Archive for the tag 'insurance law NJ'

NJ Supreme Court rules that a claim against insurer for bad faith can be decided by a jury.

SteveK June 15th, 2011

On June 14, 2011 the New Jersey Supreme Court ruled that a claim for bad faith against an insurer for failure to settle a case within the limits of an insurance policy is to be decided by a jury.  Wood v. New Jersey Manufacturers Insurance Co. involved a claim by Karen Wood who was bitten by a dog when delivering mail in a condominium complex. New Jersey Manufacturers (NJM) insured the owner of the dog and defended the case under the policy. Prior to trial an arbitrator assessed the damages as $600,000, and apportioned the award 90% to the owner of the dog and 10% to the condominium association.  The arbitration award was rejected by the defendant’s insurer and the matter proceeded to trial. Prior to trial NJM offered to settle the case for $300,000; however, the offer was rejected. The plaintiff did agree to settle the case at or near the policy limits of $500,000. Prior to trial both defense counsel and NJM’s claims handler recommended payment of the policy limits, but NJM’s claims committee refused to increase the offer. In accordance with the Rova Farms decision, the plaintiff placed NJM on notice that the offer was in bad faith.  The matter went to trial and  the jury awared the plaintiff damages  in the amount of $2,422,000. The jury also assessed 51% of the liability to the dog owner. The trial court molded the verdict so that the dog owner was responsible for $1,408,320.33 of the judgment. NJM paid the $500,000 policy limits. The defendant assigned her claim for bad faith against NJM to the plaintiff so that plaintiff could pursue NJM for the judgment in excess of the policy limits. Plaintiff filed a motion for summary judgment which was granted. On appeal, the defendant, NJM, argued that summary judgment was improper for a variety of reasons, including that the matter should have been decided by a jury.  The Appellate Division remanded to the trial court for more specific findings of fact and for the trial court to determine if the matter should be decided by a jury. The N.J. Supreme Court granted certification on the sole issue of whether such claims should be decided by a jury. The Supreme Court decided that this was not an issue of whether or not there is coverage under the policy as is typically contained in a declaratory judgment action, but is a “garden variety” contract action based upon the covenant of good faith and fair dealing which is contained in all contracts.  The Court determined that the claim was legal in nature, not equitable, and was, therefore, to be decided by a jury. The Court was careful to note that not every Rova Farms-bad faith case must be tried to a jury, as the parties may elect to waive the jury either by not demanding it in the first instance, or where the parties agree that a bench trial would be more fitting.

Once a jury trial is demanded in a pleading in New Jersey, both parties must consent to waive the jury demand unless there is no right to a jury for the claims. It is interesting to note that only the plaintiff demanded a jury trial in the pleadings of this case, but that it was NJM that insisted on the jury trial. NJM’s position was joined by the amici curiae Insurance Council of New Jersey, and the Property Casualty Insurers Association of America.  Whether the decision to assert the jury right was a strategic maneuver to avoid an adverse decision and keep the matter open for further negotiation, or was truly an assertion of a substantive right, the decision reveals the importance of assessing whether a jury demand should be included in the initial complaint or answer as the demand may be a significant factor in the overall handling and final trial of a case.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in insurance coverage. For additional information about the matters in this bulletin or in the firm’s insurance practice, please contact Steven A. Kunzman, Esq. who heads our Insurance Coverage Department.

 

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Insurance Policy Equitably Reformed – Coverage Denial Not Bad Faith

SteveK September 10th, 2009

      In a recent unreported decision, Rodriguez v. New Jersey Underwriting Ass’n, the New Jersey Appellate Division affirmed a decision reforming a homeowner’s insurance policy on equitable grounds. In the case, Diomedes Gonzales deeded his home to his former non-marital partner, Rosa Rodriguez. Prior to the transfer, Gonzalez had purchased insurance from NJUIA.  Although neither the mortgage holder nor the insurer were informed of the transfer, all payments were made on both from February 2000 until the time of an accidental fire which destroyed the house on September 2004.  NJUIA denied coverage on the basis that Gonzalez did not have an insurable interest in the home. Plaintiffs, Gonzalez and Rodriguez, instituted a declaratory judgment action seeking reformation of the policy and payment of the loss. The trial judge held that reformation was appropriate on equitable grounds, finding that NJUIA’s collection of premiums coupled with its failure to refund the premiums after declining the claim made it an appropriate case for policy reformation. The Court also justified the decision by concluding that NJUIA’s actions constituted unjust enrichment, and that there was no “gamesmanship” or fraud by the plaintiffs.

       After the trial and award of coverage, plaintiffs filed a motion to be able to assert a claim against NJUIA for breach of the covenant of good faith and fair dealing. In affirming the denial of the motion, the Court restated the reasoning of  Picket v. Lloyds, 131 N.J. 457, 67 (1993) that a finding of bad faith requires there to be no “fairly debatable” reason for denial  of a claim or where there is an unreasonable delay in processing a claim. Since the decision of NJUIA to deny the claim was “fairly debatable” there was no basis for a claim of bad faith to be sustained; therefore the denial of the motion was affirmed.

 

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of insurance companies in coverage matters. For additional information about the matters in this bulletin or in the firm’s Insurance Coverage Practice, please contact Steven A. Kunzman, Esq. 

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Coverage must be provided where wind damage to one floor requires related repairs to undamaged floors of building

admin August 19th, 2009

In DEB Associates v. Greater New York Mutual Insurance Company, (NJ App. Div.- approved for publication) the court held there is insurance coverage for the costs to update and correct construction code deficiencies on floors of a building arising from wind damage to another floor. The seventh floor of the building had been damaged from a windstorm. When the code officials inspected the damaged floor, they discovered that the walls had been secured to the concrete flooring with mortar, but not steel angle irons, as is presently required under the building code.  There was no evidence that the failure to use angle irons violated the code when the building was constructed.

The trial court found that the evidence was undisputed that the “repairs to the other floors would not have been required if the seventh floor wall had not collapsed and also that the angle irons were required [to be installed on all floors] as a consequence of the December 2003 partial collapse.” Although the parties agreed that the repair of the seventh floor required GNY to pay to reconstruct that floor in accordance with the current code, they disagreed as to coverage for repairs to the separate, undamaged portions of the building.

After reviewing case law from other jurisdictions, and restating that coverage sections of an insurance policy are to be liberally construed in favor of coverage; that exclusions are to be narrowly construed, and that ambiguities are to be construed against the insurer, the court concluded that since there was a causal connection between the collapse of the seventh floor wall and the requirement to bring the other floors in compliance with the existing building code, there is coverage for the corrective work. The court specifically stated that the decision was limited to the facts of the case, and that it may be different if the code problems were unrelated to the collapse of the wall. Since, however, the work to install angle irons to the remainder of the building was directly related to the cause of the initial collapse, involving the same structural part of the building and the same building code provisions. The court also stated that while the policy specifically excluded pre-existing code violations, the policy did not specifically exclude situations where a covered structure is grandfathered under the code but lost that status due to the occurrence. The court concluded that if the insurer had intended to exclude coverage in these situations, it could have written the policy to specifically exclude the coverage.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of insurance companies in coverage matters. For additional information about the matters in this bulletin or in the firm’s Insurance Coverage Practice, please contact Steven A. Kunzman, Esq. 

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