Insurance Coverage Update - March 2015

 

March 2015

This newsletter contains summaries of New York and New Jersey insurance coverage decisions entered during the previous month. If you see a topic that interests you, click the link to read more and obtain a full copy of the case. For further information, please contact the Newsletter Editors,   Jonathan McHenry,  Neil Mody,   William P. Krauss  and William D. Deveau  at (973) 535-0500 or email us by clicking here. CONNELL FOLEY LLP Roseland 85 Livingston Avenue Roseland, NJ 07068 973.535.0500 New York 888 Seventh Avenue 9th Floor New York, NY 10106 212.307.3700 Philadelphia 1500 Market Street 12th floor, East Tower Philadelphia, PA 19101 215.246.3403 Jersey City Harborside Financial Center 2510 Plaza Five Jersey City, NJ 07311 201.521.1000 Cherry Hill Liberty View Building 457 Haddonfield Road Suite 230 Cherry Hill, NJ 08002 856-317-7100 Jersey City  Port Liberte 23 Chapel Avenue Jersey City, NJ 07305 201.521.0200 www.connellfoley.com

NEW JERSEY Estoppel - Reservation of Rights District Court Denies Motion to Dismiss Insurer's Declaratory Judgment Action N. Am. Specialty Ins. Co. v. Diantonio, 2015 U.S. Dist. LEXIS 22461 (D.N.J. Feb. 25, 2015) The District Court of New Jersey denied a policyholder's motion to dismiss its insurer's declaratory judgment action, reasoning that the policyholder's position that the insurer must be estopped from denying coverage was grounded in reservation of rights letters that could not properly be at the motion to dismiss stage of the matter. A passenger aboard a commercial charter boat slipped and sustained an injury while on the vessel. He brought suit against the boat's owner, who, in turn, sought coverage from the vessel's insurer. Although the insurer argued it did not owe coverage because the injury occurred while more passengers were on the boat than the maximum allowed by the policy, the insurer provided a defense in the underlying action pursuant to a reservation of rights. The subsequent declaratory judgment action brought by the insurer fell under the federal district Court's admiralty jurisdiction because the matter concerned a marine insurance contract.   Read the full summary... Bad Faith Bad Faith Component of Suit Severed from Underlying Coverage Dispute Wacker-Ciocco v. Government Emples. Ins. Co., 2015 N.J. Super. LEXIS 38 (App.Div. Mar. 16, 2015) Appellate Division reverses trial court that failed to sever bad faith claim and attendant discovery from consideration of whether the policyholder was entitled to uninsured/underinsured motorist coverage. The policyholder was seriously injured in a motor vehicle accident when she was rear-ended by another vehicle. She settled her claim with the other vehicle's driver for $99,000 ($1,000 less than the limit on his policy). Her medical expenses, though, exceeded $300,000, so she demanded $200,000 from her insurer in uninsured/underinsured motorist benefits. She also insisted that her UIM claim be arbitrated. The parties were unable to resolve their dispute. The policyholder then filed suit, asserting a claim for the UIM benefits and alleging that the insurer acted in bad faith.   Read the full summary... NEW YORK Homeowner's Policy - Water Exclusion Court of Appeals Declines to Interpret Exception to Exclusion as Providing Coverage Under Homeowner's Policy for Loss Caused by Flood   Platek v. Town of Hamburg, et al., 2015 N.Y. LEXIS 252 (N.Y. Feb. 19, 2015) The New York Court of Appeals reversed the judgment of the Appellate Division and granted the insurer's motion for summary judgment finding that the damage to the policyholder's property was excluded under the applicable insurance policy. The policyholder's property was damaged when a subsurface water main abutting their property ruptured, causing water to flood into their finished basement. The policyholders submitted their claim to their homeowner's insurance carrier. The applicable insurance policy specifically excluded loss to property consisting of or caused by "water...on or below the surface of the ground, regardless of its source[, including] water...which exerts pressure on, or flows, seeps or leaks through any part of the residence premises." An exception to this exclusion, however, stated that the Insurer does cover sudden and accidental direct physical loss caused by fire, explosion or theft resulting from water on or below the surface of the ground.    Read the full summary... Estoppel  Insurer Estopped from Denying Coverage for Untimely Disclaimer First Mercury Ins. Co. v. Masonry Servs., Inc., 2015 N.Y. Misc. LEXIS 521 (N.Y. Sup. Ct. Feb. 23, 2015) The Supreme Court of New York grants Harleysville Insurance Company of New York's ("Harleysville") motion for summary judgment seeking a declaration that First Mercury Insurance Company ("First Mercury") must defend Harleysville's Named Insured, Great American Construction Corp. ("GA") in an underlying personal injury action. The plaintiff in the underlying action alleges that he was injured while working on a construction project where GA was the general contractor. Masonry Services, Inc. ("MSI"), another defendant in the underlying action was the subcontractor on the project pursuant to a written agreement between MSI and GA, which required that MSI obtain additional insured coverage for GA.      Read the full summary...

The cases annexed to this newsletter have been reproduced by Connell Foley LLP with the permission of LexisNexis. Copyright 2014, LexisNexis, a division of Reed Elsevier Inc. No copyright is claimed as to any part of the original work prepared by a government officer or employee as part of that person's official duties. ©2015 Connell Foley. The information contained in this electronic message and any attached document(s) is intended for the personal use of designated recipients. This document is for informational purposes only, and is a means of disseminating general information about judicial insurance coverage law developments. It is not to be interpreted as legal advice, which must always be tailored to individual needs and particular circumstances.

Insurance Coverage Newsletter - February 2015

February 2015 This newsletter contains summaries of New York and New Jersey insurance coverage decisions entered during the previous month. If you see a topic that interests you, click the link to read more and obtain a full copy of the case. For further information, please contact the Newsletter Editors,   Jonathan McHenry,  Neil Mody,   William P. Krauss  and William D. Deveau  at (973) 535-0500 or email us by clicking here. CONNELL FOLEY LLP Roseland 85 Livingston Avenue Roseland, NJ 07068 973.535.0500 New York 888 Seventh Avenue 9th Floor New York, NY 10106 212.307.3700 Philadelphia 1500 Market Street 12th floor, East Tower Philadelphia, PA 19101 215.246.3403 Jersey City Harborside Financial Center 2510 Plaza Five Jersey City, NJ 07311 201.521.1000 Cherry Hill Liberty View Building 457 Haddonfield Road Suite 230 Cherry Hill, NJ 08002 856-317-7100 Jersey City  Port Liberte  23 Chapel Avenue Jersey City, NJ 07305 201.521.0200 www.connellfoley.com NEW JERSEY Bad Faith New Jersey Supreme Court Holds Doctrine of Res Judicata Bars Plaintiff's Subsequent Claim for Bad Faith Wadeer v. New Jersey Manufacturers Insurance Company,  2015 N.J. LEXIS 132 (Feb.18, 2015) The New Jersey Supreme Court holds that where an insured's bad faith claim was raised, fairly litigated, and determined by the trial court in the underlying litigation, the insured is barred by the doctrine of res judicata from asserting the bad faith claim in a separate, subsequent action. The claim arose when the insured suffered injuries in a motor vehicle accident that occurred when the insured attempted to avoid an unidentified vehicle. The insured notified his insurer of his uninsured motorist (UM) claim, and demanded payment of his policy limits of $100,000.00.  The insurer declined to do so, and the matter proceeded to arbitration. The panel determined that the insured was 30% liable for the accident and that the phantom vehicle was 70% liable, and that the insured was entitled to a net award of $87,500.00. The insurer rejected the award and demanded a trial. Counsel for the insured wrote to the insurer expressing his belief that the insurer's actions constituted bad faith. Read the full summary... Bad Faith Supreme Court Finds No Bad Faith When Relying Upon Unpublished Appellate Division Decision and Plain Reading of Policy Language  Badiali v. New Jersey Manufacturers Insurance Company,  2015 N.J. LEXIS 133 (Feb. 18, 2015) The New Jersey Supreme Court ruled that an insurer's decision to reject an arbitration award was "fairly debatable" and supported by a reasonable interpretation of the policy as well as a prior, unpublished Appellate Division opinion, so as to preclude an award of counsel fees and other consequential damages to the insured under a theory of bad faith. The claim arose when the insured was struck in the rear by an uninsured motorist. The insured maintained uninsured motorist (UM) coverage with his insurer, and was also covered under his employer's policy. The insured filed a UM claim, which proceeded to arbitration and resulted in an award of $29,148.62 in favor of the insured. Both the insurer and the employer's carrier were contractually and statutorily obligation to share the award equally, in the amount of $14,574.31. The employer's carrier paid its half and the insurer rejected the award, relying on language in the policy that permitted either party to reject an award in which the total amount exceeded $15,000.00, and demanded a trial.     Read the full summary... Declaratory Judgment - Remand Federal Court Remands Insurance Coverage Action Back to State Forum Kane Builders, Inc. v. Cont'l Cas. Co., 2014 U.S. Dist. LEXIS 172591 (D.N.J. Dec. 12, 2014) New Jersey District Court judge remanded back to New Jersey Superior Court a declaratory judgment action that had previously been removed by the defendant insurer. Considerations of judicial economy mandated that the state court hear both the pending underlying suit and the insurance coverage suit, as they featured interconnected parties and issues. Various entities brought suit in New Jersey Superior Court against the insured, a builder who allegedly bore responsibility for defective construction of a structure. The entities' suit included a count against the builder's insurer for a judgment declaring that the insurer was obligated to defend and indemnify the builder in the action. Meanwhile, the insured brought a separate New Jersey state court action against the insurer. This second complaint -- like the foregoing one -- sought a judgment declaring that the insurer was obligated to defend and indemnify the insured in the underlying construction action. The insurer removed this second claim to federal court.      Read the full summary... The cases annexed to this newsletter have been reproduced by Connell Foley LLP with the permission of LexisNexis. Copyright 2014, LexisNexis, a division of Reed Elsevier Inc. No copyright is claimed as to any part of the original work prepared by a government officer or employee as part of that person's official duties. ©2015 Connell Foley. The information contained in this electronic message and any attached document(s) is intended for the personal use of designated recipients. This document is for informational purposes only, and is a means of disseminating general information about judicial insurance coverage law developments. It is not to be interpreted as legal advice, which must always be tailored to individual needs and particular circumstances.

Insurance Newsletter Update January 2015

NEW JERSEY                                                                                 January 2015 Named Insured Endorsements Appellate Division Finds Two of Four Named Insured Endorsements Obviate Coverage  Newport Assocs. Phase I Developers Ltd. P'ship v. Travelers Cas. & Sur. Co., 2015 N.J. Super. Unpub. LEXIS 103 (App. Div. Jan. 16, 2015)  The Appellate Division examined several named insured policy endorsements from different policy years and found that the plain language of two of them could not support a finding of coverage for subsidiaries of holding company insureds and that the plain language of two others created enough ambiguity to require remand to the trial court for a trial. Subsidiaries to a holding company faced environmental liability stemming from coal tar emanating from property they owned in tandem with other partners. The subsidiaries brought a declaratory judgment action against insurers who had issued policies covering the holding company. The Law Division granted summary judgment to the insurers, and the subsidiaries appealed to the Appellate Division, arguing that they qualified as "insureds" under the policy and that the policy's absolute pollution exclusion clause did not apply. Read the full summary... Policy Exclusions Appellate Division Finds No Coverage under Fungus Exclusions Hurst v. Am. Zurich Ins. Co., 2014 N.J. Super. Unpub. LEXIS 2866 (App. Div. Dec. 11, 2014) New Jersey Appellate Division finds fungus exclusion operates to obviate coverage.  The Court decided that the exclusion - - which stated it applied to "Bodily Injury and Property Damage Liability" - - applied to coverage under the products-completed operation provision, as the broad "Bodily Injury" term encompassed the more narrow products-completed operations term.  Teachers were injured after being exposed to mold in their classrooms, and they brought suit against the classroom unit's designer.  After the designer defendant defaulted, the plaintiffs brought a declaratory judgment action against two of the designer's commercial general liability insurers - - one of whom had issued a policy effective September 1, 2003 through September 1, 2004, while the other had issued a policy effective September 1, 2004 through September 1, 2005.    Read the full summary... Subrogation Rights Appellate Division Remands to Allow Participation of Necessary Party in Subrogation Dispute Nucci v. The Am. Ins. Co., 2014 N.J. Super. Unpub. LEXIS 2859 (App. Div. Dec. 11, 2014) New Jersey Appellate Division determines that novel dispute regarding whether plaintiff insured's settlement with tortfeasor co-defendants interfered with the insurer co-defendant's subrogation rights could not proceed without participation of settling tortfeasors. The insured sought coverage under her homeowner's policy for damage she claimed was caused by blasting operations conducted during construction on an adjacent property.  The insurer disclaimed coverage, so the insured brought suit, seeking coverage from the insurer and recovery in tort from the entities involved in the blasting and construction.  The insured eventually settled with the non-insurer co-defendants, though she alleged the agreement did not fully compensate for her loss.     Read the full summary... Anti-Concurrent/Anti-Sequential Clause Anti-Concurrent/Anti-Sequential Clause Bars Coverage for Loss with Both Covered and Excluded Causes Ashrit Realty, LLC, Bhavika Realty, LLC v. Tower National Insurance Company, 2015 N.J. Super. Unpub. LEXIS 107 (January 20, 2015) New Jersey Appellate Division holds that when two events, one covered under an insurance policy and the other excluded, contribute to a single property loss, coverage for the loss is excluded when the policy includes an anti-concurrent/anti-sequential cause. The claim arose from damage sustained to the insured's gas station and convenience store. The property incurred some damage during a storm on August 14, 2011, and then more extensive damage during Hurricane Irene two weeks later. Specifically, after the hurricane a large pipe that ran underneath the property collapsed, causing a large hole to form. The collapsed pipe also caused substantial leaking, which in turn led to soil erosion that caused the rear portion of a building on the property to collapse. Read the full summary... NEW YORK Non-Cumulation Clause New York Court of Appeals Finds Insurer's Maximum Liability is Limited to a Single Policy Limit for Successive Exposure to Lead Paint Nesmith v Allstate Ins. Co., 2014 N.Y. LEXIS 3350 (N.Y. Nov. 25, 2014) The New York Court of Appeals found a noncumulation clause contained in a homeowner's policy limited the insurer's maximum total liability in a case where members of different families were successively exposed to lead paint in the same apartment. Residents of a two family home sought to recover from their landlord for personal injuries caused by lead exposure.  The first family resided in the home from November 1992 until September 1993 with the second family inhabiting the same apartment thereafter.  The basis for the lead exposure was a July 1993 Department of Health violation notification regarding elevated blood lead level in one of the children - - that was corrected by the landlord - - and a similar December 1994 violation.  The landlord's insurer settled the first family's claim for $350,000 and the second family's claim for $150,000 noting that it had exhausted the policy limits.  The second family brought the present action arguing that the $500,000 limit applied to each family's claim as each was a separate loss "because they did not result 'from continuous or repeated exposure to the same general conditions.'" Read the full summary... Late Notice / Additional Insured Court of Appeals Finds that Insured Could not Establish Sufficient Relationship with Broker to Avoid Non-compliance with Notice Provision  Strauss Painting, Inc. v Mt. Hawley Ins. Co., 2014 N.Y. LEXIS 3347 (N.Y. Nov. 24, 2014)  The Metropolitan Opera Association, Inc. (the "Met") entered into a contract with Strauss/Creative to perform work at the Met's premises.  Strauss/Creative are separately owned entities with the same address and share employees with Strauss handling non-unions jobs and Creative handling union jobs.  Thus, since the contract required union work, Straus (the "Contractor") acted as the contractor and subcontracted the work to Creative (the "Subcontractor").  The contract contained the following insurance and indemnity provisions: (1) workers' compensation insurance; (2) owners and contractors protective liability ("OCP") insurance with a combined single limit of $5 million and specifies that "[l]iability should add [the Met] as an additional insured and should include contractual liability and completed operations coverage"; and (3) comprehensive general liability (CGL) insurance, with combined coverage for property and bodily injury with a minimum single limit of $5 million. The Met was provided with a certificate of insurance for a CGL policy issued to the Subcontractor, stating that the Met and Strauss were additional insureds under the policy.  The court noted that the Met was never provided with an OCP policy and that neither the Contractor or Subcontractor purchased such coverage.   Read the full summary...

This newsletter contains summaries of New York and New Jersey insurance coverage decisions entered during the previous month. If you see a topic that interests you, click the link to read more and obtain a full copy of the case. For further information, please contact the Newsletter Editors, Jonathan McHenry, Neil Mody, William P. Krauss  and William D. Deveau at (973) 535-0500 or email us by clicking here. The cases annexed to this newsletter have been reproduced by Connell Foley LLP with the permission of LexisNexis. Copyright 2014, LexisNexis, a division of Reed Elsevier Inc. No copyright is claimed as to any part of the original work prepared by a government officer or employee as part of that person's official duties. ©2015 Connell Foley. The information contained in this electronic message and any attached document(s) is intended for the personal use of designated recipients. This document is for informational purposes only, and is a means of disseminating general information about judicial insurance coverage law developments. It is not to be interpreted as legal advice, which must always be tailored to individual needs and particular circumstances.  Should you wish to unsubscribe from this list, and remove yourself from future Connell Foley mailings, please reply to contact@connellfoley.com, contact@connellfoley.com, with UNSUBSCRIBE  in the subject line.

Insurance Coverage Update November 2014

NEW JERSEY                                                                                November 2014 Priority of Coverage - Excess Insurance True Excess Policy Takes Priority of Coverage Over Primary Liability Policy Containing Excess Other Insurance Clause Encompass Ins. Co. v. Quincy Mutual Fire Ins. Co., 2014 N.J. Super. Unpub. LEXIS 2684 (App. Div., November 14, 2014) The New Jersey Appellate Division ruled that an excess policy that generally provided that its  "[c]overage is excess over any other insurance" was not superseded in priority of coverage by virtue of a primary policy that contained an excess "other insurance" clause.  The Court also remanded so the trial court could further consider whether attorney's fees and/or prejudgment interest were appropriate. The claim arose in connection with a traffic accident in which a motorcyclist was severely injured after colliding with a motor vehicle driven by a real estate agent returning to her office from a title closing. The motorcyclist brought a claim against the real estate agent and her employer, and both defendants sought coverage from their respective insurers. Read the full summary... Apportionment - Multiple Policies District Court Untangles Six-Way Priority of Coverage Dispute Arising from Multi-Million Underlying Personal Injury Settlement Carolina Cas. Ins. Co. v. Travelers Prop. Cas. Co., 2014 U.S. Dist. LEXIS 150002 (D.N.J. Oct. 22, 2014) The District Court apportioned liability in connection with a $5,000,000 personal injury settlement among six insurance policies.  In so doing, it examined how the New Jersey Omnibus motor vehicle insurance law and a subcontracting agreement interacted with policy terms. An employee of a subcontractor hired to pick up concrete road barriers from a construction staging area suffered a severe injury to his foot while the general contractor's employees moved materials into his trailer.  The employee's subsequent negligence claim settled for $5,000,000. The general contractor's liability insurer contributed its $1,000,000 limit to fund the settlement while the remaining $4,000,000 was paid by the general contractor's excess liability insurer.  Both contributing insurers sought to recover amounts under other primary and excess policies covering, respectively, the subcontractor (who owned the trailer) and a third party (who leased the tractor to the subcontractor).     Read the full summary... NEW YORK Claims Made and Reported - Interrelated Wrongful Acts Court Finds Letter Seeking Information from the Insured and Requesting Insured Cease Business Operations Constitutes a Demand for Injunctive Relief Weaver v. Axis Surplus Ins. Co., 2014 U.S. Dist. LEXIS 154746 (E.D.N.Y. Oct. 30, 2014) The EDNY found that no Directors & Officers coverage was available to an insured for an indictment related to its business as the claim and a prior demand letter constituted interrelated wrongful acts first made prior to the inception of the policy period. The insured, the President and CEO of a vending machine sales company, sought insurance coverage under a Director & Officers Claims Made Coverage Policy following the receipt of an indictment filed in the United States District Court for the Southern District of Florida (hereinafter the "2012 claim").  The indictment contained allegations of conspiracy, mail fraud and wire fraud.  Shortly before the indictment was filed, the insured received a letter informing him that he was identified as a "target of a federal grand jury investigation in the Southern District of Florida with respect to possible criminal violations including mail fraud, write fraud and conspiracy."  The insured forwarded this to the insurer whom denied coverage.  Upon receipt, the insurer denied coverage on the following bases: (1) the claim was not first made during the policy period as it arose from the same "wrongful acts" as a prior claim, a 2007 letter from the Securities Division of the Office of the Attorney General of Maryland (hereinafter the "2007 claim"); and (2) the 2007 claim occurred prior to the "Pending or Prior Claim Date" and the 2007 claim and the 2012 claim constitute interrelated wrongful acts. Read the full summary... Allocation New York Trial Court Finds Policyholder Responsible for Allocated Share of Environmental Liabilities Attributable to Period of Self-Insurance Pursuant to New York Regulation Prohibiting Coverage for Sudden and Accidental Pollution Keyspan Gas E. Corp. v Munich Reins. Am., Inc, 2014 N.Y. Misc. LEXIS 4469 (N.Y. Sup. Ct. Oct. 17, 2014) The New York Supreme Court finds that pro rata time on the risk allocation methodology applies to long-tail environmental contamination claim, with the insured being responsible for the period of 1971-1982 when pollution coverage was barred by statute but finds a question of fact regarding the insured's failure to purchase coverage when it was available in the marketplace. An excess insurer sought a declaration that a pro rata time on the risk approach should be applied to property damage at two manufacturing plants and that the insurer's share should not include those damages that occurred outside its policy periods.  Further, the insurer argued that the insured should be considered self-insured for those years in which the insured declined to purchase coverage that was available in the marketplace and those years - - 1971 to 1986 - - in which Insurance Law § 46 prohibited the issuance of pollution insurance.  In opposing summary judgment, the insured argued that New York follows the "availability of insurance" allocation methodology and as such, should allocate costs in those periods.  Furthermore, the insured argued it was the insurer who bears the burden of demonstrating the availability of insurance. Read the full summary...

This newsletter contains summaries of New York and New Jersey insurance coverage decisions entered during the previous month. If you see a topic that interests you, click the link to read more and obtain a full copy of the case. For further information, please contact the Newsletter Editors, Jonathan McHenry, Neil Mody, William P. Krauss  and William D. Deveau at (973) 535-0500 or email us by clicking here. The cases annexed to this newsletter have been reproduced by Connell Foley LLP with the permission of LexisNexis. Copyright 2014, LexisNexis, a division of Reed Elsevier Inc. No copyright is claimed as to any part of the original work prepared by a government officer or employee as part of that person's official duties. ©2014 Connell Foley. The information contained in this electronic message and any attached document(s) is intended for the personal use of designated recipients. This document is for informational purposes only, and is a means of disseminating general information about judicial insurance coverage law developments. It is not to be interpreted as legal advice, which must always be tailored to individual needs and particular circumstances.  Should you wish to unsubscribe from this list, and remove yourself from future Connell Foley mailings, please reply to contact@connellfoley.com, contact@connellfoley.com, with UNSUBSCRIBE  in the subject line.