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Rova Farms Resort, Inc. v. Investors Ins. Co.

Supreme Court of New Jersey

January 21, 1974, Argued ; August 7, 1974, Decided

No Number in Original

Opinion

 [*478]  [**497]   We consider here cross appeals from the Appellate Division affirmance ( Rova v. Investors, 124 N.J. Super. 248 (1973)) of a judgment entered by a trial court, sitting without a jury, generally in favor of a plaintiff against the defendant, its insurer. The claim rested on alleged [***2]  bad faith by the insurer in exposing its insured to payment of substantial sums in excess of policy limits, for which sums recovery was sought and awarded below.  [**498]  Plaintiff, responding here in defense of its judgment, is Rova Farms Resort, Inc., a New Jersey corporation, which we shall call variously "Rova" or "the insured." Appealing from the judgment against it is Investors Insurance Company of  [*479]  America, also a New Jersey corporation, hereafter referred to as "Investors," "the insurer," or "the insurance company."

The sequence of relevant events began with an accident entailing severe personal injuries, which occurred on the premises of Rova, on which it operated a recreational resort in Jackson Township, New Jersey, including a lake used by commercial guest patrons for diving and bathing. Investors had issued to Rova its policy of comprehensive general liability insurance which was in full force and effect on the date of accident. In the usual form, it bound Investors to pay on behalf of Rova "* * * all sums which the insured shall become legally obligated to pay as damages because of bodily injury, * * * sustained by any person and caused by accident,"  [***3]  with a limitation of $ 50,000. The policy also obligated Investors to defend any suit against the insured alleging such injury and seeking damages on account thereof. The contract further entitled Investors to make such investigations, negotiations and settlement of any claim or suit as it might deem expedient and, while binding the insured to cooperation with Investors, forbade the insured, except at its own cost, to make or pay any settlement.

Such was the contractual relationship between Investors and Rova on July 25, 1965, when Rova's commercial invitee, Lawrence McLaughlin, dove from a "diving platform" into 3 or 4 feet of murky water under circumstances described in the carefully detailed opinion of Justice Francis, writing for this Court, in McLaughlin v. Rova Farms, Inc., 56 N.J. 288 (1970). And no gesture was made in the instant litigation or otherwise to question or palliate the significance of the terrible physical injury sustained when McLaughlin's head struck the unseen bottom of the lake. 1 

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65 N.J. 474 *; 323 A.2d 495 **; 1974 N.J. LEXIS 196 ***

ROVA FARMS RESORT, INC., PLAINTIFF-RESPONDENT AND CROSS-APPELLANT, v. INVESTORS INSURANCE COMPANY OF AMERICA, A NEW JERSEY CORPORATION, DEFENDANT-APPELLANT AND CROSS-RESPONDENT

CORE TERMS

insured, settlement, policy limit, carrier, settle, good faith, coverage, bad faith, insurance company, claimant, willful, settlement offer, fiduciary, assured, exposed, trial judge, contractual, cases, conflicting interest, prejudgment interest, excess judgment, own interest, advice, limits, wanton misconduct, circumstances, negotiations, recommended, excess liability, adverse verdict

Civil Procedure, Appeals, Standards of Review, General Overview, Substantial Evidence, Judicial Officers, Judges, Insurance Law, Commercial General Liability Insurance, Coverage, Accidental Injuries, Claim, Contract & Practice Issues, Policy Interpretation, Entire Contract, Obligations of Parties, Settlements, Liability & Performance Standards, Settlements, Good Faith & Fair Dealing, Torts, Motor Vehicles, Particular Actors, Circumstances, & Liabilities, Motor Carriers, Payments, Business & Corporate Law, Agency Relationships, Fiduciaries, Fiduciary Duties, Governments, Fiduciaries, Contracts Law, Contract Interpretation, Fiduciary Responsibilities, Preliminary Considerations, Equity, Remedies, Judgment Interest, Types of Damages, Prejudgment Interest, Damages, Collateral Source Rule