’s reliance on subsection b of the statute noting the subsection expressly applies to a defendant who is a general practitioner, not a specialist. The court also held that “[t]he statutory requirements with respect to the credentials of a doctor criticizing a board certified physician are mandatory [;][t]he criticizing physician or the author of the affidavit of merit as the case may be must meet the requirements of N.J.S.A. 2A:53A-41a[;] ... the statute mandates compliance, not substantial compliance.” The court rejected these same arguments in Plaintiff’s Motion for Reconsideration.

On appeal, plaintiff renewed the arguments made to the trial court, that he is not obligated to prove the merits of his claim at this stage but is merely required under the AMS to make a threshold showing that his claims have merit. “According to plaintiff, the submission of Dr. Papa's affidavit does precisely that, even though Dr. Papa is not a board-certified orthopedic surgeon, because he is a general practitioner who possesses sufficient knowledge and expertise qualifying him to opine whether defendants committed malpractice in performing the hip replacement surgery that permanently injured plaintiff.” Plaintiff argued that because Dr. Papa's affidavit sufficiently placed defendants on notice of the nature of his claim, he should be permitted to proceed under the doctrine of substantial compliance.

The Appellate Court affirmed the trial court decision and relied substantially on the reasons articulated by the trial court Judge. The Appellate Court further noted that

Plaintiff was informed of the deficiencies in his affidavit and provided more than ample opportunity to supplement the affidavit of merit as to Dr. Savini and to provide additional affidavits in compliance with N.J.S.A. 2A:53A-41a. Plaintiff, however, chose to rely on Dr. Papa's affidavit as submitted and cannot now complain about the consequences. Moreover, plaintiff made absolutely no showing of a good faith effort to obtain an affidavit of merit from another orthopedic surgeon and presentation of Dr. Papa's credentials to invoke the waiver provision of N.J.S.A. 2A:53A-41c.

The Court held that the 2004 amendment to the AMS, the New Jersey Medical Care Access and Responsibility and Patient's First Act, heightened the requirements for the AMS by mandating that if the defendant is a specialist and the care or treatment at issue involves that specialty, the expert providing the affidavit must practice in that same specialty. N.J.S.A. 2A:53A-41a. If the defendant is board-certified, certain additional requirements are imposed on the expert witness. Id. These requirements are contained in express and unequivocal language in the statute. The Court held “ Dr. Papa, a general practitioner who specializes in family practice and cardiovascular disease, is not statutorily competent to opine on whether Dr. Naame, a board-certified orthopedic surgeon, deviated from accepted standards of practice under the heightened requirements of the existing AMS.” Therefore, the Court held, “as plaintiff failed to produce an affidavit of merit as required by N.J.S.A. 2A:53A-27, . . . he is not entitled as a matter of law to proceed with his malpractice claims against defendants.”