CITIZENS UNITED RECIPROCAL EXCHANGE VS. TARA MARTINELLI (L-0874-15, ATLANTIC COUNTY AND STATEWIDE) ( 2018 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4810-16T3
CITIZENS UNITED RECIPROCAL
EXCHANGE,
Plaintiff-Appellant,
v.
TARA MARTINELLI and CHRISTOPHER
BLAGG,
Defendants-Respondents,
and
PABLO LORA-MONTERO,
Defendant/Intervenor-
Respondent.
__________________________________
Argued October 1, 2018 – Decided October 10, 2018
Before Judges Fasciale and Gooden Brown.
On appeal from Superior Court of New Jersey, Law
Division, Atlantic County, Docket No. L-0874-15.
Chad B. Sponder argued the cause for appellant (Eric
S. Poe, attorney; Eric S. Poe and Abbey True Harris, on
the briefs).
Thomas F. Reynolds argued the cause for respondent
Tara Martinelli (Reynolds & Scheffler, LLC, attorneys;
Thomas F. Reynolds, on the brief).
Michael J. Mackler argued the cause for intervenor-
respondent Pablo Lora-Montero (Goldenberg, Mackler,
Sayegh, Mintz, Pfeffer, Bonchi & Gill, PC, attorneys;
Michael J. Mackler, on the brief).
PER CURIAM
In this declaratory judgment lawsuit, Citizens United Reciprocal
Exchange (CURE) appeals from a February 15, 2017 order entered after a bench
trial. The order required that CURE provide automobile insurance coverage for
damages sustained by Pablo Lora-Montero, who was involved in an accident
with a vehicle owned by CURE's insured, Tara Martinelli. CURE denied
coverage contending that the driver of Martinelli's vehicle, Christopher Blagg,
was not a permissive user, and that Martinelli violated the New Jersey Insurance
Fraud Prevention Act (FPA), N.J.S.A. 17:33A-1 to -34. CURE also appeals
from a March 17, 2017 order awarding counsel fees to Lora-Montero.1
1
The judge denied counsel fees to Martinelli.
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On appeal, CURE argues that the judge's findings are not supported by the
evidence in the record. CURE contends that the judge erroneously found that
Blagg had permission to drive the vehicle, and that Martinelli made material
misrepresentations to CURE during CURE's investigation of the accident.
CURE maintains that the judge abused her discretion by awarding counsel fees
– under Rule 4:42-9(a)(6) – to Lora-Montero, who CURE did not sue. Instead,
he incurred his own fees by intervening in this case.
Our standard of review is settled. The findings of a trial judge after a
bench trial are "considered binding on appeal when supported by adequate,
substantial and credible evidence." Rova Farms Resort, Inc. v. Inv'rs. Ins. Co.,
65 N.J. 474, 484 (1974). We apply a de novo standard to review questions of
law. In re Snellbaker, 414 N.J. Super. 26, 37-38 (App. Div. 2010). We review
an award of attorney's fees under an abuse of discretion standard. Garmeaux v.
DNV Concepts, Inc., 448 N.J. Super. 148, 155 (App. Div. 2016).
We affirm the judgment entered against CURE in favor of Martinelli and
Blagg. And we reverse the award of counsel fees to Lora-Montero.
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I.
We begin by addressing CURE's argument that Martinelli made
misrepresentations during the investigation of the accident and otherwise
violated the FPA.
"A misrepresentation, made in connection with an insurance policy, is
material if, when made, 'a reasonable insurer would have considered the
misrepresented fact relevant to its concerns and important in determining its
course of action. In effect, materiality [is] judged according to a test of
prospective reasonable relevancy.'" Palisades Safety & Ins. Ass'n v. Bastien,
175 N.J. 144, 148 (2003) (alteration in original) (quoting Longobardi v. Chubb
Ins. Co., 121 N.J. 530, 542 (1990)). The standard encourages policyholders to
tell the truth and entitles an insurance carrier to void a policy issued without
knowledge of the misrepresentation. Id. at 148-50.
Under certain circumstances, an insurance company may invalidate a
policy of insurance because of post-loss misrepresentations. In this insurance
policy, CURE notified Martinelli that it would not provide coverage if she made
fraudulent statements. Such a warning applies to statements made by Martinelli
during CURE's investigation of the accident. See Longobardi, 121 N.J. at 539.
Our Supreme Court has previously addressed the type of statements that will
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void a policy of insurance. In addition to requiring the misrepresentation be
knowing and material, the Court stated:
A mere oversight or honest mistake will not cost an
insured his or her coverage; the lie must be wilful. . . .
An insurer may refuse payment if an insured wilfully
misrepresented material facts after a loss, even if the
insured did not harbor such an intent. . . . Not every
knowingly false statement made by an insured,
however, will relieve an insurer of its contractual
obligations. Rather, forfeiture results only when the
fact misrepresented is material.
....
Materiality should be judged as of the time when the
misrepresentation is made. In hindsight, the
significance of an untruth may turn out to be greater or
less than expected. Hindsight, however, is irrelevant to
the materiality of an insured's misrepresentation to an
insurer.
[Id. at 540-41 (citations omitted).]
Within ten days from the date of the accident, Martinelli told a CURE
adjuster that she was friends with Blagg, and he had moved out of her apartment
and was staying at a friend's house. She explained that on the morning of the
accident, Blagg entered the apartment and took her keys while she was sleeping.
Then, two months after the accident, she gave another statement to a CURE
adjuster and said that Blagg had been her boyfriend, she suspected he used the
vehicle, and he used it from "time to time."
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The judge made the following additional findings and conclusions as to
CURE's assertion that Martinelli made material misrepresentations:
Martinelli initially told the investigator that Blagg did
not stay at the apartment the night before the accident.
That fact is not relevant and germane to the insurer's
investigation into the accident. Whether he slept at
Martinelli's house the night before the accident or came
that morning and took the car is of little relevance to
the investigation.
Martinelli also told the investigator . . . that Blagg
gained access to the house on the morning of the
accident because she left her house unlocked. . . .
Whether Blagg had a key or the door was unlocked is
not relevant to CURE's investigation of the accident.
CURE knew Blagg took the car and caused the
accident.
Martinelli also stated during the [post-accident]
interview that she didn't think Blagg would have taken
her car. Again, that fact is of no consequence to the
investigation. She told the investigator that he did
indeed take the car and was involved in the accident.
That fact was reported to CURE immediately.
Martinelli did not advise the CURE investigator
during the [post-accident] interview that Blagg was a
household resident and a regular user of the [vehicle].
That fact is true, but CURE has the burden in this matter
and no evidence has been presented to the [c]ourt to
show that CURE would not have issued Martinelli the
policy if she listed Blagg as a household member.
There's no evidence that Martinelli's [insurance
premiums] would have been affected i[f] Blagg was
listed on the policy as a household resident. Martinelli
stated she doesn't know why she didn't inform CURE
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that . . . Blagg was living [with her]. She said she just
didn't think about it, and I note that when she did apply
for this policy she wasn't living with Blagg . . . . She
was living with her parents at another address.
We see no reason to disturb the judge's findings, which are supported by
adequate, substantial and credible evidence in the record.
We conclude that CURE's contention that Martinelli violated the FPA is
without sufficient merit to warrant discussion in this opinion. R. 2:11-
3(e)(1)(E). We note briefly, as did the judge, that Martinelli made no knowingly
false or misleading material statements to CURE. On this record, we see no
basis to conclude a FPA violation occurred.
II.
We now turn to CURE's argument that the judge erred by finding Blagg
had permission to use the vehicle.
The reported opinions addressing an insurer's argument that an individual
operated a vehicle without the insured's permission, and the insurer therefore
had no obligation to provide coverage, have applied two different analytical
principles: the initial permission rule and the doctrine of implied permission.
CURE argues that Blagg had neither.
Under the initial permission rule, if there is a break in the continuous use
of the vehicle, the claim by the driver that he or she had initial permission to use
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the vehicle and was therefore authorized to use it on the later occasion, must
fail. French v. Hernandez, 184 N.J. 144, 153 (2005). Although CURE contends
Blagg lacked initial permission, the judge did not make that finding. The judge
found that Blagg had implied permission to drive Martinelli's vehicle.
Implied permission "may arise from 'a course of conduct or relationship
between the parties in which there is mutual acquiescence or lack of objection
signifying consent.'" Id. at 154 (quoting State Farm Mut. Auto. Ins. Co. v.
Zurich Am. Ins. Co., 62 N.J. 155, 167 (1973)). A party may establish implied
permission through circumstantial evidence. The fact-finder should "consider
the surrounding circumstances in deciding whether the use of a vehicle was not
contrary to the intent of its owner [or regular user]." Ibid. (citing State Farm,
62 N.J. at 168). Patterns of past permitted use "may give rise to an inference
that the owner [or regular user] gave his consent to use on a subsequent
occasion." Ibid. "Ultimately, the resolution of the issue will be fact-sensitive
and depend on the totality of the circumstances." Ibid.In finding that Blagg had implied permission to drive the vehicle on the
day of the accident, the judge made the following findings:
Blagg took the [vehicle] to get cigarettes . . . on
numerous occasions. . . . Blagg drove the [vehicle] on
three occasions prior to the accident and got . . . motor
vehicle citations. Blagg used [the vehicle and another
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car owned by Martinelli] without restrictions.
Martinelli took no affirmative action to stop Blagg from
driving her cars other than . . . allegedly telling [him]
that he couldn't take [the vehicle,] but he seemed to take
it when he wanted to.
Implied permission is essentially actual permission proven
circumstantially. State Farm, 62 N.J. at 167-68. In Martinelli's second
statement to CURE, she said Blagg lived with her from May 2013 to the date of
the accident in November 2014. She admitted that Blagg used both of her cars.
We conclude the judge applied the correct law, and there is substantial credible
evidence in the record to support the judge's finding that Blagg had implied
permission to use Martinelli's vehicle on the date of the accident.
III.
We now turn to the award of counsel fees, which the judge awarded under
Rule 4:42-9(a)(6). A court may award counsel fees "[i]n an action upon a
liability or indemnity policy of insurance, in favor of a successful claimant." R.
4:42-9(a)(6). Lora-Montero and Martinelli were successful claimants. We
review the order for abuse of discretion. Abuse of discretion may be shown
when the judge makes a decision without rational explanation, departs from
established policies, or relies on an impermissible basis. Flagg v. Essex Cty.
Prosecutor, 171 N.J. 561, 571 (2002). We conclude such is the case here.
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The judge awarded $22,520 in counsel fees to Lora-Montero. In denying
counsel fees to Martinelli, the judge concluded that CURE filed this lawsuit
against Martinelli and Blagg in good faith. It was for that reason that the judge
denied Martinelli's fee application. Nevertheless, the judge awarded fees to
intervenor Lora-Montero because the judge concluded that Lora-Montero was
an innocent victim of the accident, who, during the pendency of this case,
offered to waive counsel fees and settle with CURE for Martinelli's policy limit
of $15,000.
CURE contends that if it acted in good faith in filing the lawsuit against
Martinelli, as the judge found, then it acted in good faith as to Lora-Montero as
well. CURE argues that any potential settlement with Lora-Montero depended
on full resolution of the coverage issues, including whether Martinelli made
material misrepresentations to CURE and whether Blagg had implied permission
to drive the vehicle. CURE asserts the judge abused her discretion because it is
inconsistent to say it litigated the case in good faith, and then require it to settle
with Lora-Montero before the judge adjudicated the dispute.
Although Martinelli and Lora-Montero prevailed on the coverage action,
counsel fees under Rule 4:42-9(a)(6) are not automatic. "The trial judge has
broad discretion as to when, where and under what circumstances counsel fees
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may be proper." Enright v. Lubow, 215 N.J. Super. 306, 313 (App. Div. 1987).
Factors the court may consider include:
(1) the insurer's good faith in refusing to pay the
demands; (2) excessiveness of plaintiff's demands; (3)
bona fides of one or both of the parties[;] (4) the
insurer's justification in litigating the issue; (5) the
insured's conduct in contributing substantially to the
necessity for the litigation on the policies[;] (6) the
general conduct of the parties[;] and (7) the totality of
the circumstances.
[Ibid. (citations omitted).]
The judge found that "CURE had a reasonable basis for disclaiming coverage"
because Martinelli's statements "contributed substantially to the necessity for
the litigation." The judge correctly denied Martinelli's fee application, which
explains why she did not cross-appeal from that order.
Importantly, Lora-Montero incurred fees by intervening in the case.
Although Lora-Montero participated in the trial as an intervenor, we conclude
that Lora-Montero's status as an injured party does not change the judge's
conclusion that CURE had a good faith basis to challenge whether coverage
existed for the accident. This would be a different situation had the judge
concluded that CURE was without a reasonable basis to file this lawsuit. Such
is not the case.
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Affirmed in part; reversed in part. We do not retain jurisdiction.
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