Reliance on Court’s Unpublished Opinion Saves Insurer from Bad Faith Finding

03.19.2015

In Badiali v. New Jersey Manufacturers Insurance Group, 2015 WL 668206 (N.J. Feb. 18, 2015), the Supreme Court of New Jersey considered the question of whether an insurer’s rejection of an arbitration award in an uninsured motorist (“UM”) claim was “fairly debatable,” thereby barring the insured from recovering attorney’s fees under a theory of bad faith.  The Court affirmed the judgment of the lower court, finding that the existence of an unpublished opinion allowed the insurer to avoid a finding of bad faith for actions taken in accordance with that holding.

The plaintiff in this matter, Augustine Badiali, was injured when an uninsured motorist rear-ended his vehicle.  Badiali filed a UM claim, which proceeded to arbitration and resulted in an award of $29,148.62 in his favor.  Badiali then filed suit against his insurer, New Jersey Manufacturers Insurance Group (“NJM”) after NJM rejected the arbitration award and refused to pay its share.  The trial court confirmed the arbitration award and found NJM liable for its share of the award.  Subsequently, Badiali filed suit against NJM asserting that NJM had litigated in bad faith and had caused him to incur substantial expense, years of delay, and undue aggravation as a result of its handling of his UM claim.  According to Badiali, this entitled him to punitive damages, as well as attorney’s fees and costs.

NJM moved for summary judgment, asserting that its actions did not constitute bad faith because it relied on a 2004 unpublished opinion in Geiger v. N.J. Mfrs. Ins. Co., No. A-5135-02 (App. Div. Mar. 22, 2004), in which the court held, under essentially the same circumstances, that the insurer (also NJM) was entitled to reject the arbitration award and demand a trial. The court agreed, holding that NJM’s position to reject the arbitration award was “fairly debatable” based on the existence of the unpublished Geiger decision.  The Supreme Court of New Jersey later granted Badiali’s petition for certification and addressed his argument that NJM could not rely upon the unpublished Geiger opinion.

NJM maintained that its reasoning for rejecting the arbitration award was “fairly debatable” because it was supported by a prior, unpublished opinion of the same court.  Importantly, the Geiger case involved nearly identical facts—a UM claim, an arbitration award in favor of the plaintiff, and a motion by NJM to reject the award and to request a trial de novo.  Not only was NJM a party in both cases, but the arbitration provision at issue in Geiger was the same provision that appeared in Badiali’s policy.  NJM also argued that it was entitled to rely on Geiger based upon the simple premise that litigants are presumed to know the outcome of cases in which they are a party.  In other words, NJM’s position and reasoning in rejecting Badiali’s arbitration award was exactly the same as its position and reasoning in rejecting the arbitration award in Geiger, and because the court expressly vindicated that position and reasoning in Geiger, NJM had every reason to make the same argument in Badiali’s case.

There was no dispute that an unpublished opinion such as Geiger had no legal precedential value.  Still, the court found that NJM was entitled to rely upon previous unpublished opinions—especially those in which they were involved—in forming their business decisions.  The existence of the Geiger opinion established that NJM had, at the very least, fair reason to believe that it was making a legitimate legal and business decision by rejecting the arbitration award and seeking trial.  Thus, the Geiger decision precluded a finding of bad faith against NJM.

While courts generally disfavor citations to and reliance upon unpublished decisions, the Badiali case shows that even unpublished decisions can inform an insurer’s business and legal decisions and can have an impact on the analysis of an insured’s claims.  Presumably, in defending against bad faith claims, insurers will broaden their search to find any and every decision (unpublished or otherwise) that might make their actions seem “fairly debatable.”  Insureds would be wise to look to the underlying facts of these unpublished opinions and confirm that they are similar enough to justify reliance.  Policyholders should also be able to use such unpublished opinions in their favor when an insurer goes against the opinion’s holding in making coverage decisions.

Jaime Wisegarver is an associate in the Litigation Section, where she handles a variety of civil and commercial matters, including insurance recovery litigation and counseling. For more information, please contact Jaime at (804) 771-5634 or jwisegarver@hf-law.com.