By: Audrey L. Shields, Esq. and Joseph C. Valenzuela, Esq.
In a recent unpublished decision, Vrskovy v. Curcio, 2016 N.J. Super. Unpub. LEXIS 1377 (App.Div. June 15, 2016), the Appellate Division addressed the validity of an insured’s assignment of rights, in the form of a consent judgment, to a Plaintiff seeking indemnification under optional excess coverage of an insurance policy. In its decision, the Appellate Court upheld the principles set forth in Griggs v. Bertram, 88 N.J. 347 (1992), which held that if an insurer improperly denies coverage, that insurer could be bound by an unfavorable settlement agreement entered into by the insured without the carrier’s consent.
In Vrskovy, on November 9, 2009, Plaintiff attended a party celebrating the nineteenth birthday of Jessica Curcio, daughter of the Defendants, Guiseppe and Joanna Curcio (“Curcios”). Mrs. Curcio was home at the time of the party. Alcohol was provided by one of the guests and was consumed by Plaintiff. After the party, Plaintiff drove home and was involved in a single-car accident. His blood alcohol at the time was .205%. Plaintiff suffered a spinal cord injury and was permanently paralyzed from the waist down. Plaintiff then filed a social host liability action against the Curcios.
At the time of the accident, the Curcios maintained an automobile insurance policy with Palisades Property and Indemnity (“Palisades”), which provided primary liability coverage and optional excess liability coverage. The Curcios also had homeowners’ coverage issued by Harleysville Insurance Company (“Harleysville”), which provided primary liability coverage. Upon filing of the action, Harleysville tendered its policy limit under the homeowners’ policy and assigned counsel to defend the Curcios. Palisades denied coverage under the automobile policy claiming that the optional excess coverage was not an autonomous clause within the Policy. Palisades was subsequently added to the action as a co-Defendant.
While in litigation, Plaintiff and the Curcios entered into an Initial Settlement Agreement wherein Plaintiff agreed to dismiss the claims against the Curcios in exchange for the $500,000.00 policy limit under the Harleysville policy, and an Assignment of “any and all rights” the Curcios had against Palisades. In response, Palisades immediately moved for summary judgement, arguing that the settlement agreement “was an unconditional release” which thereby relieved the Curcios of any liability from the subject accident, and barred Plaintiff from any further relief. Palisades’ motion was denied after Plaintiff and the Curcios averred that the intent of the parties was to release the Curcios from personal liability, while preserving any remaining causes of action against Palisades. The Initial Settlement Agreement was withdrawn, and the Curcios and Plaintiff executed a Revised Settlement Agreement. As part of the Revised Settlement, Plaintiff and the Curcios entered into a consent judgment in the amount of $2 million (less the $500,000.00 policy limit from Harleysville) and in return, the Curcios agreed to assign to Plaintiff any and all rights to claims against Palisades. The Curcios were also given a Warrant of Satisfaction to discharge the judgment.
After execution of the Revised Settlement Agreement, Plaintiff and Palisades moved for Summary Judgment, seeking enforcement of the Revised Settlement, and a declaration against Palisades for improperly denying coverage.
The trial court found that there was no coverage under the primary automobile insurance policy, but that coverage existed under the excess policy. The trial court further determined that the settlement was reasonable under the circumstances and was not the product of bad faith or coercion. Shortly thereafter, the Insured Defendant filed the Warrant of Satisfaction to discharge the judgment. Palisades then moved for reconsideration, arguing that the filing of the Warrant extinguished the Insured Defendant’s (and vicariously, Palisades’) liability to the Plaintiff. The trial court disagreed, and denied reconsideration.
Palisades appealed the trial court decision. The Appellate Division affirmed the existence of coverage, and upheld the consent judgment as reasonable in amount and free from collusion and bad faith. In examining the consent judgment, the Appellate Court echoed the sentiments of Griggs v. Bertram, 88 N.J. 347 (1992), where the Supreme Court held:
[A]n insured tortfeasor should be able to reach an agreement relieving it of liability when its carrier wrongfully declines to defend. In this way an insured is able to retain the protection of its insurance, while the injured party obtains a potential remedy against the insurer who has wrongfully removed itself from the suit. Id. at 370.
The Appellate Court specifically held that the consent judgment in this matter was precisely the type of mechanism to be upheld under Griggs. The Appellate Court further held that a settlement may be enforced against an insurer only if it is reasonable in amount and entered into in good faith.
The lesson from Vrskovy is clear, and firmly supports the Supreme Court’s holding in Griggs: an insurer denying a claim must be cognizant of the possibility of the insured assigning their claims against the insurer by way of a consent judgment with Plaintiff, or any other third-party. In these instances, an insurer is not a party to the agreement, and thus has no input as to the settlement amount agreed upon by Plaintiff and the insured. Thus, an insurer may be forced to pay the policy limits pursuant to a settlement agreement between the Plaintiff and an insured, as long as the court deems it reasonable. The failure to present any proofs to attack the validity of the consent agreement, as Palisades failed to do in Vrskovy, will lead to the enforcement of settlement against the insurer, without its consent.
 Audrey L. Shields, Esq. is a Shareholder in GRSLB&G’s Coverage Department. She represents insurance carriers and brokers in various matters brought forth in New Jersey, Pennsylvania, and Federal Courts. Audrey can be reached at email@example.com.
 Joseph C. Valenzuela, Esq. is an Associate in GRSLB&G’s Litigation Department. He defends a wide variety of clients in various civil actions brought forth in New Jersey and New York State and Federal Courts. Joe can be reached at firstname.lastname@example.org.