Insurance Coverage Newsletter - February 2015

Print

Covered in this post: 

  • New Jersey Supreme Court Holds Doctrine of Res Judicata Bars Plaintiff's Subsequent Claim for Bad Faith
  • Supreme Court Finds No Bad Faith When Relying Upon Unpublished Appellate Division Decision and Plain Reading of Policy Language
  • Federal Court Remands Insurance Coverage Action Back to State Forum

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.
 
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Supreme Court Finds No Bad Faith When Relying Upon Unpublished Appellate Division Decision and Plain Reading of Policy Language 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arbitration award was "fairly debatable" and supported by a reasonable interpretation of the policy as well as a prior, unpublished Appellate Division opinion, so as to preclude an award of counsel fees and other consequential damages to the insured under a theory of bad faith.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. 
  
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.