New Jersey Insurance law attorney Jared Stolz comments on RSI Bank v The Providence Mutual Fire Ins
Recently, the New Jersey Supreme Court touched on many issues to consider for insurance law practitioners in cases involving PTI restitution and indemnification agreements. Jared Stolz, Esq. wrote a review of the case.
By: Stolz and Associates
"Third-party defendant Dr. George Likakis was charged with aggravated arson and insurance fraud after a fire destroyed a residential building that he owned." As part of the pretrial intervention process (PTI), Likakis was ordered to pay approximately $11,000 to Providence Mutual for payments it had already made to RSI Bank, the mortgage holder, and to indemnify Providence for undetermined future liability to RSI arising from the arson. Likakis paid the specified restitution amount during the one-year PTI period, but did not satisfy the indemnification provision as the litigation between Providence and RSI Bank had not yet completed. "With the prosecutor's consent and with no discussion of the indemnification provision, the PTI court terminated Likakis's PTI supervision and dismissed his indictment."
In subsequent civil litigation, Providence sought to enforce the indemnification provision against Likakis in its third-party complaint. After settling the claim with RSI for $353,536.90, Providence sought to recover $243,890.60 on the basis of the indemnification provision. Trial court enforced the indemnification and appellate division affirmed.
Likakis' argument at all stages of the appeal was that trial court lacked the jurisdiction to enforce the restitution order and that only the PTI court was authorized to enforce.
Supreme court's consideration addressed two points. First, in order for a restitution order to be proper, the court has to carefully examine the defendant's ability to pay. Because the purpose of PTI restitution is at least in part rehabilitative, the restitution amount must take into consideration the ability to pay. Here, the open-ended order of indemnifying Providence's losses obviously does not evaluate whether Likakis actually could pay such indemnification amount. Further, the record was entirely devoid of any examination of Likakis' ability to pay the indemnification. In addition, the PTI proceeding terminated without any mention of the outstanding indemnification at the end of the one year period. Thus, the supreme court concluded, that Likakis had no obligation to make further restitution payments arising from the PTI agreement. Supreme court also noted that PTI indemnification agreement was not admissible evidence in a civil litigation anyway. Therefore, trial court's ruling was reversed and remanded.
The case presents many issues to consider for insurance law practitioners in cases involving PTI restitution and indemnification agreements, notes Jared Stolz, Esq.
The case is RSI Bank v. The Providence Mutual Fire Insurance Company, (A-079116)
*** Jared Elliott Stolz is an attorney in New Jersey, focusing on insurance law and litigation. He is the managing partner of Stolz and Associates.
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