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Keywords

contractsettlementbreach of contractdamagesattorneyliabilitytrialmalpractice

contractsettlementdamagesappealtrial

Related Cases

Lieberman v. Employers Ins. of Wausau, 84 N.J. 325, 419 A.2d 417

Facts

Howard Lieberman, a neurosurgeon, was sued for malpractice by a former patient, Philip DeSarno, after performing an arteriogram. Lieberman had a malpractice insurance policy with Employers Insurance of Wausau, which required his consent for any settlement. Although Lieberman initially consented to a settlement, he later revoked that consent, expressing a desire to go to trial. Despite this revocation, the insurer settled the claim without his approval, leading Lieberman to sue for breach of contract and the attorney for breach of the attorney-client relationship.

Lieberman instituted suit against Employers on October, 2, 1975 seeking recovery of the surcharge premium. The gravamen of Lieberman's complaint was that Employers, by executing a settlement of the DeSarno claim without effective consent, had breached its contract of insurance with Lieberman.

Issue

Whether the insured's written consent to the settlement of a claim can be revoked prior to the execution of any settlement, and whether an attorney retained by the insurance carrier can settle a claim against the wishes of the insured.

The questions presented by this appeal are as follows: (1) whether the insured's written consent to the settlement of a claim, a consent expressly required by the insurance policy, may be revoked or withdrawn by the insured prior to the execution of any settlement.

Rule

The consent of the insured to authorize the insurer to effect a settlement is revocable in the absence of a contrary provision in the insurance policy.

We therefore hold that consent of the insured to authorize the insurer to effect a settlement is revocable in the absence of a contrary provision.

Analysis

The court found that Lieberman's consent to settle was revocable since the insurance policy did not contain a provision making the consent irrevocable. The insurer's reliance on the initial consent was deemed unreasonable, especially after Lieberman communicated his desire to proceed to trial. The attorney, McDonough, breached his duty to Lieberman by settling the case without his consent, which constituted malpractice.

In this case, it should be emphasized that the insurance contract contained no express provision that would either render the insured's consent to settlement irrevocable or prevent such a consent from being withdrawn once it has been given.

Conclusion

The court reversed the trial court's dismissal of Lieberman's claims against the insurer and remanded the case for a new trial on damages. The attorney's liability was affirmed, but the damages were also remanded for a new trial.

The Appellate Division reversed the Law Division's judgment in favor of Employers and remanded that claim for trial.

Who won?

Howard Lieberman prevailed against the insurer and the attorney, as the court found that both had breached their respective duties to him.

The Appellate Division reversed this dismissal and remanded the case for a trial against Employers and for a new trial on damages against McDonough.

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