Zirger v. General Acc. Ins. Co

In Zirger v. General Acc. Ins. Co., 144 N.J. 327, 676 A.2d 1065 (1996), the tortfeasor's liability policy only provided $ 15,000 in coverage. Zirger's automobile policy issued by General Accident provided underinsured motorist coverage (UIM) of $ 1,000,000. In addition, General Accident's UIM endorsement provided for arbitration in the event the parties were unable to agree as to whether the insured was legally entitled to recover damages, or did not agree as to the amount of damages. Zirger had filed suit against the tortfeasor and during the course of litigation, informed General Accident about the limit of the tortfeasor's policy, requesting General Accident's permission for him to settle with the tortfeasor for the tortfeasor's policy limit, in order to pursue a UIM claim under his own policy. Zirger's attorney also demanded arbitration. Subsequently, General Accident consented to Zirger's proposed settlement of his claim against the tortfeasor for the policy limit. However, the settlement never occurred. After a trial on liability only, a jury determined that the tortfeasor was responsible for Zirger's injuries. The tortfeasor's insurance carrier then offered to settle the case for the policy limit, and Zirger's attorney contacted General Accident's attorney, stating that he was inclined to reject the offer and proceed to a jury trial on damages. General Accident's attorney informed Zirger's attorney "that if he chose to do so he should proceed to obtain a jury verdict on the question of damages." The jury awarded Zirger $ 400,000 and he demanded payment of that amount from General Accident, reduced by the $ 15,000 recovery against the tortfeasor. Rejecting General Accident's contention that the UIM carrier had the right to insist upon arbitration as set forth in the policy, the Supreme Court held that if a UM or UIM motorist carrier is afforded notice and adequate opportunity to intervene in a Law Division action for damages and declines to do so, the jury's award of damages is given preclusive effect and the carrier may not insist upon relitigation of the issue through arbitration. Zirger, supra, 144 N.J. at 342- 44, 676 A.2d 1065. Arbitration is designed to be a substitute for litigation, not a supplement to litigation. Id. at 343, 676 A.2d 1065.