New Jersey Insurance Blog

For over 100 years, it has been well established under New Jersey law that an insurance broker owes a duty to the insured, its client, to act in good faith and with reasonable skill in performing its services.  That duty, however, is not unlimited.  For instance, absent a “special relationship,” an insurance broker has no duty to recommend that its client purchase higher limits of coverage or even advise its client that such limits are available.  See Wang v. Allstate Ins. Co., 125 N.J. 2, 11-12 (1991).  That principle recently was reaffirmed by the New Jersey Appellate Division in C.S. Osborne & Co. v. Charter Oak Fire Insurance Co., 2017 WL 1548796 (App. Div. May 1, 2017).

The insured in that case, a family-owned business that manufactured tools used for leatherwork and upholstery, among other things, had manufacturing facilities in Harrison, New Jersey, and St. Louis, Missouri.  The insured had a twelve-year relationship with Bollinger, Inc., its insurance broker.  Over that time, the broker would unilaterally review the insured’s coverage and make recommendations.  For instance, the broker had made suggestions about purchasing coverage for terrorism, employment practices, earthquake, product recall, pollution liability, directors and officers liability, among other things.

The insured’s property insurance policy, which was in effect on the date that Superstorm Sandy hit New Jersey, contained a “water” exclusion, although it also provided $1 million in flood coverage.  In connection with the renewal of the prior year’s policy, the broker informed the insured:

Higher limits or sub-limits may be available so please advise us if you are interested in higher limits options so that we may secure quotations for your consideration.

However, the broker did not specifically recommend that higher limits should be purchased; it left that decision to the insured.

As a result of Superstorm Sandy, the insured’s New Jersey facility sustained significant flood damage in excess of the $1 million flood limit.  The insured subsequently sued its broker, arguing that the broker should have recommended a higher flood limit.  The insured retained an expert who “opined that because elevations were low with a river nearby, a discussion about flooding should have occurred” between the insured and the broker.  Id. at *2.

The trial judge grated summary judgment in favor of the broker, and that decision was affirmed on appeal.  Despite the  twelve-year relationship between the parties, the court found that there was no “special relationship” that would have given rise to a duty to recommend higher coverage limits.  In order for a special relationship to be found, an insured must establish “something more” than a traditional broker-client relationship.  See, e.g., Triarsi v. BSC Group Services, LLC, 422 N.J. Super. 104, 116-17 (App. Div. 2011).  Reasonable reliance by the insured on the broker’s recommendations may give rise to such a relationship.  In Osborne, however, the court found that “Bollinger never told plaintiff anything that would reasonably cause plaintiff to rely on his quotes as recommendations for the proper amount of insurance coverage.”  Id. at *6.  The court went on to note:

Bollinger’s insurance proposal also clearly informed plaintiff of its ability to offer more insurance coverage.  Bollinger did not have any more information than plaintiff, and nothing in the record shows Bollinger acted to cause plaintiff to rely on it to recommend the proper amount of insurance coverage.

Id. at *6.

While insureds may be surprised to learn that their broker has no duty to recommend appropriate levels of insurance coverage, the Osborne decision, in and of itself, is not surprising.  As noted, over twenty-five years ago the New Jersey Supreme Court held that a broker does not owe such a duty to its client.  One possible way for an insured to get around this is simply for the insured to inform the broker that it is seeking the “best available coverage.  See Harrington v. Hartan Brokerage, Inc., 2014 WL 2957756, *8 (N.J. Super. Ct. App. Div. July 2, 2014) (court held that “by asking for the ‘best available’ insurance, the insured put the agent on notice that he was relying on the agent’s expertise to obtain the desired coverage”).

© William D. Wilson and NJInsuranceBlog.com, 2017.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to William D. Wilson or NJInsuranceBlog.com with appropriate and specific direction to the original content.

Property insurance policies, like other insurance policies, contain an overall limit of liability, which is the maximum amount that the insurance company will pay for any given loss.  In addition to an overall limit, policies may also contain “sublimits” of liability that apply to certain types of perils or damage.  A sublimit is less than the overall policy limit.  It is not uncommon to see sublimits pertaining to catastrophic losses, such as losses caused by hurricanes, earthquakes, and floods.  In addition, sublimits typically apply to business interruption losses and the cost to remove the debris resulting from a covered loss.

An issue that often arises in connection with large losses is whether an insured can “stack” multiple sublimits under a policy to increase its overall recovery.  In other words, can an insured recover under multiple sublimits as long as the total of the potentially applicable sublimits does not exceed the overall policy limit?  Resolution of that issue obviously turns on the particular policy language at issue.  However, courts do not always interpret policy language in the same way, which can give rise to inconsistent decisions.

In Oxford Realty Group Cedar v. Travelers Excess and Surplus Lines Company, A-85-15, 077617 (N.J. May 25, 2017), the New Jersey Supreme Court dealt with a stacking issue involving flood damage caused by Superstorm Sandy.  The insureds in that case were the owners and managers of an apartment complex located in Long Branch, New Jersey, which sustained significant flood damage.

The policy contained a $1 million sublimit for “all losses” caused by flood.  However, the policy also contained a separate, “additional” $500,000 sublimit for debris removal.  The insureds sought to recover $207,961.28 in debris removal expenses in addition to the $1 million in flood coverage.  The insurer denied any claim in excess of the $1 million flood sublimit.

The main policy form contained an exclusion for flood damage.  Flood coverage was added to the policy, however, by way of endorsement.  The endorsement provided that “[t]he most [Travelers] will pay for the total of all loss or damage caused by Flood in any one policy year is the single highest Annual Aggregate Limit of Insurance specified for Flood shown in the Supplemental Coverage Declarations,” which was $1 million. The endorsement further provided that the limit applied to “all losses covered under this policy … [o]ccurring at Insured Premises resulting from Flood to buildings, structures or property in the open within Flood Zone A … or property in or on buildings or structures located within such Flood Zones ….”  With respect to the potential application of multiple sublimits, the endorsement provided:

If more than one Annual Aggregate Limit of Insurance applies to loss or damage under this endorsement in any one occurrence, each limit will be applied separately, but the most [Travelers] will pay under this endorsement for all loss or damage in that occurrence is the single highest Annual Aggregate Limit of Insurance applicable to that occurrence.

The “single highest Annual Aggregate Limit of Insurance” that applied to the loss at issue was the $1 million flood sublimit.

The trial court held that the policy unambiguously limited the insureds’ maximum recovery to the $1 million flood sublimit.  The Appellate Division, interpreting the same policy language, reversed, concluding that the insureds could recover under both the flood and debris removal sublimits.  On further appeal, in a five-to-two decision, the New Jersey Supreme Court agreed with the trial court and reversed the decision of the Appellate Division.

The Court began its analysis by noting “that absent the Flood Endorsement, the Policy would not cover any flood damage.”  According to the Court, that endorsement “places a hard cap on the amount recoverable for flood damage.”  The Court noted that the policy specifically provides that “[t]he most [Travelers] will pay for the total of all loss or damage caused by Flood . . . is the single highest Annual Aggregate Limit of Insurance specified for Flood shown in … the Supplemental Coverage Declarations,” which was $1 million.  The Court further noted that the policy:

fortifies this hard cap by explaining that, even if multiple Annual Aggregate Limits of Insurance apply to flood damage, the Limit of Insurance specified in Section B.14 of the Supplemental Coverage Declarations is the most Travelers will pay. Section B.14 sets that Limit of Insurance at $1,000,000.

The Court observed that the Eighth Circuit’s decision in Altru Health System v. American Protection Insurance Co., 238 F.3d 961 (8th Cir. 2001), further supported its conclusion.  The court in that case dealt with similar policy language, and also concluded that the insured’s losses were capped by the flood sublimit.

The insureds argued that the policy was ambiguous and that, therefore, they were entitled to coverage under the contra proferentem and/or reasonable expectations doctrines.  The Court noted that, as a general rule, “courts construe insurance contract ambiguities in favor of the insured via the doctrine of contra proferentem.”  The Court correctly observed that “[s]ophisticated commercial insureds, however, do not receive the benefit of having contractual ambiguities construed against the insurer.”    As to whether the insureds were “sophisticated,” the Court noted that the policy at issue was a surplus lines insurance policy, which can only be obtained through a licensed surplus lines insurance broker.  The Court then noted:

Insureds procure surplus lines policies covering commercial risk through insurance brokers, thus involving parties on both sides of the bargaining table who are sophisticated regarding matters of insurance.

The Court also noted that “similar to the doctrine of contra proferentem, the doctrine of reasonable expectations is less applicable to commercial contracts.”  Under that doctrine, ambiguous and/or misleading language in an insurance policy is considered in light of the insured’s reasonable expectations as to coverage.  The Court did not rule out the doctrine’s application to commercial insurance policies.  It just found it to be “less applicable.”

Thus, it appeared that the Court was of the view that neither doctrine was applicable because the insureds in the case before it were sophisticated commercial insureds.  At the conclusion of its opinion, however, the Court stated that “[b]ecause we do not find the terms of the Policy ambiguous, we need not address Oxford’s contentions about contra proferentem or the doctrine of reasonable expectations,” thus rendering the Court’s comments dicta.

Justice Fernandez-Vina wrote the majority opinion, in which Chief Justice Rabner and Justices LaVecchia, Patterson, and Solomon joined.  Justice Albin wrote a dissent in which Justice Timpone joined.  The dissenting justices were of the view that the policy was “hopelessly ambiguous and needlessly complex,” somewhat dramatically comparing the policy language to the “Enigma code.”  Justice Albin summarized his position as follows:

Because reasonable minds can differ about the meaning and interplay of the flood insurance and debris removal clauses in the insurance policy and because Travelers drafted the ambiguous policy terms, I believe that the insured’s interpretation should prevail under the doctrines of contra proferentem and reasonable expectations.  I therefore respectfully dissent.

The flood sublimit clearly stated that it applied to “all loss or damage caused by Flood.”  The phrase “all loss or damage” is clear and unambiguous.  Moreover, the flood endorsement clearly stated that in the event multiple sublimits applied, the most Travelers would pay would be $1 million.  Thus, the majority reached the correct decision.  The Court’s decision also is consistent with sublimit decisions by courts in other jurisdictions, like Six Flags, Inc. v. Westchester Surplus Lines Ins. Co., 565 F.3d 948 (5th Cir. 2009), New Sea Crest Healthcare Ctr., LLC v. Lexington Ins. Co., 2014 WL 2879839 (E.D.N.Y. June 24, 2014), EL-AD 250 W. LLC v. Zurich Am. Ins. Co., 13 N.Y.S.3d 68 (N.Y. App. Ct. 2014), and Orient Overseas Assoc. v. XL Insurance America, Inc., 2016 WL 2770278 (N.Y. Sup. Ct. May 11, 2016), as well as Altru, which was specifically cited by the Court.

Justice Albin, on the other hand, essentially went with the “old school” view that insurance policies should be interpreted in such a way as to maximize coverage even when issued to sophisticated commercial insureds who are represented by equally sophisticated insurance brokers.  The majority decision represents a more moderate approach in interpreting insurance policies that is consistent with the approach the Court took in Templo Fuente De Vida Corp. v. National Union Fire Ins. Co., 224 N.J. 189 (2016), which was discussed in a prior blog post. See https://njinsuranceblog.com/failure-to-provide-timely-notice-under-claims-made-policy-results-in-forfeiture-of-coverage/

A copy of the Oxford Realty decision can be found here:  a_85_15

© William D. Wilson and NJInsuranceBlog.com, 2017.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to William D. Wilson or NJInsuranceBlog.com with appropriate and specific direction to the original content.

When an insurer pays an insurance claim, it becomes subrogated to the rights of its insured.  The rights of the insurer, however, are no greater than the rights of its insured.  Thus, any defenses that a potentially responsible party could assert against the insured can be asserted against the insurer.  It is not uncommon for contracts, especially lease agreements, to contain a “waiver of subrogation” clause.  A waiver of subrogation clause contained in an agreement entered into by an insured precludes an insurer from commencing a subrogation action against another party to that agreement.

An issue that recently was addressed by the Appellate Division is whether someone who is not a party to the agreement also can benefit from such a clause.  Based on the facts before it, the court concluded that it could not.

In Haftell v. Busch, 2017 WL 1077045 (N.J. Super. Ct. App. Div. March 22, 2017), the insurer for a residential tenant, Mitchell Haftell, commenced a subrogation claim against another tenant, Steven Busch, after it reimbursed its insured for damages resulting from a fire started by Mr. Busch.  The fire started after Mr. Busch discarded a lit cigarette while standing on the balcony of the apartment he shared with his wife and family.

After reimbursing its insured, The Cumberland Insurance Group commenced an action against the Busches.  Before any discovery was completed, the Busches moved for summary judgment based on a waiver of subrogation provision contained in the lease between Haftell and the landlord.  That provision provided:

Regardless of anything stated in this Lease, Tenant releases Landlord from any injury, loss or damage to personal property or persons from any cause.  Landlord shall only be responsible for any acts caused by negligence of its employees, servants or agents.  Tenant waives any right of subrogation by Tenant or any insurance company, which covers Tenant.

Id. at *1.  The Busches argued that they were entitled to the benefit of that provision because Haftell waived “any right of subrogation” and not just its right of subrogation against the landlord.  Id.  The trial judge agreed and granted summary judgment in favor of the Busches.  Not surprisingly, Cumberland appealed.

The Appellate Division reversed the trial court’s decision.  The court began its analysis by noting that, as a general rule, a non-party is not entitled to benefit from the terms of a contract absent evidence that the contracting parties intended to confer a benefit on the non-party.  The court then observed:

In the case before us, the contractual waiver of subrogation clause is contained in a lease between Haftell and the landlord.  Defendants are not parties to that contract.  Thus, the threshold inquiry is not whether the waiver of subrogation clause is generally enforceable, but rather whether the parties to the lease, Haftell and the landlord, “intended others to benefit from the existence of the contract[.]” Nothing in the lease suggests they did.

Id. at *3 (citation omitted).

The court distinguished this case from an earlier one, Skulskie v. Ceponis, 404 N.J. Super. 510 (App. Div. 2009), in which it held that the insurer of a condominium unit owner was barred from commencing a subrogation action against another unit owner.  There, the court found that the “scheme created by th[e] residential condominium community contemplated no litigation between unit owners or between unit owners and the Association.”  Id. at *514.  The Haftell court observed:

Unlike Skulskie, here we can discern no “scheme” created by either the landlord or the residential community.  Perhaps one exists, but if it does, it is not apparent from the summary judgment motion record.  The motion judge granted summary judgment before the parties could develop the issue through discovery.

Id. at *3.  The court further observed that, unlike the policy at issue in Skulskie, there was no evidence that Cumberland’s policy contained a waiver of subrogation provision.  However, it would be surprising if it did not.

The Appellate Division reversed the trial court’s decision.  Rather than rule in favor of the insurer, however, it remanded the action to give the parties “an opportunity to present their positions on the need for discovery and presentation of parol evidence.”  Id. at *4.

The Busches arguably jumped the gun by moving for summary judgment before any discovery was completed.  Thus, the Appellate Division had to rule on an incomplete record.  However, it is unclear whether conducting discovery would have helped the Busches.  It is unlikely that the owner of an apartment complex, unlike a condominium association, would have adopted a “scheme” to bar litigation by one tenant against another tenant.  Moreover, given the Appellate Division’s conclusion that they were not third-party beneficiaries of the Haftell lease, the Busches will be hard pressed to establish that the insurer’s claim is barred by the waiver of subrogation provision in that lease.

© William D. Wilson and NJInsuranceBlog.com, 2017.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to William D. Wilson or NJInsuranceBlog.com with appropriate and specific direction to the original content.

Procrastinators put things off until the last minute.  Waiting until “the midnight hour” to take care of important tasks, however, can have some truly negative consequences.  A recent example of this can be found in Megna v. Leading Insurance Services, Inc., 2017 WL 393573 (N.J. Super Ct. App. Div. Jan. 30, 2017).  There, the insureds purchased insurance to cover their business.  However, the insureds failed to pay the premium for the policy.  Consequently, the insurer sent out a notice of cancellation, which indicated that the policy would be reinstated if the insureds paid the premium prior to the cancellation date.  The insureds failed to do that and you can guess what happened.

In accordance with Murphy’s law, one day after the cancellation date, a fire caused damage to the insureds’ property.  While the fire was still burning, the insureds attempted to pay a portion of the outstanding  premium electronically through the insurer’s electronic portal system.  You can’t make this stuff up.

Three days later, the  insureds’ insurance broker advised the insurer that there had been a fire.  The insureds then made a second electronic payment.

The insurer informed the insureds’ broker that it would not reinstate the policy unless the insureds provided a statement that there were no losses between the date of cancellation and the reinstatement date.  When that statement was not received, the insurer returned the two payments.  One month later, however, it sent the insureds an invoice for the outstanding premium in error, which the insureds paid.  That payment also was returned to the insureds.

The insurer ultimately denied the claim because the policy had been cancelled prior to the loss.  The insureds then sued the insurer, arguing that the insurer waived its rights to cancel the policy, and/or was estopped from doing so, based on its “acceptance” of the electronic premium payments and the mailing of the premium invoice.

Both the insureds and the insurer moved for summary judgment.  The trial court granted the insurer’s motion, and denied the insureds’ motion, concluding that the policy had been validly cancelled prior to the loss.  The court also rejected the insureds’ waiver/estoppel argument.  The Appellate Division affirmed.

The Appellate Division noted that “even giving plaintiffs the benefit of all favorable inferences from the evidence, no rational fact-finder would conclude that plaintiffs’ policy was not properly cancelled and that they were entitled to coverage for the . . . loss.”  Id. at *2.  With respect to the waiver/estoppel argument, the court reasoned:

New Jersey courts have only recognized waiver in cases where the insurer either retained a late premium payment or engaged in some other course of conduct that clearly manifested an intent on the part of the insurer to continue coverage.

We discern, however, no evidence from which it could be inferred that [the insurer] intended to reinstate the policy by retaining plaintiffs’ post-cancellation payments or otherwise.

Id. at *3 (citations omitted).

Thus, the cancellation of a policy will be enforced as long as an insurer returns any post-cancellation payments and takes no actions clearly showing that it intends to continue coverage.  The Megna case makes it clear that an insured who ignores a cancellation notice based on the non-payment of premium does so at its own peril.  The insured must pay the premium before the cancellation becomes effective if it wants to continue coverage.  In this case, hindsight was not 20/20.

© William D. Wilson and NJInsuranceBlog.com, 2017.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to William D. Wilson or NJInsuranceBlog.com with appropriate and specific direction to the original content.

In Givaudan Fragrances Corp. v. Aetna Cas. & Sur. Co., 2017 WL 429476 (N.J. Feb. 1, 2017), the New Jersey Supreme Court held that an anti-assignment clause in an insurance policy does not prevent the post-loss assignment of an insurance claim.  Givaudan dealt with the issue of the assignment of claims under decades-old insurance policies.  The case involved claims for costs incurred to remediate environmental contamination of soil and groundwater.  The policies in question were issued between 1964 and 1986 and had been assigned to the plaintiff in 2010, long after they had expired, by the plaintiff’s predecessor corporations. The plaintiff acquired the rights under the policies through “a series of very complex corporate mergers, transfers, and re-formations . . . .” See Givaudan, 442 N.J. Super. 28, 32 (App. Div. 2016), aff’d, 2017 WL 429476.

The insurers who issued the policies refused to recognize the assignment of the policies to the plaintiff.  The policies explicitly prohibited assignment without the consent of the insurers and such consent was never obtained.  The plaintiff moved for summary judgment and the insurers cross-moved for summary judgment.  The trial judge ruled in favor of the insurers, finding, among other things, that the assignment was not valid.  In a decision that was the subject of a prior blog post, the Appellate Division reversed, noting that since at least the 1950s, New Jersey courts have held that an insured may assign a claim or potential claim under an occurrence-based policy after a loss occurs.  See https://njinsuranceblog.com/court-upholds-post-loss-assignment-of-claims-under-decades-old-insurance-policies

On further appeal, the New Jersey Supreme Court affirmed the decision of the Appellate Division.  The Court held that “once an insured loss has occurred, an anti-assignment clause in an occurrence policy may not provide a basis for an insurer’s declination of coverage based on the insured’s assignment of the right to invoke policy coverage for that loss.”  2017 WL 429476, *3.  The reasoning behind this rule is that liability under an occurrence-based policy attaches once the occurrence takes place even though no claim has been asserted.  Thus, the insurer becomes obligated to the insured on the date of the loss and that obligation may freely be assigned.

The Court was not deterred by the fact that determining liability for environmental contamination can be very difficult and imprecise:

The fact that the environmental claim will require time to sort out liability and damages resulting therefrom does not alter our conclusion.  Other claims involving losses that have occurred, but which cannot be determined with precision, do not alter the conclusion that the assignment must be honored.

Id. at *15.  The Court further held that “[w]here a valid post-loss claim assignment is made as to a given claim, an insurer has a duty to defend the assignee as the holder of that claim.” Id. at *17.  Thus, an insurer owes the assignee both a duty to defend and a duty to indemnify it in connection with a covered loss.

The Court’s decision is not surprising.  Although the New Jersey Supreme Court had not previously addressed the issue, the law in New Jersey upholding the post-loss assignment of claims dates back over 60 years.  Moreover, as the Court observed, “the overwhelming majority of jurisdictions that have, over the decades, spoken on the issue” have reached the same conclusion.  Id. at *10.

© William D. Wilson and NJInsuranceBlog.com, 2017.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to William D. Wilson or NJInsuranceBlog.com with appropriate and specific direction to the original content.

Cases involving insurance coverage for multiple claims arising out of bodily injury or property damage resulting from exposure to toxic substances or long-term environmental damage can present extremely complex coverage issues.  In such cases, insureds may have insurance coverage spanning many decades under multiple policies issued by various insurers.   In Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437 (1994), and Carter-Wallace, Inc. v. Admiral Ins. Co., 154 N.J. 312 (1998), the New Jersey Supreme Court adopted a method for determining how losses should be allocated among the various insurers.

In deciding Owen-Illinois and Carter-Wallace, the New Jersey Supreme Court was trying to fashion a method for dealing with complex losses that were not contemplated by the parties to the insurance policies at the time they were issued.  The method selected by the court was less than perfect.  As new issues arise, the New Jersey courts try to mold the facts and policy language at issue to fit the Carter-Wallace/Owens-Illinois allocation methodology.  When the policy language does not fit within the methodology adopted by the court, the policy language simply is not enforced.

Despite the fact that Owens-Illinois was decided over two decades ago, and Carter-Wallace was decided eighteen years ago, issues continue to arise concerning the Carter-Wallace/Owens-Illinois allocation methodology.  In September 2014, the New Jersey Appellate Division issued a decision, IMO Indus. Inc. v. Transamerica Corp., 437 N.J. Super. 577 (App. Div. 2014), certif. denied, 222 N.J. 16 (2015), in which it addressed a number of outstanding issues.  That decision was the subject of a prior blog post.  See https://njinsuranceblog.com/owens-illinoiscarter-wallace-revisited-n-j-court-addresses-allocation-yet/

In July of this year, the Appellate Division once again had occasion to address allocation issues in Continental Ins. Co. v. Honeywell Int’l, Inc., 2016 WL 3909530 (App. Div. July 20, 2016).  That case involved coverage for bodily injury claims arising out of exposure to asbestos-containing products.  One of the issues addressed by the court was what happens if an insured is aware of the risks posed by its products, is unable to purchase insurance covering those risks, but decides to sell its products anyway.  The Owens-Illinois court previously held that an insured is required to assume a portion of the risk during those periods when coverage was available but the insured chose not to purchase it.  The situation in Continental was different, however, because insurance coverage was unavailable.

The insured was sued “in tens of thousands of [personal injury] actions” and the insured and its insurers “spent over $1 billion in defending, settling, and paying asbestos-related claims.”  Id. at *1.  After litigating with its insurers for thirteen years, all but two high-level excess insurance carriers settled with the insured.  The Continental decision concerned only the claims against those two insurers.

Surprisingly, the court held that New Jersey law applied even though the polices at issue “were brokered, underwritten, issued and delivered to [the insured] in Michigan,” its principal place of business.  Id. at *9.  When it comes to choice-of-law issues, New Jersey courts apply the “dominant significant relationship” or “most significant relationship” test.  Under that test, a court is supposed to apply the law of the state that “has the most meaningful connections with the interests in the transaction and the parties.”   NL Indus., Inc. v. Commercial Union Ins. Co., 65 F.3d 314, 316 (3d Cir. 1995).   Some of the factors to be considered by a court in making its determination include the principal place of business of the insured, the principal place of business of the insurance company, the location where the policy was negotiated, the location where the policy was issued, the location where the insurance broker is located (assuming there is one), the principal location of the risk, and the location where the injury took place.  Based on those considerations, it appears that Michigan, and not New Jersey, had the most meaningful connections.  However, the court obviously was mindful of the fact that applying New Jersey law would maximize the available insurance coverage.

The insured in Continental sold asbestos-containing brake and clutch pads over a period of several decades.  Starting in 1986, its insurance policies contained asbestos exclusions.  Yet, it continued to sell asbestos containing products until 2001.  Some of the insurers argued that the insured effectively decided to self-insure during those years.  The insurers took the position that the insured had “assumed the risk by continuing to manufacture and sell asbestos-containing products after 1987.”  Id. at *11.  The court rejected that argument:

No New Jersey case has adopted the concept of assumption of the risk as advocated for by [the excess insurers].  Instead, cases applying the Owens–Illinois rule have focused on the availability of insurance and have only found that the insured assumed the risk when insurance was available and the insured chose not to purchase coverage.

Given the facts of this case, we conclude that the correct focus was whether Honeywell could reasonably have purchased insurance for asbestos-related claims.  In the context of this case, the assumption of the risk language in Owens–Illinois did not refer to when an insurer sells or manufacturers a product that might lead to a claim of exposure to asbestos.  Instead, the assumption of the risk occurs when an insurer fails to purchase insurance that was reasonably available.

Id. (citations omitted).  Because the evidence established that insurance coverage was not available after 1987, the court concluded that the insured did not assume the risk during that period.

The Appellate Division also held that, based on the particular language of the policies at issue, the excess insurers were not required to provide coverage for the payment of defense costs and that the insured was not entitled to recover the attorneys’ fees it incurred in the coverage action.

On December 12, 2016, the New Jersey Supreme Court granted certification in the Continental case.  Interestingly, the Court declined to hear an appeal in the IMO case, which involved numerous novel and significant allocation issues.   Presumably, the choice-of-law ruling caught the Court’s attention, although the assumption of risk argument also presents a novel issue.  Regardless of why it granted certification, the Court will now have yet another opportunity to weigh in on the Owens-Illinois/Carter-Wallace allocation method.

© William D. Wilson and NJInsuranceBlog.com, 2016.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to William D. Wilson or NJInsuranceBlog.com with appropriate and specific direction to the original content.

New Jersey passed the Insurance Fraud Prevention Act (“IFPA”) to aggressively address the problem of insurance fraud in New Jersey.  To that end, the IFPA provides for the imposition of both civil and criminal penalties in connection with the commission of insurance fraud.  In State v. Goodwin, 224 N.J.102 (2016),  the New Jersey Supreme Court addressed the requirements for a criminal conviction under the IFPA.  In that case, the defendant, Robert Goodwin, ended up with a seven-year prison term because he facilitated the filing of a false insurance claim in an attempt to hide that he was cheating on his live-in girlfriend.

Mr. Goodwin was convicted of second-degree insurance fraud, N.J.S.A. § 2C:21-4.6, for falsely reporting that his girlfriend’s SUV had been stolen.  Mr. Goodwin actually borrowed his live-in girlfriend’s SUV to visit his other girlfriend.  The SUV was vandalized and severely damaged by fire while parked overnight down the street from his second girlfriend’s apartment.  Upon discovering the damage to the SUV, Mr. Goodwin returned to the apartment he shared with his first girlfriend.  He convinced her to report the SUV as stolen to the police department and the insurance company.  During an examination under oath conducted by the insurance company, Mr. Goodwin admitted that he lied about the SUV being stolen.  Based on Mr. Goodwin’s misrepresentation about the theft, the insurer denied the claim.

Mr. Goodwin was later charged with second-degree aggravated arson, third-degree attempted theft by deception, and second-degree insurance fraud.  The jury found Mr. Goodwin guilty of second-degree insurance fraud and not guilty on the other counts.  The trial judge instructed the jury that a person is guilty of insurance fraud if he “knowingly makes or causes to be made a false … or misleading statement of material fact … in connection with a claim for payment, reimbursement, or other benefit from an insured’s company.”  Id. at 107-08.  The judge further instructed the jury that “[a]n insured’s misstatement is material if when the statement was made, a reasonable insurer would have considered the misrepresented [fact] relevant to its concerns and important in determining its course of action.”  Id. at 108.  Finally, the judge instructed the jury that “the statement of fact is material if it could have reasonably affected the decision by an insurance company … to pay a claim.”  Id.

On appeal, the Appellate Division reversed the conviction, concluding, among other things, that the jury should have been instructed that Mr. Goodwin could be found guilty only if the insurer actually relied on the his false statements.  The court held “that defendant was not guilty of insurance fraud on the theft claim because [the insurer] knew that the SUV was not stolen and did not pay the claim.”  Id.  The New Jersey Supreme Court reversed.  According to the Court:

A person violates the insurance fraud statute … even if he does not succeed in duping an insurance carrier into paying a fraudulent claim. A false statement of material fact is one that has the capacity to influence a decision-maker in determining whether to cover a claim. If the falsehood is discovered during an investigation but before payment of the claim, a defendant is not relieved of criminal responsibility.

224 N.J. at 104-05.  The Court held that because Mr. Goodwin falsely reported that the SUV was stolen, “[i]t was for the jury to determine whether the series of false statements about the theft generated by defendant had the capacity to influence the insurance carrier in deciding whether to reimburse for the damage caused by the arson.”  Id. at 105.  The Court further held that it was not necessary for the defendant to have been convicted of arson or theft to support his conviction of insurance fraud.  Id. at 115.

Thus, a person can be convicted of insurance fraud regardless of whether the insurer actually was influenced to pay the claim by the defendant’s false statements.  In other words, it is not necessary to show that the insurer actually relied on the defendant’s statements.  The State merely has to show that the defendant’s actions “had the capacity to influence the insurance carrier” to pay the claim.

In this case, the jury found Mr. Goodwin not guilty on the claims that he stole or vandalized the SUV.  It appears that his only false statement was the SUV was stolen and he made that statement because he was trying to hide his actions from his live-in girlfriend.  That deception cost him seven years in prison.

© William D. Wilson and NJInsuranceBlog.com, 2016.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to William D. Wilson or NJInsuranceBlog.com with appropriate and specific direction to the original content.

An insured generally is required to provide its insurer with timely notice of a loss that may be covered under its insurance policy.  Failure to provide timely notice may preclude coverage for the loss.  Under New Jersey law, an insured’s failure to provide timely notice will preclude coverage only if the insurer shows that it sustained appreciable prejudice as a result thereof.  There is one exception, however:  Failure to provide timely notice of a loss under a claims-made policy will bar coverage even in the absence of prejudice.  The notice requirements of a claims-made policy are strictly enforced.

A claims-made policy provides coverage for claims first made against the insured and reported to the insurance company during the policy period or shortly after the expiration thereof.  It does not matter when the conduct giving rise to the claim occurred as long as any claim arising therefrom is first asserted against the insured during the policy period and reported to the insurer within the time period set forth in the policy.  This is because it is the making of the claim that triggers coverage and not the occurrence of the damage that gave rise to the claim.  Thus, insurers can limit the time during which they will be subject to claims being made under a particular policy to a certain finite period.

This is in contrast to the more typical occurrence-based policies.  In order for a loss to be covered under an occurrence-based policy, the damage at issue must “occur” during the policy period.  In most instances, it does not matter when a claim is actually asserted as long as the damage took place during the policy period.

The most common type of claims-made policy is a professional liability and/or malpractice policy issued to a doctor, lawyer, architect, engineer, or other professional.  Such a policy provides coverage for claims arising out of “professional services” rendered by the insured.  In addition to a claims-made policy, a professional typically also will purchase an occurrence-based policy to provide coverage for claims that do to arise out of the rendering of professional services.

There typically are two different notice requirements under a claims-made policy: (1) the claim must be reported within the policy period; and (2) the claim must be reported “as soon as practicable” or “immediately.”  The first notice requirement was addressed by the New Jersey Supreme Court in Zuckerman v. National Union Fire Ins. Co., 100 N.J. 304 (1985).  The second notice requirement was addressed by the Court in Templo Fuente De Vida Corp. v. National Union Fire Ins. Co., 224 N.J. 189 (2016), which was the subject of a February 15, 2016 blog post.  Unless an insured meets both of the notice requirements, there will be no coverage under the policy.

In S.M. Electric Co. v. Torcon, Inc., 2016 WL 6091256 (App. Div. Oct. 19, 2016), the Appellate Division dealt with the issue of what constitutes a claim sufficient to trigger the notice requirements.  In that case, Torcon, Inc. (“Torcon”) was insured under two separate Professional and Pollution Liability-General Contractors policies issued by Greenwich Insurance Company (“Greenwich”).  The policies were claims-made policies, which provided coverage for liability arising out of the insured’s rendering of professional services.  Each policy provided coverage for any claims first made against the insured and reported to the insurer, in writing, during the policy period.  The first policy was in effect from November 11, 2007 through February 1, 2009 and the second policy was in effect from February 1, 2009 through February 1, 2010.

Claim was broadly defined as a “demand received by the INSURED for money or services that arises from PROFESSIONAL SERVICES or CONTRACTING SERVICES.”  Id. at *1  The policies further provided that a claim was “not necessarily … limited to lawsuits, petitions, arbitrations or other alternative dispute resolution requests filed against the INSURED.”  Id.  The word “demand” was not defined in the policy, however.

Torcon was the construction manager for a project being built by the New Jersey Economic Development Authority (“NJEDA”).  Torcon subcontracted with S.M. Electric Company (“SME”) to provide electrical work.  Due to problems with SME’s work, on May 7, 2008, NJEDA issued a notice of violation to Torcon.  On May 14, 2008, Torcon, in turn, declared SME in default of its obligations under the subcontract.  In response, SME claimed that Torcon was at fault and informed Torcon that it intended to submit a claim seeking compensatory damages.

By letter dated August 19, 2008, SME informed Torcon that it was seeking in excess of $15 million “as compensation for the additional costs of performing work at the . . . project.”  Id. at *2.  The letter was entitled “A Request for Equitable Adjustment” and requested the issuance of various change orders.

After receipt of the letter, Torcon’s representatives met with SME’s principals.  Torcon claimed that it was advised by SME at the meeting that SME no longer intended to pursue the claim, which was not supported by any backup.  However, on September 17, 2009, approximately a year later, SME sent Torcon an “amended claim” for “cost adjustment.”  Id.  In January 2010, SME sued Torcon.  Torcon subsequently informed Greenwich of the filing of the complaint.

Greenwich denied coverage on the basis that the claim was first set forth in the August 19, 2008 letter, which fell under the first policy period.  In other words, the claim was not first asserted under the then current (i.e., second) policy.  It did not matter that Greenwich also was the insurer at the time the claim was made because it was not reported to Greenwich at that time.       

Both parties moved for summary judgment and the trial judge ruled in favor of Greenwich.  That decision was affirmed on appeal.  The primary issue was whether the August 19, 2008 letter constituted a claim under the policy.  The Appellate Division summarized the trial judge’s conclusion as follows:

Judge Grispin found that the “practical and logical” interpretation of the letter, “in the context of the overall dispute” among the parties, “can lead to no other conclusion but that it was a demand for money arising out of professional services.” Since the letter was a claim for which notice should have been provided under the 2007 policy, Torcon was prevented from seeking coverage in the 2009 term.

Id. at *3.

Finding the policy’s definition of “claim” to be unambiguous, the Appellate Division concluded that “it is abundantly clear that the 2008 Letter was a claim.”  Id. at *5.  The court also rejected the argument that use of the phrase “change order” in the letter took away from the fact that it was a demand letter:

The letter clearly conveyed a demand. This was not a request for change orders regarding future conduct, but a claim for equitable compensation by one party seeking, as a matter of right, the payment of money in connection with the other party’s alleged wrongdoing.

Id. at *5.

The court noted that because the letter constituted a claim, Torcon was required to provide notice to Greenwich.  With respect to Torcon’s argument that its “subjective assessment” as to whether the letter was a claim should control, the court held:

Notice requirements of a claims made policy are strictly enforced without regard to an insured’s subjective assessment of the merits.  Even if Torcon’s subjective perception was relevant to the analysis, it does not outweigh the evidence supporting the construction of the letter as a claim.

Id. at *6.  Moreover, the court concluded that the alleged withdrawal of the claim by SME during its meeting with Torcon “did not affect Torcon’s responsibility to give notice to the insurer.”  Id. at * 7.  The court observed:

The letter was withdrawn in the context of an ongoing dispute regarding millions of dollars.  It is not credible that anyone would have considered SME’s demand for nearly two-thirds of the contract amount in additional payment to have been actually “withdrawn” as a result of the failure to adequately document their claims.  Judge Grispin was unconvinced about this argument; so are we.  Once the letter was presented, at that snapshot of a moment, it was Torcon’s responsibility under the terms of the policy to provide notice to Greenwich.

Id.  Thus, the court concluded:

The claim was made during the 2007 policy term, and Torcon did not provide notice.  It was not until the 2009 lawsuit that Torcon conveyed the claim to Greenwich. Greenwich’s denial is therefore proper.

Id. at *6.

The lesson to be learned from S.M. Electric is that an insured needs to put its insurer on notice even if it doubts whether a demand may ripen into an actual claim, questions the merits of the potential claim, or believes the claim will be resolved without litigation.  The rule here is better safe than sorry.

© William D. Wilson and NJInsuranceBlog.com, 2016.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to William D. Wilson or NJInsuranceBlog.com with appropriate and specific direction to the original content.

Insurance policies typically contain what are known as other-insurance clauses.  Other-insurance clauses set forth a methodology for apportioning liability when multiple insurers have issued policies that provide coverage for a loss.  There are three basic types of other-insurance clauses:  pro-rata, escape, and excess.  Deciding how different other-insurance clauses apply is like a game of rock-paper-scissors.

A pro-rata clause typically provides that each insurer will pay its proportional share of the loss based on total available policy limits.  An escape clause provides that an insurer will have no liability to the insured when other insurance coverage is available.  The excess clause provides that the insurer will be liable only after the exhaustion of the limits of any other applicable insurance.  In cases where other-insurance clauses can be reconciled, the clauses will be enforced pursuant to their terms and conditions.

For instance, if two policies each contain pro-rata clauses, the insurers will share in the payment of a loss on a pro-rata basis based on the overall limits of the policies.  If one policy contains a pro-rata clause and the other contains an excess clause, the policy with the pro-rata clause will be exhausted before the other policy is triggered.

Other-insurance clauses will not be enforced, however, if they conflict and cannot be reconciled.  For instance, if there are two policies and each contains an excess other-insurance clause, neither clause will be enforced.  In that case, each insurer will share equally in the payment of the loss until the limit of the smallest policy is exhausted.

The New Jersey Appellate Division addressed application of dueling other-insurance clauses in Foerster v. Meckel Enterprises, LLC, 2016 WL 5922746 (Oct. 12, 2016).  The plaintiff in that case was injured when he slipped and fell on the bathroom floor of space leased by Robert S. Foerster Optician, Inc. (“RFO”).  The space was leased from Meckel Enterprises, LLC and Ann Arbor Associates, Inc. (collectively, “Meckel”).

In accordance with the terms of the lease agreement, RFO obtained $1 million in insurance coverage, naming Meckel as an additional insured.  That policy, which was obtained from Penn National Insurance, contained an excess other-insurance clause, which provided:

1. If there is other insurance covering the same loss or damage, we will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance, whether you can collect on it or not. But we will not pay more than the applicable Limit of Insurance.
2. Business Liability Coverage is excess over any other insurance that insures for direct physical loss or damage.

Id. at *1.

Meckel also had its own insurance policy, which was issued by Citizens Insurance Company of America.  That policy contained a hybrid, pro-rata excess clause.  The clause provided:

This insurance is excess over:

*     *     *

2)   Any other primary insurance available to you covering liability for damages arising out of the premises or operations, or the products and completed operations, for which you have been added as an additional insured by attachment of an endorsement.

*     *     *

     c.     When this insurance is excess over other insurance, we will pay only our share of the amount of the loss if any, that exceeds the sum of:

              1)   The total amount that all such other insurance would pay for the loss in the absence of this insurance;

*     *     *

     e.     Method of Sharing

*     *     *

If any of the other insurance does not permit contribution by equal shares, we will contribute by limits. Under this method, each insurer’s share is     based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers.

Id.

There was no question that there was coverage under both policies.  The only question was how the two policies should contribute toward the loss.

Meckel claimed that Penn National’s other-insurance clause did not apply.  According to Meckel, Penn National had to provide primary coverage and the Citizens policy was triggered only after coverage under the Penn National policy was exhausted.  Penn National obviously made the opposite argument.  The trial judge agreed with Penn National and Meckel appealed.  On appeal, the Appellate Division affirmed.

Meckel argued that paragraph 2 of the Penn National other-insurance clause limited application of the clause to claims involving “direct physical loss or damage.”  According to Meckel, the claim at issue involved bodily injury and not direct physical loss or damage.  Thus, the Penn National other-insurance clause did not apply.  The Appellate Division rejected that argument, noting that paragraph 1 of the other-insurance clause clearly stated that the Penn National policy provided excess coverage over “other insurance covering the same loss or damage.”  Id. at *2.

The court then noted that the Citizens other-insurance clause called for pro-rata allocation when other primary insurance is available.  The court failed to note, however, that the pro-rata allocation applies only when there is other excess coverage.

The court further noted that the Citizens clause provided that “[w]hen, as here, the other-insurance does not permit contribution by equal shares,” each insurer will contribute its proportional share of the loss based on total policy limits.  Id. at *3.  Once again, the court failed to note that this provision applies only when there is other excess coverage.

The court contrasted the Citizens clause with the Penn National clause, which did not call for a sharing of obligations.  As noted by the court, under New Jersey law:

where one policy has an excess other-insurance clause and another policy on the same risk does not, the former policy will not come into effect until the limits of the latter policy are exhausted.

Id. (quoting W9/PHC Real Estate LP v. Farm Family Cas. Ins. Co., 407 N.J. Super. 177, 197 (App. Div. 2009)).  The court concluded:

because the Penn National policy contains an excess other-insurance clause and the other-insurance provision in the Citizens policy provides for pro-rata sharing of the insurance obligation, the Penn National policy does not come into effect until the Citizens policy limits are exhausted.

Id.  Therefore, the court affirmed the trial court’s ruling.  The court essentially ruled that the Penn National clause was the rock to Citizens’s scissors.

The court appears to have misinterpreted the Citizens clause.  There is no question that the Citizens clause was an excess other-insurance clause.  Indeed, it clearly states that the Citizens policy “is excess over . . . any other primary insurance available to you.”  Thus, the two clauses arguably should have cancelled each other out and the insurers should have shared in the loss.  The court seemed a bit confused, however, by the pro-rata language in the Citizens clause, thereby mistaking the clause for a pro-rata and not an excess clause.  The court seems to have missed the fact that the pro-rata language clearly provides that it applies only when there is excess coverage.

It should be noted that the court did not quote Citizens’s entire other-insurance clause.  Based on the portion of the clause that was quoted, Penn National and/or Meckel could have argued that the Citizens clause was meant to apply only when there was “other primary insurance available.”  Thus, it would have no application in this case because there was no other primary insurance.  In other words, Citizens would have to provide primary coverage, which is the same result the court reached, albeit for a different reason.  It does not appear, however, that anyone made the argument that the clause did not apply at all.

© William D. Wilson and NJInsuranceBlog.com, 2016.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to William D. Wilson and/or NJInsuranceBlog.com with appropriate and specific direction to the original content.

Application of a particular state’s law can have a significant impact on the determination as to whether a loss is covered.  Given the impact choice-of-law decisions may have, insureds and insurance companies may “forum shop” to pick the jurisdiction most favorable to resolution of their claims.  This is especially true when it comes to a late notice defense.

An insured is required to provide its insurer with timely notice of a loss.  Insurance policies typically require that notice be provided “as soon as practicable” or, in some cases, “within a reasonable time.”  The purpose of a notice provision is to give the insurer an opportunity to conduct a full investigation of the facts and circumstances concerning a claim while the evidence and the witnesses’ memories are still fresh.  Once it receives notice, the insurer can decide whether to compromise or defend the claim.

The failure to provide timely notice may bar coverage for a claim.  However, the standard that applies differs from state to state.  For instance, under New Jersey law, an insurance company generally must establish that it sustained appreciable prejudice to avoid coverage under a late notice defense.  Under New York law, on the other hand, a showing of prejudice is not always required.  Moreover, a delay in providing notice of just 22 days has been found to bar coverage under New York law with respect to a first-party policy.

The issue of whether to apply New Jersey or New York law to a late notice defense was addressed by the New Jersey Appellate Division in Waldorf Holding Corp. v. Chartis Claims Inc., 2016 WL 4651436 (Sept. 7, 2016).  The plaintiff in that case, Waldorf Holding Corp. (“Waldorf”), was a demolition and construction company incorporated in New York.  Defendant Illinois National Insurance Company (“INIC”), an AIG company, issued a commercial umbrella policy to Waldorf.  The policy listed a Mount Vernon, New York, location as Waldorf’s mailing address.  The INIC policy provided coverage in excess of that provided by a policy issued to Waldorf by Arch Specialty Insurance Company (“Arch”).

Under the policy, the insured was required to notify INIC “as soon as practicable of an Occurrence that may result in a claim or Suit under this policy.”  The insured was further required to “immediately send . . . copies of any demands, notices, summonses or legal papers received in connection with the claim or Suit.”  Notice was to be provided to AIG Domestic Claims, Inc. (“AIG”) at an address in New York.

An employee of a Waldorf subsidiary was injured in May 2008 while working on a construction project in New York.  The employee sued the owner of the project and the general contractor.  Those parties, in turn, filed a third-party compliant against Waldorf.  Waldorf apparently notified Arch of the lawsuit and Arch agreed to provide a defense and indemnification to Waldorf.  Arch sent a copy of its letter accepting the tender of the claim by Waldorf to AIG at a Georgia address.  The letter was not sent to the New York address as required under the INIC policy.

In August 2010, more than two years after the injury occurred, Arch sent a letter to AIG at the New York address listed in the policy, advising AIG of the pending action and indicating that it served as formal notice of the loss.  AIG was further notified that the Arch policy had a limit of $1 million and the plaintiff recently made a $6 million settlement demand. On September 1, 2010, INIC notified Arch and Waldorf that it was denying coverage based on the failure to provide INIC with timely notice of the loss.

After the personal injury action was settled, Waldorf commenced an action against INIC, Arch, and an insurance broker in state court in New Jersey.  After engaging in some discovery, INIC and Waldorf both moved for summary judgment.  INIC argued that New York law applied and Waldorf argued that New Jersey law applied.  According to Waldorf, although it was incorporated under New York law, its only place of business was in Englewood, New Jersey.  Waldorf claimed it had not used the Mount Vernon address since 2006.  Waldorf further claimed that the policy had been procured through a New Jersey insurance broker and delivered to Waldorf in New Jersey.

There was no question that the more than two-year delay in providing notice would bar coverage under New York law.  A more detailed factual analysis would have to be performed to see if coverage was barred under New Jersey law.

Performing a choice-of-law analysis, Judge Susan J. Steele, the trial judge, concluded that New York law applied because New York had the most significant interest in the matter.  According to the judge:

[w]hile the contract was signed in New Jersey through a New Jersey insurance broker, [it] does not outweigh the other contacts which lean in favor of New York.  The policy was issued to Waldorf, a New York corporation with a New York address, which had not changed regardless if the plaintiff asserted the principal place of business of the company is now Englewood, New Jersey and the New York address had not been used for some years.  Nothing set forth before the court indicated the New York address was invalid at the time the policy was executed.

Id. at *2.  Judge Steele went on to note that “the circumstances surrounding the necessity for coverage all occurred in New York.”  Id.  Applying New York law, Judge Steele held that the notice was untimely and, therefore, coverage was barred.  She also rejected an argument that the claim was not untimely because INIC may have had constructive notice of the loss much earlier, noting:

Absent authority to the contrary, of which there appears to be none, that the insurer may have been copied on a letter does not absolve the insured of its obligations under the agreement it signed to timely send notice.

Id. at *3.  On appeal, the Appellate Division affirmed “substantially for the reasons expressed by Judge Steele as reflected in her well-reasoned, thorough written opinion.” Id.

Waldorf appears to be a classic case of forum shopping.  Realizing its claim would be barred under New York law, the insured commenced an action in New Jersey and argued that New Jersey law applied.  The court correctly rejected that argument.

© William D. Wilson and NJInsuranceBlog.com, 2016.  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to William D. Wilson and/or NJInsuranceBlog.com with appropriate and specific direction to the original content.