NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-4398-13T4 A-0275-14T4
PATRICIA C. MYSKA, DAX MORALES and KATHERINE K. WAGNER, APPROVED FOR PUBLICATION Plaintiffs, May 8, 2015 and APPELLATE DIVISION JOHN B. TODISCO,
Plaintiff-Appellant,
v.
NEW JERSEY MANUFACTURERS INSURANCE COMPANY and AAA MID-ATLANTIC INSURANCE COMPANY OF NEW JERSEY,
Defendants,
and
PALISADES INSURANCE COMPANY,
Defendant-Respondent. _________________________________________
PATRICIA MYSKA and KATHERINE WAGNER,
Plaintiffs-Appellants,
JOHN B. TODISCO and DAX MORALES,
Plaintiffs,
v. NEW JERSEY MANUFACTURERS INSURANCE COMPANY,
Defendant-Respondent,
PALISADES INSURANCE COMPANY and AAA MID-ATLANTIC INSURANCE COMPANY OF NEW JERSEY,
Defendants. _________________________________________
Argued January 20, 2015 - Decided May 8, 2015
Before Judges Lihotz, Espinosa and St. John.1
On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-5136-13.
Eric D. Katz and Stephen T. Sullivan, Jr., argued the cause for appellants (Mazie Slater Katz & Freeman, LLC, and Keefe Bartels, LLC, attorneys; Mr. Katz, David M. Estes, and Mr. Sullivan, on the briefs).
Bruce D. Greenberg and Daniel J. Pomeroy argued the cause for respondent (A-0275-14) New Jersey Manufacturers Insurance Company (Lite DePalma Greenberg, LLC, and Pomeroy, Heller & Ley, LLC, attorneys; Mr. Greenberg, Mr. Pomeroy, and Karen E. Heller, on the briefs).
Robert J. DelTufo (Skadden, Arps, Slate, Meagher & Flom, LLP) argued the cause for respondent (A-4398-13) Palisades Insurance Company.
1 Judge Espinosa did not participate in oral argument. However, with the consent of counsel, she has joined in this opinion. R. 2:13-2(b).
2 A-4398-13T4 The opinion of the court was delivered by
LIHOTZ, P.J.A.D.
On remand from the Supreme Court, we consider these
appeals, calendared back-to-back and consolidated for purposes
of our opinion. In their putative class action complaint,
plaintiffs challenged defendant-insurers' alleged denial of
diminution in value damages, as a covered component of the
underinsured and uninsured motorist provisions in their
respective automobile insurance policies. The interlocutory
orders under review were entered upon defendants' motions to
dismiss plaintiffs' complaint. Specifically, plaintiffs
Patricia C. Myska, Katherine K. Wagner, and John B. Todisco
appeal from two March 21, 2014 orders striking their class
allegations and dismissing their claims against defendant
insurers for violation of the Consumer Fraud Act (CFA), N.J.S.A.
56:8-1 to -195. Prior to discovery, the Law Division judge
concluded class certification was improper and the CFA
inapplicable. He severed the surviving breach of contract and
the implied covenant of good faith and fair dealing claims
alleged by Myska and Wagner against defendant New Jersey
Manufacturers Insurance Company (NJM); all claims asserted by
Todisco against defendant Palisades Insurance Company
3 A-4398-13T4 (Palisades) were dismissed and the matter was ordered to proceed
to arbitration.2
Plaintiffs challenge as premature the denial of their class
allegations. Further, they argue the judge erred in ordering
the dismissal of their CFA claims and for Todisco to proceed to
arbitration.
Following our review, we affirm the denial of class
certification, agreeing the controversy does not lend itself to
a class action because the facts underpinning each plaintiff's
claims were dependent upon the individual insurance policy
provisions, the distinct vehicle damaged and the specific
calculation of damages alleged, which require separate
litigation of every action. We also determine the amounts in
controversy are not nominal and would not prevent any party's
singular pursuit of relief were their claims individually tried.
Finally, specific to the Palisades policy, we determine the
arbitration provision is unenforceable as it fails to meet the
requirements outlined in Atalese v. U.S. Legal Servs. Grp.,
L.P., 219 N.J. 430 (2014), petition for certiorari filed Jan.
21, 2015, and reverse that provision of the Law Division order.
Nevertheless, because Todisco failed to file a claim for
2 Plaintiff Dax Morales voluntarily dismissed claims against defendant AAA Mid-Atlantic Insurance Company of New Jersey.
4 A-4398-13T4 diminution of value damages, his complaint was properly
dismissed. Consequently, the Law Division order is affirmed as
modified.
I.
In this section we recite the undisputed facts surrounding
each plaintiff's claims taken from the motion record. Because
there are two parties insured by NJM, we group together the
facts surrounding the claims presented by Myska and Wagner (NJM
plaintiffs). We then examine Todisco's allegations against
Palisades. Finally, we discuss the motions and the trial
judge's findings and conclusions undergirding the challenged
orders.
A.
On July 31, 2011, Myska's 2011 Chevy Equinox suffered
physical damage when struck by an uninsured or underinsured
tortfeasor. On November 14, 2012, Wagner's 2011 Mercedes Benz
E350 was struck by a motorist who ran a red light, causing
significant damage requiring structural repair. The tortfeasor
was either an uninsured or underinsured motorist (UM/UIM).
Myska and Wagner were insured under separate automobile policies
issued by NJM. It is agreed their accidents occurred within
their respective policy periods and both submitted claims
invoking the respective NJM policy provisions.
5 A-4398-13T4 NJM satisfied claims for repair of physical damage to the
NJM plaintiffs' vehicles, in accordance with the terms of their
respective policies. Despite repair, Myska and Wagner each
maintained their vehicles' values had decreased as a direct
result of the accidents. In April 2013, Myska and Wagner
separately submitted a second claim for payment, seeking payment
for diminution of value.
With respect to the issues raised on appeal, the NJM
policies contain identical terms governing payment for
diminution of value following conduct by an UM/UIM. Part B of
the NJM policies addresses the scope of uninsured motorists
coverage, and provides, generally: "[NJM] will pay compensatory
damages which an insured is legally entitled to recover from the
owner or operator of an uninsured motor vehicle or underinsured
motor vehicle" arising from "[p]roperty damage caused by an
accident . . . ." "Property damage as used in this endorsement
means injury to or destruction of: 1. Your covered auto."
To support their diminution of value claims, Myska and
Wagner separately supplied a report from Collision Consulting
(CC), quantifying the amount sought. As to Myska, CC inspected
her vehicle to "assess the quality and thoroughness of the
repairs performed as well as to determine what effect, if any,
the loss . . . would have on the value of this vehicle." CC
6 A-4398-13T4 defined "Inherent Diminishment of Value" as "the loss of value
stemming from [an automobile's] accident history[,] as opposed
to the diminishment [of value] that could arise from improper or
defective/deficient repair." CC suggested:
[w]hen a reasonable and prudent consumer is given the choice between two vehicles, one that has sustained previous damage and one that had not . . . they will buy the one that has not been involved in an accident if priced the same. For the consumer demand to be equal on the two vehicles, the damaged vehicle, even when properly repaired, must be less in price.
. . . .
It is generally accepted that the proper measure of loss is the difference between the fair market value (FMV) of the property (vehicle) immediately prior to the negligent act and the fair market value after the loss.
Averaging the vehicle's calculated residual value in a
third-party sale and after a trade-in, CC determined the average
residual diminished value for Myska's vehicle was $14,399. In
the report prepared following inspection of Wagner's vehicle, CC
set forth the same definitions and utilized the same methodology
to calculate the average residual diminished value of Wagner's
vehicle as $17,524.
Following its receipt, NJM responded to Myska and Wagner in
separate, but identical letters, stating "NJM denies payment of
7 A-4398-13T4 [the] diminished value claim[s] at this time." The letters
explained:
[T]o the extent that New Jersey law recognizes claims for diminished value, you have failed to offer sufficient proof of diminished value for [the] vehicle. . . .
In support of your claim, you provided a report by [CC]. The report is insufficient to support a claim for monetary loss. Specifically, the report fails to describe the evidence that supports the author's conclusion that [the] vehicle sustained a diminished value for a certain amount. No data is provided for the sales price of comparable vehicles that were sold after being involved in an accident. Also the raw data used by the author to come to his conclusion regarding the diminution in value has not been provided.
The letter recited the absence of available authority to guide
calculation of the diminished value loss, noting:
[t]he New Jersey Department of Banking and Insurance [(DOBI)] does not recognize diminution in value in its regulations relating to "fair and equitable settlements applicable to property and liability insurance with regard to third[-]party claimants." N.J.A.C. 11.2-17.10. Nor does the [DOBI] recognize the claim for diminished value in its regulations relating to "Adjustment of Partial Losses." N.J.A.C. 11.3-10.3. . . . It is clear that these regulations do not contain a requirement that an insurer pay diminished value damages to a third[-]party claimant. Moreover, there is no relevant New Jersey statute, addressing this issue.
8 A-4398-13T4 In addition to the above, the Model Civil Jury Charges, which summarize relevant New Jersey law, state that if a vehicle is not deemed a total loss "and it can be repaired at a cost less than the difference between its market value before and its market value after the damage occurred[,] the plaintiff's damages would be limited to the cost of repairs." Model Civil Jury Charge 8.44. Additionally, motor vehicle appraisal guides[,] including the NADA Official Used Car Guide and Kelley's Blue Book do not consider prior accidents as a factor when calculating their published figures. Based upon the information provided, there is insufficient evidence to prove that [plaintiff] sustained a diminished value loss that would justify payment over and above the cost of repairs.
Lastly, the time at which the alleged damage would be capable of true measurement is unknown. Thus, until the vehicle was sold, the measurement of the alleged diminution claim would be uncertain. Assuming that a damaged vehicle has been properly repaired with high quality replacement parts, it is reasonable to encounter a situation where an expert would state that the vehicle has not decreased in value except for the passage of time between the accident, and repair of the vehicle and the sale of the vehicle.
Neither Myska nor Wagner replied to NJM's letter and
neither submitted the requested data used by CC to support its
damage calculations. Instead, the NJM plaintiffs filed a
putative class action complaint on behalf of NJM insureds,
alleging the insurer's actionable denial of payment for
diminution of value represented a breach of contract, breach of
9 A-4398-13T4 the covenant of good faith and fair dealing, and violation of
the CFA. On behalf of the class, the NJM plaintiffs sought to
"put an end to NJM's systematic practice of denying, obfuscating
coverage of, or otherwise avoiding claims by New Jersey
consumers for the diminution of value of insured vehicles
resulting from third-party UM/UIM." Further, the NJM plaintiffs
asserted NJM failed to disclose the right to submit third-party
UM/UIM diminution of value claims at the time their respective
repair claims were made.
B.
Todisco insured two automobiles under a policy issued by
Palisades. A 2007 Bentley Continental, covered under the
policy, was involved in an accident with an uninsured or
underinsured tortfeasor on June 13, 2012. Todisco submitted a
claim to repair the damage sustained to the Bentley, which
Palisades paid in accordance with the policy terms.
Subsequently, in a February 15, 2013 letter to Palisades,
Todisco advised Palisades he was "making a claim for diminished
value damages" and requested the insurer's "position with
respect to a diminished value claim," pursuant to the policy's
UM/UIM coverage provisions. The letter did not recite the
amount of damages suffered or a method to determine the
associated loss.
10 A-4398-13T4 The Palisades policy provisions contain similarities to the
NJM policy, as both contracts are based on the Standard New
Jersey Automobile Policy (as distinguished from a Basic
Automobile Liability Policy),3 but the documents are not
identical. Nothing in the Palisades policy explicitly precludes
recovery for diminution of value damages.
C.
NJM moved to dismiss the NJM plaintiffs' complaint for
failure to state a claim for relief, contending the NJM policies
provided coverage for diminution of value damages, if supported.
NJM argued it did not "fail to pay" the claims; plaintiffs
simply failed to submit "adequate proof to support the
substantial diminution of value damages claimed via the opinion
of Collision Consulting"; therefore, there was no breach of
contract. NJM also asserted New Jersey law does not impose a
duty to instruct insureds regarding policy provisions; the CFA
does not govern disputes regarding payment of insurance
benefits; and Myska and Wagner "provide[d] no basis supporting
either reformation . . . or . . . injunctive relief." Finally,
the notice of motion also requested "the [c]ourt enter an order
severing the action by plaintiffs Wagner and Myska against [NJM]
3 See N.J. Dept. of Banking & Ins., http://www.state. nj.us/dobi/division_consumers/insurance/standardpolicy.html (last visited Apr. 15, 2015).
11 A-4398-13T4 from the action brought by . . . Todisco," arguing joinder of
unrelated claims against multiple unrelated insurance companies
was improper.
During argument, NJM acknowledged the policy provided for
reimbursement of all legal available damages, which would
include diminution of value damages; however, the proofs by
Myska and Wagner were deficient. Plaintiffs opposed this
position, suggesting NJM was attempting to prematurely seek
summary judgment.
Palisades filed its own motion to dismiss Todisco's claims,
asserting different reasons. Palisades maintained Todisco never
submitted a claim for diminution of value damages or identified
a policy provision that was breached. Further, Palisades argued
coverage disputes must be determined in an arbitral forum.
The Law Division judge entered two orders on March 21,
2014, accompanied by a written opinion. The first, regarding
NJM, granted in part and denied in part, its requested relief.
Specifically, the judge found certain allegations legally
untenable. He noted the law imposed no duty upon insurers to
advise plaintiffs of policy provisions or explain clearly worded
provisions of a policy once the policy was issued. Accordingly,
claims premised on the failure to advise plaintiffs of a right
to pursue damages arising from a proven diminishment of value
12 A-4398-13T4 lacked merit. He also concluded claims contending failure to
pay benefits were not within the scope of the CFA. Further, the
judge dismissed plaintiffs' demands for reformation, injunctive
relief, and punitive damages, after finding the allegations were
"nothing more than conclusory statements[,] which are directly
contradicted by documents that are integral to the [c]omplaint."
However, the judge allowed the NJM plaintiffs' breach of
contract claims to proceed "individually," after finding "the
factual differences between the parties required a separation of
the claims."
As to these claims, the judge denied class certification,
concluding a class action would be unsuitable based on the
nature of the significant factual differences regarding the
allegations supporting each plaintiff's action. The judge found
plaintiffs' "common allegation that [they] suffered harm because
they did not receive coverage for the diminution of value of
their vehicle[s] is contradicted by the unique circumstances
surrounding the[ir] different claims." He noted by way of
illustration, NJM's proofs showing the NJM plaintiffs' claims
were not denied, merely unsubstantiated, and, as asserted by
Palisades, Todisco never filed such a claim.
The second order addressed Palisades' requested relief,
which was granted. The judge dismissed Todisco's complaint and
13 A-4398-13T4 compelled him to arbitrate his claims "in accordance with the
arbitration provisions contained in his" insurance policy. The
judge characterized Todisco's letter as a "mere inquiry" and
found it did not "afford[] Palisades the opportunity to evaluate
a bona fide claim under the terms of the . . . policy and
respond to it." Further, the Palisades contract contained an
agreement to arbitrate all issues involving the insured's and
insurer's "relationship and any disputes occurring between
them."
The NJM plaintiffs appealed from the provisions of the
March 21, 2014 order striking the class allegations and
dismissing their CFA claims (A-0275-14). Todisco separately
appealed from the dismissal of his claims in favor of complying
with the policy's arbitration clause (A-4398-13). Plaintiffs
moved for leave to appeal, which was denied by this court. By
order dated September 9, 2014, the Supreme Court granted leave
for plaintiffs to appeal and summarily remanded the matter to
this court for review of the merits.
II.
Some of the arguments raised in the separate appeals are
identical, and others are distinctly based upon claims under an
individual insurance policy. In addressing the various issues
14 A-4398-13T4 presented, we join claims common to both appeals. Before doing
so, we set forth the standards guiding our review.
The orders under review resulted from defendants'
respective motions to dismiss, filed pursuant to Rule 4:6-2(e).
The standard traditionally utilized by courts to determine whether to dismiss a pleading for failure to state a claim on which relief may be granted is a generous one. As we have explained, "[i]n reviewing a complaint dismissed under Rule 4:6-2(e) our inquiry is limited to examining the legal sufficiency of the facts alleged on the face of the complaint." Printing Mart- Morristown v. Sharp Elecs. Corp., [116 N.J. 739,] 746 [(1989)]. The essential test is simply "whether a cause of action is 'suggested' by the facts." Ibid. (quoting Valentzas v. Colgate-Palmolive Co., 109 N.J. 189, 192 (1988)).
[Green v. Morgan Props., 215 N.J. 431, 451- 52 (2013) (alteration in original).]
Where a "complaint states no basis for relief and . . .
discovery would not provide one, dismissal of the complaint
[under Rule 4:6-2] is appropriate." Cnty. of Warren v. State,
409 N.J. Super. 495, 503 (App. Div. 2009) certif. denied, 201
N.J. 153, cert. denied, 561 U.S. 1026, 130 S. Ct. 3508, 177 L.
Ed. 2d 1092 (2010).
An additional overlay results because plaintiffs seek
review as a class action. See R. 4:32-1 (stating requirements
for maintaining a class action). "A class action, generally,
15 A-4398-13T4 permits one or more individuals to act as plaintiff or
plaintiffs in representing the interests of a larger group of
persons with similar claims." Lee v. Carter-Reed Co., 203 N.J.
496, 517 (2010). The "action permits 'claimants to band
together' and, in doing so, gives them a measure of equality
against a corporate adversary, thus providing 'a procedure to
remedy a wrong that might otherwise go unredressed.'" Id. at
517-18 (quoting In re Cadillac V8-6-4 Class Action, 93 N.J. 412,
424 (1983)).
In our review of each of these questions, we owe "no
deference to the trial court's conclusions." Rezem Family
Assocs., LP v. Borough of Millstone, 423 N.J. Super. 103, 114
(App. Div.), certif. denied, 208 N.J. 368 (2011). Rather, we
must "search[] the complaint in depth and with liberality to
ascertain whether the fundament of a cause of action may be
gleaned even from an obscure statement of claim, opportunity
being given to amend if necessary." Green, supra, 215 N.J. at
451-52 (citation and internal quotation marks omitted). See
also Int'l Union of Operating Eng'rs Local No. 68 Welfare Fund
v. Merck & Co., 192 N.J. 372, 386 (2007) (holding questions of
law related to class certification are reviewed de novo).
16 A-4398-13T4 B.
Common to both appeals is whether class certification was
prematurely denied. Plaintiffs argue the determination to
strike the class allegations prior to discovery, after finding
the claims were unsuitable to proceed as a class action, was
error. They also contend the court "overstepped its bounds" in
analyzing the issues, by considering documents not referenced in
the complaint and drew improper inference from this document
review.
"Class certification decisions rest [o]n the sound
discretion of the trial court." Muise v. GPU, Inc., 371 N.J.
Super. 13, 31 (App. Div. 2004) (citing In re Cadillac, supra, 93
N.J. at 437). "The analysis must be 'rigorous' and 'look beyond
the pleadings to understand the claims, defenses, relevant
facts, and applicable substantive law.'" Local Baking Prods.,
Inc. v. Kosher Bagel Munch, Inc., 421 N.J. Super. 268, 274 (App.
Div.) (quoting Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88,
106-07 (2007)), certif. denied, 209 N.J. 96 (2011).
In reviewing the grant or denial of class certification,
"an appellate court must ascertain whether the trial court has
followed [Rule 4:32-1(b)(3)'s] standards and properly exercised
its discretion." Carter-Reed, supra, 203 N.J. at 506. An
"abuse of discretion . . . arises when a decision is made
17 A-4398-13T4 without a rational explanation, inexplicably departed from
established policies, or rested on an impermissible basis."
Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002)
(citation and internal quotation marks omitted)).
The provisions of Rule 4:32-1 obligate putative plaintiffs
to satisfy general and specific requirements. Local No. 68
Welfare Fund, supra, 192 N.J. at 382; Iliadis, supra, 191 N.J.
at 106. See also Rule 4:32-1(a), (b). Prerequisites for class
certification include: numerosity, commonality, typicality, and
adequacy of representation. Carter-Reed, supra, 203 N.J. at
511-512. Class certification is appropriate only if:
(1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
[R. 4:32-1(a).]
"In addition to meeting the initial requirements of Rule
4:32-1(a), the party seeking to certify the class must also
satisfy one of the three criteria enumerated in Rule 4:32-1(b)."
Varacallo v. Mass. Mut. Life Ins. Co., 332 N.J. Super. 31, 41-42
(App. Div. 2000). These considerations examine "not only the
interests of class members and other parties, but also the
18 A-4398-13T4 effect of class certification on efficient judicial management,"
In re Cadillac, supra, 93 N.J. at 436, and include: (1) whether
individual lawsuits present risk of inconsistent judgments; (2)
the appropriateness of injunctive relief as to the class as a
whole; or (3) whether common questions or law and fact
predominate over individualized questions and a class action is
superior to other available methods of adjudication. Muise,
supra, 371 N.J. Super. at 30. Regarding the last provision,
pertinent findings should be made on:
(A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability in concentrating the litigation of the claims in the particular forum; and (D) the difficulties likely to be encountered in the management of a class action.
[R. 4:32-1(b)(3).]
In short, "the movant must demonstrate both the predominance of
the common issues and the 'superiority' of a cause of action
over other available trial techniques." Saldana v. City of
Camden, 252 N.J. Super. 188, 196 (App. Div. 1991).
"'New Jersey courts . . . have consistently held that the
class action rule should be liberally construed.'" Carter-Reed,
supra, 203 N.J. at 518 (alteration in original) (quoting
19 A-4398-13T4 Iliadis, supra, 191 N.J. at 103). Plaintiffs seeking class
certification have the burden of proof as to each of the rule's
requirements. See Muise, supra, 371 N.J. Super. at 32.
Plaintiffs' initial challenge to the order striking class
certification focus on the timing of the judge's determination.
Plaintiffs assert the judge erred in denying class certification
prior to discovery, incorrectly expanded review of documents
outside the four corners of the complaint, and entered the order
despite notice.
1.
No precise procedures are established for granting or
denying class certification at the incipient stage of
litigation. Rather, our rules state "the court shall, at an
early practicable time, determine by order whether to certify
the action." Rule 4:32-2(a). This language, adopted in 2007,
"is intended to make clear that the class determination need not
be the first event in the court's consideration of [an] action."
Pressler & Verniero, Current N.J. Court Rules, comment 3.2.2 on
R. 4:32-2 (2015).4
4 The prior iteration of this requirement provided: "As soon as practicable after the commencement of an action brought as a class action, the court shall determine by order whether it is to be so maintained." Riley v. New Rapids Carpet Center, 61 (continued)
20 A-4398-13T4 Citing dicta from Riley, plaintiffs suggest it is well
established that class allegations may not be struck in the
course of a pre-trial motion to dismiss. See Riley, supra, 61
N.J. at 228 ("[A] court should be slow to hold that a suit may
not proceed as a class action."). Plaintiffs suggest the
"circumstances in Riley, where premature dismissal was reversed,
are identical, if not less egregious than, those in this case."
Although we agree courts must liberally view class
allegations and allow reasonable inferences to be gleaned from
the complaint's allegations and search for a possible basis for
class relief so as to avoid premature dismissals, Carter-Reed,
supra, 203 N.J. at 505-06, 518, we do not abide a view that
precludes dismissal, following the required analysis, when a
court determines alleged claims do not properly lend themselves
to class certification. See Riley, supra, 61 N.J. at 225
(holding "a class action should lie unless it is clearly
infeasible").
In Riley, the Court examined the pre-trial denial of class
certification for bait-and-switch type consumer fraud claims,
(continued) N.J. 218, 228 (1972). The Court commented on this rule noting, "the draftsman was mindful of the difficulties involved and of the latitude required. It would be rare that a decision to deny a class action should be made on the face of the complaint." Ibid.
21 A-4398-13T4 where the defendants advertised a carpet deal at a special low
price, accompanied by a free gift, and when the plaintiffs
attempted to take advantage of that deal, were redirected and
upsold a more expensive product. Id. at 222. The Court
considered the complaint and noted:
No doubt a consumer class action may hold problems not found in an antitrust action or a stock fraud suit where some rather precise act or omission radiates harm throughout the class. If the representations to consumers are so diverse that all of the individual transactions must be tried, there would be no economy of effort and expense and the litigation would be unmanageable.
[Id. at 227.]
Under these circumstances, the Court found pre-trial
dismissal of the class allegations erroneous because the
plaintiffs' complaint included "a showing of a possible basis
for class relief" as to whether the defendants "ever intended to
sell carpet on the terms advertised." Id. at 229. Elaborating,
the Court instructed:
When, as here, the approach to the consumer appears to be sharp or slick, a plaintiff should be permitted to seek relevant data from [the] defendants so that an informed decision may be made on the class-action issue. Here, for example, it might be revealing if [the] plaintiffs were permitted to inquire of [the] defendants as to how many sales were made on the advertised basis and how many "free gifts" were delivered. The answers might support the charge that a
22 A-4398-13T4 bait-and-switch tactic was employed, or as suggested by the positions taken by [the defendants], that the advertisement was merely a pretext to obtain salable leads of persons in the market for carpet.
[Ibid.]
Contrary to plaintiffs' suggestions in this matter, the
test does not merely turn on the stage of the litigation.
Rather, dismissal is dependent on the nature of the claims and
the propriety of their presentation as a class action, in
accordance with the provisions of Rule 4:32-1. We flatly reject
plaintiffs' urging to impose a bright-line rule prohibiting
examination of the propriety of class certification until
discovery is undertaken. See e.g., Local Baking Products,
supra, 421 N.J. Super. at 280 (upholding dismissal of class
certification when putative class could not meet "the more
demanding criteria of predominance and superiority" (citation
and internal quotation marks omitted)).
After accepting as true all of the allegations in a
complaint, and considering the issues in the context of a
challenge to class certification, the central inquiry remains:
whether the putative class raises "questions of law or fact
common to the members of the class [that] predominate over any
questions affecting only individual members, and that a class
23 A-4398-13T4 action is superior to other available methods for the fair and
efficient adjudication of the controversy." R. 4:32-1(b)(3).
Guided by that pronouncement, we turn to the facts at hand.
Plaintiffs defined the proposed class in their complaint as:
"All persons currently insured or previously insured by [NJM], Palisades . . . at any time during the six (6) year period from the date of filing of this lawsuit who presented UM/UIM, physical damage claims for their insured vehicles arising from vehicular collisions or other accidental losses and were denied coverage or compensation, or did not otherwise receive coverage or compensation, for diminution of value of their vehicles in response to these claims."
The questions of law or fact common to all members are
alleged as:
(a) Whether [defendants] have issued automobile insurance policies that expressly prohibit class members from recovering for diminution of value of their vehicles arising from third-party UM/UIM vehicular collisions or other accidental losses;
(b) Whether [defendants] have issued . . . policies that are ambiguous or silent with regard to [diminution of value coverage] . . . arising from third-party UM/UIM vehicular collisions or other accidental losses;
(c) Whether [defendants] . . . have improperly denied compensation for diminution of value in response to third- party UM/UIM physical damage claims . . . ;
(d) Whether [defendants] have engaged in a pattern or practice of failing to pay for diminution of value;
24 A-4398-13T4 (e) Whether [defendants] breached, and continue to breach, their contractual obligations by not, inter alia, paying for diminution of value claims.
The foundation of these allegations is breach of each
plaintiff's respective insurance contract. Although, as
plaintiffs suggest, insurance contract interpretation is a
"[p]urely legal question," Badiali v. N.J. Mfrs. Ins. Group, 220
N.J. 544, 555 (2015), that alone will not permit these matters
to proceed as a class action. The significant legal conflict
centers on the terms of each insurance contract. Here, the
contracts of the actual and presumed putative plaintiffs are not
identical.
There is no statutory or other regulatory directive which
mandates the use of a standard form of automobile liability
policy. Automobile policy provisions, although reviewed by the
DOBI, remain individualized between an insurer and insured.
Accordingly, there is no common provision directed to payment of
diminution of value damages payable as a result of UM/UIM
claims. The lack of uniformity in such contract coverage is
easily illustrated by the two named defendant-insurers, whose
respective policies contain divergent provisions governing such
claims.
Thus, an inquiry into the breach of such contracts may be
as varied as the number of insurers that issue policies and the
25 A-4398-13T4 vehicles those policies cover. Even when policies include
similar provisions, such as the UM/UIM provisions in the NJM
plaintiffs' policies, the facts and circumstances surrounding
the claim and an insured's compliance with the policy terms to
submit claims remains unique.
Typicality among defendants to the putative class
allegations is also absent. NJM acknowledged diminution of
value damages were included within the scope of the stated
coverage,5 and the NJM plaintiffs' claims were not denied, just
not paid because they lacked sufficient proof to support the
underlying basis for the amount sought. On the other hand,
Palisades argued Todisco never filed a claim asserting such
coverage, and if he had, that coverage dispute was subject to
mandatory arbitration (an issue we separately analyze below).
The individualized facts and circumstances of the
relationship between each insurer and its insured also precludes
predominance. R. 4:32-1(b)(3) (stating the class certification
5 The record contains a form of NJM policy but not plaintiffs' actual policies. We have identified the UM/UIM provision cited to govern plaintiff's claims. We also observe Part D of this document, entitled "COVERAGE FOR DAMAGE TO YOUR AUTO," generally outlines the available coverage for, and limitations on liability to, payments for vehicle damage. Under a subsection entitled "EXCLUSIONS," the form policy expressly states "We will not pay for . . . Loss to your covered auto . . . due to diminution in value." Because no party has discussed the impact, if any, of this clause upon the UM/UIM claim, we will not undertake such consideration.
26 A-4398-13T4 is appropriate when the court finds the questions of law or fact
common to the class predominate over any questions affecting
only individual members). We recognize predominance does not
require "all issues be identical among class members or that
each class member be affected in precisely the same manner."
Local No. 68 Welfare Fund, supra, 192 N.J. at 383 (citing Fiore
v. Hudson Cnty. Employees Pension Comm'n, 151 N.J. Super. 524,
528 (App. Div. 1977)). However, the individualized nature of
the parties' automobile insurance contracts and the
circumstances giving rise to their respective claims for
reimbursement predominates over possible common questions among
class members. Moreover, contrary to plaintiffs' suggestion,
the insurance contracts between the different plaintiffs and
their respective insurers were not substantially similar.
Therefore, neither the commonality requirement of R. 4:32-
1(a)(2) nor the predominance provision of R. 4:43-1(b)(3) were
satisfied.
Plaintiffs also urge "the trial court's unsolicited
elimination of the putative class denied . . . the 'main thrust
of the litigation' because the cost of litigating each claim
individually outweighs the amount of the claim." See Riley,
supra, 61 N.J. at 221. We have defined the principle this way:
Class actions are generally appropriate where individual plaintiffs have "small
27 A-4398-13T4 claims" which "are, in isolation, too small . . . to warrant recourse to litigation . . . ." Iliadis, supra, 191 N.J. at 104 (internal quotation marks omitted). In such instances, "the class-action device equalizes the claimants' ability to zealously advocate their positions." Ibid. That equalization principle remedies the incentive problem facing litigants who seek only a small recovery. "In short, the class action's equalization function opens the courthouse doors for those who cannot enter alone." Ibid.
[Local Baking Prods., supra, 421 N.J. Super. at 280 (alteration in original).]
Here, the damage claims asserted by the NJM plaintiffs' are
not nominal. Myska's claim of $14,399 approaches the maximum
Special Civil Part $15,000 cognizable limit, R. 6:1-2(a)(5), and
Wagner's claim of $17,524 clearly exceeds that amount.
Certainly such demands are neither "too small . . . to warrant
recourse to litigation" nor so insignificant to preclude legal
representation forcing plaintiff to enter the courthouse alone.
Iliadis, supra, 191 N.J. at 104 (alteration in original)
(citation and internal quotation marks omitted). We reject as
unfounded the suggestion that the size of the claims proffered
by Myska and Wagner made remedies illusory because each
"individual loss [was] too small to warrant a suit." Muhammad
v. Cnty. Bank of Rehoboth Beach, Del., 189 N.J. 1, 16 (2006).
Following our review, we find the motion judge's analysis
of plaintiffs' allegations as individual to each plaintiff, such
28 A-4398-13T4 that the factual basis for each claim was dependent on a
specific individual experience and not common to the claims of
the other plaintiffs, is supported by the record. This
separateness of each claim precludes class certification. Our
review confirms the record supports the judge's findings and his
conclusion to deny class certification to the parties' distinct
claims for damages resulting from separate accidents covered
under their individualized policies. Further, the amount of
damages at issue for each claim is not so small as to
disincentivize suit.
2.
Related to this issue is plaintiffs' attack on the scope of
documents reviewed by the court in performing its analysis of
the class certification issue. Plaintiffs argue the judge
erroneously considered documents outside the complaint. We
reject this contention as meritless.
In its review, a court may consider documents specifically
referenced in the complaint "without converting the motion into
one for summary judgment." E. Dickerson & Son, Inc. v. Ernst &
Young, LLP, 361 N.J. Super. 362, 365 n.1 (App. Div. 2003),
aff’d, 179 N.J. 500 (2004). "In evaluating motions to dismiss,
courts consider 'allegations in the complaint, exhibits attached
to the complaint, matters of public record, and documents that
29 A-4398-13T4 form the basis of a claim.'" Banco Popular N. Am. v. Gandi, 184
N.J. 161, 183 (2005) (quoting Lum v. Bank of Am., 361 F.3d 217,
222 n.3 (3d Cir.), cert. denied, 543 U.S. 918, 125 S. Ct. 271,
160 L. Ed. 2d 203 (2004)). "It is the existence of the
fundament of a cause of action in those documents that is
pivotal; the ability of the plaintiff to prove its allegations
is not at issue." Ibid.
Here, in addition to examining the complaint, the judge
considered the insurance policies, correspondence from NJM and
Palisade's purportedly denying the diminution of value claims,
which attached the CC reports presented by Myska and Wagner.
Although the complaint does not describe those documents in
detail, its provisions certainly reference them, and we find no
error in the judge's review when determining the motions. See
Rapaport v. Robin S. Weingast & Assocs., 859 F. Supp. 2d 706,
714 (D.N.J. 2012) ("[W]hen allegations contained in a complaint
are contradicted by the document it cites, the document
controls." (citation and internal quotation marks omitted)).
We also reject as unavailing plaintiffs' suggestions the
judge, when reviewing these additional documents, improperly
drew inferences favoring NJM and Palisades, rather than
indulgently granting all favorable inferences to them. Thus,
plaintiffs argue he improperly resolved key factual disputes,
30 A-4398-13T4 such as whether plaintiffs submitted claims for diminution of
value and whether defendants denied those claims, in favor of
NJM and Palisades.
We reject this argument, as the language in the documents
is clear and not susceptible to more than one interpretation.
NJM's correspondence, after considering the NJM plaintiffs'
respective demands, stated payment would not be issued "at this
time" and specified additional documentation required for
further review and consideration. Todisco's letter to Palisades
did not articulate the nature or amount of his purported loss.
3.
Plaintiffs next contend the trial court took sua sponte
action and violated their rights of due process by striking
their class claims without proper notice. We are not persuaded.
"[D]ue process requires an opportunity to be heard at a
meaningful time and in a meaningful manner." Doe v. Poritz, 142
N.J. 1, 106 (1995). As plaintiffs point out, courts must guard
against sua sponte action or "resort[ing] to a 'shortcut' for
the purposes of 'good administration' and circumvent[ing] the
basic requirements of notice and an opportunity to be heard."
Klier v. Sordoni Skansa Constr. Co., 337 N.J. Super. 76, 84-85
(App. Div. 2001). See Curzi v. Raub, 415 N.J. Super. 1, 25-26,
28 (App. Div. 2010).
31 A-4398-13T4 Here, in addition to seeking dismissal for failure to state
a claim, NJM sought dismissal of the complaint's class
allegations and demands for "[c]ertification of this action as a
class pursuant to [Rule] 4:32." Specifically, NJM argued the
NJM plaintiffs' complaint presented no actionable allegations
because their claims had not been denied, but rather unpaid
pending further support. Palisades maintained Todisco had not
submitted a claim. Alternatively, NJM requested the immediate
severance of any surviving claims by Myska and Wagner. The
notice of motion and the supporting pleadings placed plaintiffs
on notice their assertions of class certification were attacked
as improper and unwarranted. We find no due process
deprivations.
D.
Plaintiffs assert the judge erred in concluding the CFA did
not apply to the denial of insurance claims, arguing he failed
to recognize their claims alleged unconscionable business
practices, which are cognizable under the CFA. We disagree.
"The language of the CFA evinces a clear legislative intent
that its provisions be applied broadly in order to accomplish
its remedial purpose, namely, to root out consumer fraud."
Lemelledo v. Benefit Mgmt. Corp., 150 N.J. 255, 264 (1997).
"Accordingly, our courts have invoked it to cover a wide variety
32 A-4398-13T4 of practices." Ibid. In Lemelledo, the Court considered
whether the CFA applies to commercial lenders who increase the
principal amount of a loan by adding loan-related services, such
as credit insurance, that the borrowers may not want. Id. at
259-60. In discussing the CFA's application, the Court stated
"although several lower courts have held that the payment of
insurance benefits is not subject to the CFA, our reading of the
CFA convinces us that the statute's language is ample enough to
encompass the sale of insurance policies as goods and services
that are marketed to consumers." Id. at 265 (citations and
footnote omitted). Accordingly, the CFA was held applicable to
insurance sales practices. Id. at 266.
"To prevail on a CFA claim, a plaintiff must establish
three elements: '1) unlawful conduct by defendant; 2) an
ascertainable loss by plaintiff; and 3) a causal relationship
between the unlawful conduct and the ascertainable loss.'"
Zaman v. Felton, 219 N.J. 199, 222 (2014) (quoting Bosland v.
Warnock Dodge, Inc., 197 N.J. 543, 557 (2009)). Under the CFA
an "unlawful practice" is defined to include
unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real
33 A-4398-13T4 estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby.
[N.J.S.A. 56:8-2.]
Further, "[t]he Legislature included 'services' within the
definition of 'merchandise,' a term that encompasses 'any
objects, wares, goods, commodities, services or anything
offered, directly or indirectly to the public for sale.'"
D'Agostino v. Maldonado, 216 N.J. 168, 187 (2013) (quoting
N.J.S.A. 56:8-1(c)). Thus, although the CFA must be interpreted
"'broadly to protect consumers from a wide variety of abhorrent
deceptive practices,' it has meaningful limits." Ibid.
(quoting Lee v. First Union Nat'l Bank, 199 N.J. 251, 258
(2009)).
While, we agree Lemelledo authorizes pursuit of a private
right of action against an insurance company for "fraudulent,
deceptive or other similar kind of selling or advertising
practices," Daaleman v. Elizabethtown Gas Co., 77 N.J. 267, 271
(1978), there are limits on the statute's application. For
example, the CFA is not appropriate where a regulatory scheme
"deal[s] specifically, concretely, and pervasively with [a]
particular activity, implying a legislative intent not to
subject parties to multiple regulations that, as applied, will
work at cross-purposes." Lemelledo, supra, 150 N.J. at 270.
34 A-4398-13T4 Further, while the CFA "encompass[es] the sale of insurance
policies as goods and services that are marketed to consumers,"
it was not intended as a vehicle to recover damages for an
insurance company's refusal to pay benefits. Id. at 265. See
Nikiper v. Motor Club of Am. Cos., 232 N.J. Super. 393, 400-01
(App. Div.), certif. denied, 117 N.J. 139 (1989); In re Van
Holt, 163 F.3d 161, 168 (3d Cir. 1998) ("The mere denial of
insurance benefits to which the plaintiffs believe[] they [are]
entitled does not comprise an unconscionable commercial
practice.").
The NJM plaintiffs assert no facts alleging NJM
fraudulently procured their agreement for coverage. In fact,
the availability of coverage under the policy purchased was
conceded. Therefore, the essence of plaintiffs' causes of
action involve whether they filed and supported a claim for a
specified amount of benefits under their respective policies —
issues which fall outside the scope of the CFA. Kuhnel v. CNA
Ins. Cos., 322 N.J. Super. 568, 582 (App. Div. 1999), certif.
denied, 163 N.J. 12, cert. denied, 531 U.S. 819, 121 S. Ct. 61,
148 L. Ed. 2d 27 (2000) See also Pierzga v. Ohio Cas. Group of
Ins. Cos., 208 N.J. Super. 40, 47 (App. Div.), ("[T]he insurance
industry is already heavily regulated by the Department of
Insurance[, making] exclusive regulatory jurisdiction of
35 A-4398-13T4 insurance companies, at least with respect to the payment of
claims, . . . within the Department of Insurance."), certif.
denied, 104 N.J. 399 (1986).
We are not persuaded by plaintiffs' reliance on Weiss v.
First Unum Life Insurance Company, 482 F.3d 254 (3d Cir. 2007).
In that matter, the plaintiff's suit claimed the defendant
discontinued payment of his disability benefits as part of a
racketeering scheme involving an intentional and illegal policy
of rejecting expensive payouts to disabled insureds. Id. at
256. After review, the court reinstated the plaintiff's claims
under the Racketeer Influenced and Corrupt Organizations Act
(RICO), 18 U.S.C.A. §§ 1961-1968. Id. at 269. In its analysis,
the court examined whether the plaintiff's claim was covered by
the CFA, which could undercut a RICO suit. Id. at 265-66.
Noting it did "not share the District Court's conviction that
the CFA and its treble damages provision are inapplicable to
schemes to defraud insureds of their benefits," id. at 266, the
Third Circuit concluded "[t]he CFA covers fraud both in the
initial sale (where the seller never intends to pay), and fraud
in the subsequent performance (where the seller at some point
elects not to fulfill its obligations)." Ibid.
We need not determine the soundness of this legal analysis
because the facts in Weiss are significantly distinguishable
36 A-4398-13T4 from those at hand. The court in Weiss found the CFA applied to
allegations of fraudulent discontinuation of previously
authorized benefits. The Court did not discuss the precedent we
have cited, which excludes determination of initial coverage
disputes. Nikiper, supra, 232 N.J. Super. at 401; Kuhnel,
supra, 322 N.J. Super. at 582.
Myska and Wagner also maintain NJM's practice of failing to
disclose an insured's right to seek compensation for diminution
of value, not merely repair of their vehicles, fell within the
ambit of the CFA. We disagree.
"[A]n insured is chargeable with knowledge of the contents
of an insurance policy in the absence of fraud or inequitable
conduct on the part of the carrier." Edwards v. Prudential
Prop. & Cas. Co., 357 N.J. Super. 196, 204 (App. Div.), certif.
denied, 176 N.J. 278 (2003). "Normally, insurance purchasers
are expected to read their policies and the law may fairly
impose upon [them] such restrictions, conditions and limitations
as the average insured would ascertain from such reading." Id.
at 204-205 (alteration in original) (citations and internal
quotation marks omitted). See also Millbrook Tax Fund, Inc. v.
Henry & Assocs., Inc., 344 N.J. Super. 49, 53 (App. Div. 2001)
("[A] policy holder is obligated to read the policy he receives
and is bound by the clear terms thereof").
37 A-4398-13T4 E.
Our final consideration concerns the arbitration provision
contained within the Palisades policy. Todisco argues the trial
court erred in dismissing his claims in their entirety in favor
of arbitral review. Supplemental submissions filed by Todisco
rely on Atalese, which defines the necessary requirements of a
clause waiving one's right to sue in court, in favor of binding
parties to pursue arbitration. Atalese, supra, 219 N.J. at 442-
44. Atalese was decided after the trial court reviewed this
matter, so the judge did not have the benefit of the Court's
guidance.
In Atalese, the Court emphasized an arbitration clause in a
contract must "assure that the parties know that in electing
arbitration as the exclusive remedy, they are waiving their
time-honored right to sue." Id. at 444 (citation and internal
quotation marks omitted). "By its very nature, an agreement to
arbitrate involves a waiver of a party's right to have her
claims and defenses litigated in court." NAACP of Camden Cnty.
E. v. Foulke Mgmt. Corp., 421 N.J. Super. 404, 425 (App. Div.),
certif. granted, 209 N.J. 96 (2011), appeal dismissed, 213 N.J.
47 (2013). The Court in Atalese has clarified the scope of this
requirement in the context of arbitration clauses contained in
consumer contracts. Atalese, supra, 219 N.J. at 442-43.
38 A-4398-13T4 "An agreement to arbitrate, like any other contract, 'must
be the product of mutual assent, as determined under customary
principles of contract law.'" Id. at 442 (quoting NAACP, supra,
421 N.J. Super. at 424). The mutual agreement must contain a
provision waiving the right to pursue judicial determination of
the parties' respective rights and responsibilities. Ibid.
This is because "an average member of the public may not know —
without some explanatory comment — that arbitration is a
substitute for the right to have one's claim adjudicated in a
court of law." Ibid. Therefore, "'[a]n effective waiver
requires a party to have full knowledge of his [or her] legal
rights and intent to surrender those rights.'" Ibid. (quoting
Knorr v. Smeal, 178 N.J. 169, 177 (2003)). The Court
emphasized:
Our jurisprudence has stressed that when a contract contains a waiver of rights — whether in an arbitration or other clause — the waiver must be clearly and unmistakably established. Thus, a clause depriving a citizen of access to the courts should clearly state its purpose. We have repeatedly stated that [t]he point is to assure that the parties know that in electing arbitration as the exclusive remedy, they are waiving their time-honored right to sue.
[Atalese, supra, 219 N.J. at 444 (alteration in original) (citations and internal quotation marks omitted).]
39 A-4398-13T4 We recite the entirety of the arbitration provision in the
Palisades policy, found in Part E:
If we and an insured do not agree whether that person is legally entitled to recover damages under this Part; or as to the amount of damages; either party may make a written demand for arbitration. In this event, each party will select an arbitrator. The two arbitrators will select a third. If they cannot agree within 30 days, either may request that selection be made by a judge of a court having jurisdiction.
Each party will pay the expenses it incurs and bear the expenses of the third arbitrator equally.
Unless both parties agree otherwise, arbitration will take place in the county in which the named insured lives. Local rules of law as to procedure and evidence will apply. A decision agreed to by two of the three arbitrators will be binding as to:
1. Whether the insured is legally entitled to recover damages; and
2. The amount of damages.
The decision is binding only if the amount does not exceed the minimum limit for liability specified by the financial responsibility law of New Jersey. If the amount exceeds that limit, either party may demand the right to a trial for all issues of liability and damages. . . .
It is clear, the Palisades contract fails Atalese's basic
test. The language does not identify the insured's clear and
unmistakable waiver of the right to seek determination of
disputes in a judicial forum when choosing arbitration.
40 A-4398-13T4 Atalese, supra, 219 N.J. at 444. Accordingly, the arbitration
provision in the Palisades contract is unclear and ambiguous,
and, therefore, unenforceable. Id. at 448. See also
Dispenziere v. Kushner Cos., 438 N.J. Super. 11, 20 (App. Div.
2014) (invalidating an arbitration provision because it "failed
to provide [the] plaintiffs any notice that they were giving up
their right to seek relief in a judicial forum").
Despite the flaws of the Palisades arbitration clause,
however, Todisco's action is not saved. As noted, Todisco
produced no evidence he submitted a claim demanding payment for
diminution of value damages. His February 15, 2013 letter
contains no facts or monetary calculation. Further, Todisco did
not comply with the subsequent requests for proof of loss,
required by the claims provisions within Part F of his policy.
Therefore, his claims for breach of contract cannot be
sustained.
III.
In summary, we find no flaw with the trial judge's
determination to deny class certification or the procedure
employed in that examination. We conclude the CFA does not
apply to the dispute regarding payment or scope of coverage.
Finally, although we find the arbitration clause in the
Palisades policy is unenforceable, we nevertheless conclude
41 A-4398-13T4 dismissal of Todisco's complaint was warranted based upon his
noncompliance with the unambiguous claims procedure.
Affirmed, as modified.
42 A-4398-13T4