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V.K. v. N.J. Mfrs. Ins. Co.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION
Aug 26, 2013
(App. Div. Aug. 26, 2013)

Opinion

08-26-2013

V.K., M.K. and G.R., Infant Minors, by their Guardian Ad Litem, ROCCO PEZZELLA, as assignees of COREY J. CLIFFORD and COLIN J. CLIFFORD, Plaintiffs-Appellants, v. NEW JERSEY MANUFACTURERS INSURANCE COMPANY, Defendant-Respondent. JENNIFER ANN RODEN, as assignee of COREY J. CLIFFORD and COLIN J. CLIFFORD, Plaintiff-Appellant, v. NEW JERSEY MANUFACTURERS INSURANCE COMPANY, Defendant-Respondent.

Jacqueline DeCarlo argued the cause for appellants V.K., M.K. and G.R., infant minors in A-4682-11 (Hobbie, Corrigan & Bertucio, P.C., attorneys; Ms. DeCarlo, on the brief). Randall Peach argued the cause for appellant Jennifer Ann Roden in A-4681-11 (Law Offices of Roy D. Curnow, attorneys; Mr. Curnow, of counsel and on the brief). Richard J. Williams, Jr., argued the cause for respondent in A-4681-11 and A-4682-11 (McElroy, Deutsch, Mulvaney & Carpenter, LLP, attorneys; Mr. Williams and Michael J. Marone, of counsel; Mr. Williams, on the brief).


NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

Before Judges Messano, Ostrer and Kennedy.

On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket Nos. L-1136-11 and L-4351-10.

Jacqueline DeCarlo argued the cause for appellants V.K., M.K. and G.R., infant minors in A-4682-11 (Hobbie, Corrigan & Bertucio, P.C., attorneys; Ms. DeCarlo, on the brief).

Randall Peach argued the cause for appellant Jennifer Ann Roden in A-4681-11 (Law Offices of Roy D. Curnow, attorneys; Mr. Curnow, of counsel and on the brief).

Richard J. Williams, Jr., argued the cause for respondent in A-4681-11 and A-4682-11 (McElroy, Deutsch, Mulvaney & Carpenter, LLP, attorneys; Mr. Williams and Michael J. Marone, of counsel; Mr. Williams, on the brief). PER CURIAM

These back-to-back appeals, argued together and consolidated for purposes of this opinion, had their genesis in a motor vehicle accident that occurred on August 5, 2006. We set forth the underlying facts as contained in our earlier decision, Kearney v. Clifford, No. A-5147-08 (App. Div. Nov. 9, 2010):

[P]laintiff Jennifer Roden operated her automobile in Parkertown, with her then husband, Alvin Roden, seated in the front passenger seat, with the parties' son [G.R.], and Jennifer Roden's two daughters, [V.K.] and [M.K.], seated in the rear passenger seat. While the Roden vehicle proceeded northbound on East Main Street, defendant Corey Clifford . . . proceeded in the opposite direction on the same street.
Suddenly and without warning, the Clifford vehicle crossed the center dividing line on the roadway and struck the Roden vehicle head-on. The Roden vehicle was then struck from behind by a vehicle operated by defendant Casey Walsh. The Clifford vehicle was insured by New Jersey Manufacturers Insurance Company (NJM) with a combined $500,000 single limit liability insurance policy.
[(Slip op. at 1-2).]
Roden and her children (the minor plaintiffs) were severely injured and filed separate personal injury actions that were consolidated in the Law Division. Id. at 2.
On November 7, 2007, one of plaintiffs' counsel sent a letter to defense counsel demanding that NJM deposit the insurance policy proceeds into court. NJM did not comply with the demands. On November 7, 2008, defense counsel sent plaintiffs' counsel a letter advising that he had obtained authority from NJM to offer $478,122.81 in full settlement of all claims, said amount representing defendant's policy limits, less $21,877.19 previously paid to Jennifer Roden on her automobile property damage claim. Plaintiffs[] rejected the offer to settle.
On November 13, 2008, defendant filed a motion seeking to deposit the balance of his insurance policy proceeds into court. The court granted the motion, and defendant deposited the insurance proceeds on January 14, 2009. On March 30, 2009, the matter proceeded to trial on the issue of damages only, defendant having stipulated to liability.
[Id. at 3-4.]
Prior to verdict, Roden and the minor plaintiffs accepted an assignment of rights from Clifford to pursue "a bad faith claim" against NJM in return for releasing Clifford from any judgment exceeding his $500,000 policy limits. The jury subsequently returned the following verdicts: M.K. -- $10 million; G.R. -- $4 million; V.K. -- $2 million; and Roden -- $1.5 million. Id. at 14. We affirmed the judgments. Id. at 30.

Even though their full names were used in the underlying complaint and in our prior opinion, for reasons unexplained, the complaint filed in this matter utilized the initials of the children. We will do the same in this opinion.

Walsh was subsequently granted summary judgment.

We also vacated the judgment entered in favor of Alvin Roden. Kearney, supra, No. A-5147-08 at 22.

Within days of our decision, the minor plaintiffs, as assignees of Clifford and with their maternal grandfather, Rocco Pezzella, serving as their guardian ad litem, filed a complaint alleging bad faith against NJM. Roden filed a separate bad faith action against NJM a few months later. Discovery ensued, and while the record includes numerous examples of the contentious nature of the proceedings, these appeals are focused on one discrete issue, which arose in the following context.

Roden was deposed on December 30, 2011. As a result of what occurred during that deposition, NJM filed a motion seeking to compel Roden's continued deposition. On February 24, 2012, the parties appeared before the trial judge for argument, after which the judge entered his oral opinion on the record and the conforming order under review, which provides:

Roden shall appear . . . for the continuation of her deposition, at which time [she] shall answer questions concerning the following topics . . . :
1. her knowledge and understanding of the various settlement demands and offers exchanged between the parties in the underlying matters of Roden v. Clifford and M.K. et al v. Clifford ("the underlying matters");
2. Ms. Roden's motivation for and reasons for rejection of the defendant's settlement offer in the underlying actions; and
3. the circumstances, including date, time location, and a list of all attendees of any meetings attended by Ms. Roden involving the law firm of Hobbie[,] Corrigan & Bertucio or any predecessor firm, as well as the nature and content of any communications at such meetings concerning settlement of the underlying matters or settlement offers from the defendants in the underlying matters.
The order further provided:
Roden may not refuse to answer any questions concerning any settlement demands, offers, or the rejection of any settlement demands or offers by her or any other party in the underlying matters on the ground that answering such questions requires disclosure of attorney-client communications. The attorney-client privilege shall not preclude any testimony by . . . Roden or any other party to this matter concerning settlement demands or offers or the rejection of any settlement demands or offers in the underlying matters[.]
We granted Roden's and the minor plaintiffs' motions for leave to appeal. The trial judge entered an order staying the proceedings pending appeal.

Before us, Roden and the minor plaintiffs essentially argue that the judge's order "improperly compels [them] to disclose privileged communications with their attorneys." NJM counters by arguing "information concerning the plaintiffs' knowledge, understanding of, and motivation behind the settlement demands and offers exchanged . . . is necessary and relevant and can only be obtained from plaintiffs."

Having considered these arguments in light of the record and applicable legal standards, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion. We also dismiss the appeal filed by the minor plaintiffs.

I.

Early in Roden's deposition, her attorney, Curnow, and counsel for the minor plaintiffs, DeCarlo, began lodging objections by asserting the attorney-client privilege. We quote at length what subsequently occurred.

[Counsel for NJM]: . . . What I'm really most interested in knowing is why is it that you were represented individually by Mr. Curnow without your children?
Mr. Curnow: Objection.
Ms. DeCarlo: Objection to form.
. . .
Ms. DeCarlo: And again, if we're going down this road where we're going to try to get into conversations that she had with anybody at [my firm] I would make . . . two objections. Number one, I think there's — it's a tricky area, because there is a common interest issue here, and also, there may be meetings with . . . Roden and . . . Roden's mother at the same time, and again, the interests are common interests, I think similar to a common interest defense in a . . . criminal case. So --
. . . .
-- I'm going to be instructing, and I've already spoken to Mr. Curnow with respect to this, I'm going to be instructing, for the most part, that . . . Roden's not going to talk about any communication[] that she's had with my firm or that she's been in . . . a meeting where I've met with her mother.
After some further colloquy, NJM's counsel asked Roden if she had ever participated "in a meeting in which you sat down and attorneys from [DeCarlo's firm] were present, maybe your mother was present, people other than just you and Mr. Curnow, where you discussed the first lawsuit?" Objections followed:
Ms. DeCarlo: I object to that. . . . [S]he's not my client, but I believe there's an attorney[-]client privilege issue there.
Mr. Curnow: Right.
. . . .
Ms. DeCarlo: No, I can't instruct her, but —
Mr. Curnow: I'm instructing her not to answer, because you can't ask her if she had discussions with her attorney.
Ms. DeCarlo: And her prior attorney.
Mr. Curnow: And her prior attorney.
. . . .
Mr. Curnow: . . . I mean just in the interest of brevity, I think that what you should do is file your motion, because she's not going to talk about meetings that she's had with her attorneys and discussions with her attorneys. I mean it's just -- can't do it.
Ms. DeCarlo: I . . . think the issue is going to be if you're going to contest that there's a common interest privilege, if you're going to contest that, that's really at the heart of the issue.
. . . .
Mr. Curnow: We should get that cleared up.

Roden's mother, the minor plaintiff's maternal grandmother, originally served as guardian ad litem in the underlying personal injury case.

NJM's counsel asked Roden if she was aware of any settlement demands or offers that were made during the underlying case. Objections were again made, and the attorneys attempted, off the record and outside the deposition room, to resolve the dispute. However, continued objections followed with both lawyers frequently asserting attorney-client privilege.

At other times, however, DeCarlo noted, "I can't instruct her not to answer."

NJM moved to compel Roden's appearance at a continued deposition. The judge asked NJM to explain the relevancy of Roden's testimony regarding settlement demands in the underlying case, particularly since he had already ordered that the attorneys themselves be deposed. NJM's counsel argued that plaintiffs were trying to establish a bad faith claim based, in part, upon NJM's failure to respond to "several ten-day time-restricted settlement demands." NJM argued that it should be allowed to determine the reasonableness of these time-restricted demands, since "allowing a plaintiff to make an arbitrary, unilateral deadline puts the carrier in a Catch-22, because the carrier's obligation . . . is to do a thorough investigation of [a] claim." Counsel for the minor plaintiffs argued that, under New Jersey case law, claims alleging bad faith by an insurer focus "on the conduct of the carrier," and therefore conversations between plaintiffs and their attorneys were irrelevant to the claim of bad faith.

This referred to various correspondence between counsel for the minor plaintiffs and NJM in which counsel demanded the policy limits be deposited in court within ten days. At a later point, counsel agreed to settle the case for the policy limits only of NJM responded within ten days.

The judge granted the motion, stating:

I think that this whole question as to whether or not there's evidence to establish that [NJM] in this case was . . . set up, whether or not there was a good faith basis for these various demands[,] was there a good faith reason for the generation of the chain of correspondence that took place here[,] all bear on that issue. I think the defendant may[,] in a given set of circumstances[,] be in a position to argue that the record in a given set of circumstances has been manipulated to put the defendant in a situation where the carrier's made to look as though it has acted in bad faith.
I think the question as to why an offer was acceptable on one date and then [not acceptable] a relatively short time later is also relevant to this same issue. I think it is relevant under the Kozlov test. I don't really see how else the . . . defendant would be in a position to address any of these issues except by deposing the [plaintiff] with respect to the chain of correspondence and the various settlement offers and demands.
I also am concerned . . . about what may develop as this case goes to trial . . . . I haven't heard anything to disabuse me of assuming that the jury will receive this chain of correspondence in evidence. They[,] . . . on the face of the correspondence itself[,] may or may not incorrectly develop an impression that the carrier, without more, acted in bad faith by
failing to respond. It seems to me that the defendant should be in a position to respond to that with relevant evidence.
. . . On that basis and for those reasons, the Court will grant the motion and allow [Roden] to be deposed in this matter as demanded on the issues which I've just discussed.
The judge entered the order under review.

In re Kozlov, 79 N.J. 232 (1979).

II.

The judge never addressed whether Roden could assert a claim of attorney-client privilege regarding communications made in front of others, including counsel for the minor plaintiffs, because she and her children shared a "common interest" in the underlying litigation. None of the parties have addressed the issue in their briefs, although at oral argument before us, counsel for the minor plaintiffs claimed that a common interest did exist so as to shield any such communications.

Because the issue was not properly preserved before the trial court, and because the appellate record fails to fully expose the facts surrounding any such communications, we refuse to decide the question. Nonetheless, for the reasons that follow, failure to resolve that question does not prevent us from concluding leave to appeal was improvidently granted to the minor plaintiffs. We therefore dismiss their appeal.

"The [attorney-client] privilege is codified at N.J.S.A. 2A:84A-20, and it appears in the Rules of Evidence as N.J.R.E. 504." Stengart v. Loving Care Agency, Inc., 201 N.J. 300, 315 (2010). "[F]or a communication to be privileged it must initially be expressed by an individual in his capacity as a client in conjunction with seeking or receiving legal advice from the attorney in his capacity as such, with the expectation that its content remain confidential." Ibid. (citations omitted).

Pursuant to N.J.S.A. 2A:84A-29 and N.J.R.E. 530, "[a] person waives his right or privilege to refuse to disclose or to prevent another from disclosing a specified matter if he . . . without coercion and with knowledge of his right or privilege, made disclosure of any part of the privileged matter or consented to such a disclosure made by anyone." "It has been recognized, however, that not every disclosure constitutes a waiver of privilege." Laporta v. Gloucester Cnty. Bd. of Chosen Freeholders, 340 N.J. Super. 254, 261 (App. Div. 2001). "Rather, 'courts have interpreted [the waiver] principle in a commonsensical way, fashioning a "common interest" doctrine which protects communications made to a non-party who shares the client's interests.'" Ibid. (quoting In re State Comm'n of Investigation Subpoena No. 5441, 226 N.J. Super. 461, 466 (App. Div.), certif. denied, 113 N.J. 382 (1988)).

We need not explore the full scope of the "common interest" doctrine, except to note that it "may be asserted with respect to communications among counsel for different parties if (1) the disclosure is made due to actual or anticipated litigation; (2) for the purposes of furthering a common interest; and (3) the disclosure is made in a manner not inconsistent with maintaining confidentiality against adverse parties." Id. at 262 (citation and internal quotation marks omitted). It suffices to say, however, that in the end, "the privilege belongs to the client." In re Advisory Opinion No. 544, 103 N.J. 399, 405 (1986).

Here, the order under review dealt only with Roden's continued deposition. She, and on her behalf, her attorney, could assert the privilege regarding communications Roden had with her attorney or, perhaps, with others who shared her common interests. Counsel for the minor plaintiffs, however, could not assert the privilege regarding those communications, even if her clients and Roden shared a "common interest." See N.J.S.A. 2A:84A-32(1) and N.J.R.E. 533(1) ("A party may predicate error on a ruling disallowing a claim of privilege only if he is the holder of the privilege.").

Rule 2:3-3 permits "interested" parties to "join in an appeal . . . or . . . appeal separately." We do not, therefore, fault the minor plaintiffs for seeking leave to appeal separately from Roden. However, it is clear that the minor plaintiffs are not "aggrieved" by the order under review. See, e.g., G.D.M. v. Bd. of Ed. of the Ramapo Indian Hills Regional High School Dist., 427 N.J. Super. 246, 267 (App. Div. 2012) (noting only a party aggrieved by the judgment or order under review may appeal from it). We are convinced leave to appeal was improvidently granted to the minor plaintiffs, and we dismiss their appeal.

Because we anticipate Roden may again be deposed, we urge counsel for the minor plaintiffs to refrain from objecting, except to the extent permitted by Rule 4:14-3(c) and not on the basis of attorney-client privilege.
--------

III.

Roden's appeal is framed by the divergent positions expressed before the trial judge. Essentially, NJM broadly asserts that, given the nature of this litigation, it was entitled to ask Roden about communications regarding potential settlement of the underlying action. In other words, there is something unique about a bad faith claim against an insurance company that essentially strips away any claim of privilege regarding attorney-client communications in the underlying action. Roden claims there was nothing unique about a bad faith claim brought against an insurer, and NJM was not entitled to pierce the attorney-client privilege unless it met the test enunciated in Kozlov.

A.

Before moving on to consider these substantive arguments, it is fair to say that some objections during Roden's deposition far exceeded the recognizable scope of the privilege. In other contexts, we have noted "the privilege must be anchored to its essential purpose," United Jersey Bank v. Wolosoff, 196 N.J. Super. 553, 561 (App. Div. 1984), which is to "encourage a client's free and full disclosure of information to the client's attorney to facilitate the attorney's best advice in return." Horon Holding Corp. v. McKenzie, 341 N.J. Super. 117, 124 (App. Div. 2001) (citations omitted). "Application of the privilege is therefore to be strictly construed to achieve its underlying purpose, in light of the reason for its assertion and the attorney's ethical obligations under the unique circumstances of each case." Id. at 124-25 (citations omitted).

By its terms, Rule 504 applies to "communications between [a] lawyer and his client in the course of that relationship and in professional confidence" (Emphasis added); see also Paff v. Div. of Law, 412 N.J. Super. 140, 153 (App. Div. 2010) ("The attorney-client privilege is of course limited to communications made to the attorney in his professional capacity.") (citations and internal quotation marks omitted), certif. denied, 202 N.J. 45 (2010). So, for example, in Daisey v. Keene Corp., 268 N.J. Super. 325, 332-35 (App. Div. 1993), we held that questions posed to a party regarding when he met with his attorney and how long he spent preparing to testify did not run afoul of the attorney-client privilege. We particularly noted, "[t]he specific question objected to did not . . . seek the contents of the meeting . . . ." Id. at 334-35.

During Roden's deposition, her counsel and counsel for the minor plaintiffs began lodging objections to questions that asked background information. These questions, for example, regarding meetings that were held and with whom, did not seek disclosure of privileged "communications." It is apparent from our objective reading of the deposition transcript that NJM's counsel was effectively thwarted from legitimately inquiring about non-privileged information. Because it was improper to broadly assert the privilege as to such questions, we affirm that portion of the order that provided for Roden's continued deposition.

We anticipate that during the continued deposition, a more complete record may be made regarding whether Roden shared a "common interest" with the minor plaintiffs such that communications she had with their attorneys are privileged. We anticipate that objections may still be asserted, by Roden through her attorney only, based upon the privilege, if NJM insists on making inquiry about the specifics of such communications. If that occurs, it will be necessary for the trial judge to specifically reach the issue on the more-fully developed record, and subject to the guidance we attempt to provide below.

B.

We now consider the more difficult issue of whether the judge's order permitted inquiry into privileged communications without NJM demonstrating appropriate grounds for piercing the privilege. Whether the attorney-client privilege applies is primarily a legal issue, which we review de novo. Paff, supra, 412 N.J. Super. at 149.

In Kozlov, supra, 79 N.J. at 243, the Court held that a party seeking to pierce any privilege must first show there is "a legitimate need . . . to reach the evidence sought to be shielded." Second, "[t]here must be a showing of relevance and materiality of that evidence to the issue before the court." Id. at 243-44. Third, the party seeking the information must show that the information "could not be secured from any less intrusive source." Id. at 244 (emphasis removed) (citation omitted).

In Kinsella v. Kinsella, 150 N.J. 276 (1997), the Court applied the Kozlov test to assertion of the psychologist-patient privilege, N.J.R.E. 505, in a matrimonial action. Before doing so, the Court noted that "[c]ases applying Kozlov have generally upheld the attorney-client privilege." Id. at 299. On the other hand, "[t]he typical setting in which the attorney-client privilege has not been sustained under Kozlov is where the party claiming the privilege has implicitly waived it by putting the confidential communications 'in issue' in the litigation[,]" something "[m]ost jurisdictions recognize [as an] implicit waiver of the attorney-client privilege . . . ." Id. at 300.

A communication is "in issue" when it "goes to the heart of the claim in controversy." Ibid. (quotation marks omitted) Courts have generally refrained from "treat[ing] the 'in issue' doctrine as operating automatically based on the cause of action pled," preferring instead to use the three-part test articulated in Kozlov in limiting the scope of an implicit waiver. Id. at 301.

More recently, in State v. Mauti, 208 N.J. 519, 538-39 (2012), the Court stated:

Kinsella made another point as well -- that the separate notion of waiver of a
privilege remains vital and that, in addition to the express waiver provided in N.J.R.E. 530, a party can implicitly waive a privilege by conduct -- that is, by placing an otherwise protected matter in issue. In those circumstances, the waiving party voluntarily creates the "need" for the protected evidence to be revealed to the adversary.
Together, Kozlov and Kinsella establish the narrow circumstances, apart from the express exceptions in the rules, under which the "need" prong can be satisfied: (1) where a constitutional right is at stake, or (2) a party has explicitly or implicitly waived the privilege.

Initially, we agree with Roden that the judge erred in his application of the tripartite Kozlov test. His analysis focused heavily on the "relevancy" prong, finding essentially that NJM was permitted to discover all the circumstances surrounding plaintiffs' "time-restricted demand" because it was relevant to NJM's potential defense, i.e., plaintiffs were "setting [NJM] up" for a bad faith claim. However, as we noted in Dontzin v. Myer, 301 N.J. Super. 501, 508-09 (App. Div. 1997), "it would be a rare confidential communication that would not satisfy the relevancy test." Kozlov required NJM to establish more than relevancy.

In the first instance, NJM must establish the need for Roden's testimony regarding her knowledge of the settlement demands and the single pre-trial settlement offer it made in the underlying lawsuit. As Mauti has now clarified, the need prong of Kozlov is satisfied only if a "constitutional right is at stake," not so in this case, or "a party has explicitly or implicitly waived the privilege." Mauti, supra, 208 N.J. at 539.

We distill from NJM's argument before the trial judge and before us that it essentially contends the assertion of a bad faith claim against an insurer implicitly waives the attorney-client privilege as to relevant communications between the plaintiff and her counsel in the underlying litigation. NJM concedes in its brief that "no reported decision in New Jersey . . . directly addresses a claim of bad faith predicated on an alleged failure to promptly accept a time-restricted settlement demand." It relies upon out-of-state decisions that recognize such communications may be relevant to the insurer's defense, in particular, that it was "set-up" for a bad faith claim. We note that Roden and the minor plaintiffs do not rest the success of their bad faith claims on such limited grounds, but, rather, they assert a course of bad faith conduct by NJM, in addition to its response to their so-called "time-restricted" settlement demands.

It is axiomatic that:

where under the policy the insurer reserves full control of the settlement of claims
against the insured, prohibiting him from effecting any compromise except at his own expense, that reservation -- viewed in the light of the carrier's obligation to pay on behalf of the insured all sums up to the policy limit which he shall become obligated to pay -- imposes upon the insurer the duty to exercise good faith in settling claims.
[Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 492 (1974).]
"A question whether the insurer fulfilled that duty is raised 'where . . . any adverse verdict at trial is likely to exceed the policy limit.'" Courvoisier v. Harley Davidson, 162 N.J. 153, 164 (1999) (quoting Rova Farms, supra, 65 N.J. at 493). But a resulting verdict above the policy limits does not, per se, prove bad faith. Fireman's Fund Ins. Co. v. Security Ins. Co. of Hartford, 72 N.J. 63, 70 (1976).

The "standards for evaluating whether the insurer acted in good faith," Courvoisier, supra, 162 N.J. at 164, were explained in Rova Farms:

"[A] decision not to settle must be a thoroughly honest, intelligent and objective one. It must be a realistic one when tested by the necessarily assumed expertise of the company." This expertise must be applied, in a given case, to a consideration of all the factors bearing upon the advisability of a settlement for the protection of the insured. While the view of the carrier or its attorney as to liability is one important factor, a good faith evaluation requires more. It includes consideration of the anticipated range of a verdict, should it be adverse; the strengths and weaknesses
of all of the evidence to be presented on either side so far as known; the history of the particular geographic area in cases of similar nature; and the relative appearance, persuasiveness, and likely appeal of the claimant, the insured, and the witnesses at trial.
Rova Farms, supra, 65 N.J. at 489-90 (citations omitted) (emphasis in original).]
NJM argues that because "all of the factors" animating its decision-making are relevant, it must be permitted to examine Roden's knowledge of all the settlement demands, including the "time-restricted demands," in the underlying case, and, in doing so, it further should be permitted to inquire of actual conversations she had with her attorney or the attorney for the minor plaintiffs (assuming they shared a common interest).

We agree with NJM that it was entitled to ask Roden of her knowledge regarding the settlement demands and offer. This is so because once the insured has demonstrated bad faith, "'[i]t is then up to the insurer to demonstrate that settlement could not have been achieved within the policy limit or for the policy limit plus any amount the insured would have been able and willing to contribute.'" Courvoisier, supra, 162 N.J. at 164 (quoting Yeomans v. Allstate Ins. Co., 130 N.J. Super. 48, 52 (App. Div. 1974)). So, in the continued deposition, NJM may ask Roden about her knowledge of the settlement demands because NJM is entitled to discover whether an earlier-made settlement offer for the policy limits would have likely been accepted. In other words, when an insured pursues a bad faith claim, the likelihood that she would have settled the case for the policy limits is "in issue," and, therefore, under Mauti's paradigm, Roden has "implicitly waived" the privilege as to communications regarding her knowledge of the settlements offers and demands, and whether she would or would not have accepted a settlement for the full policy limits. NJM has demonstrated the "need" prong of Kozlov's tripartite test.

Yet, even in this regard, we do not think actual conversations Roden had with her lawyer -- or if she shared a common interest, with her children's attorney -- are necessarily fair game. That is so because NJM must establish that the information sought could not be obtained from any "less intrusive source." Kozlov, supra, 79 N.J. at 244.

Although he gave careful consideration to this prong of the Kozlov test, the judge ultimately concluded, "I don't really see how else the . . . defendant would be in a position to address any of these issues except by deposing the [plaintiff] with respect to the chain of correspondence and the various settlement offers and demands." We think the record, as it currently stands, does not support the conclusion that NJM has established that questioning Roden about actual communications she had with counsel is the least intrusive method to obtain the information.

First, the judge has ordered the deposition of the attorneys. In large part, the record of settlement demands is fully set forth in the documents, which, obviously were authored by the attorneys and not by Roden, who is not an attorney. Second, during the continued deposition, NJM can fully ascertain Roden's knowledge of these demands by showing her the documents and asking her questions about them, without asking her specifics about privileged communications she had with the attorneys. Based upon Roden's responses and everything else that may transpire, if NJM concludes direct questions regarding privileged communications must be posed, it may again seek an order, at which point the judge may reconsider the issue in light of our holding.

As a result, we reverse the order under review to the extent it permits specific questioning of Roden regarding actual conversations she had with her attorney. Whether communications she had with counsel for the minor plaintiffs should also be considered privileged must, as noted above, abide the development of a more complete record regarding the "common interest" she may have shared with the minor plaintiffs.

IV.

The record in this case amply demonstrates the fervor each side has brought to this litigation. Unfortunately, that has caused significant delay in litigating the claims. We believe that, in order to facilitate the expeditious resolution of this litigation, it would be wise for the trial judge to vigilantly oversee Roden's continued deposition.

Therefore, the continued deposition shall observe several ground rules. An objection to a question on the basis of privilege essentially seeks the court's protective order, see R. 4:10-3, and the party seeking such protection bears the burden of demonstrating good cause, i.e., in this case, that the question seeks disclosure of a privileged communication. Horon Holding, supra, 341 N.J. Super. at 130. Blanket assertions of the privilege are inappropriate. Ibid. Thus, at the continued deposition, it will be necessary for Roden "to demonstrate that a protective order was necessary as to specific and discrete questions objected to on attorney-client privilege grounds, rather than by asserting a blanket objection to the deposition in its entirety." Ibid. It would behoove the parties to schedule the deposition at a time and place where the judge is available to consider specific objections if, and as, made.

Affirmed in part, reversed in part. The appeal in A-4682-11 is dismissed.

I hereby certify that the foregoing is a true copy of the original on file in my office.

CLERK OF THE APPELLATE DIVISION


Summaries of

V.K. v. N.J. Mfrs. Ins. Co.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION
Aug 26, 2013
(App. Div. Aug. 26, 2013)
Case details for

V.K. v. N.J. Mfrs. Ins. Co.

Case Details

Full title:V.K., M.K. and G.R., Infant Minors, by their Guardian Ad Litem, ROCCO…

Court:SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION

Date published: Aug 26, 2013

Citations

(App. Div. Aug. 26, 2013)