Insurance Coverage Update - September 2015

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Covered in this post: 

  • New Jersey Appellate Division Rejects Bad Faith Claim When Insurer Settles Less Than All Underlying Claims for Policy Limit
  • New Jersey District Court Rejects Policyholder's Attempt to Amend Complaint to Add Bad Faith Claim
  • New Jersey Appellate Division Allows Assignment of Rights under Occurrence-Based Policy
  • New Jersey Supreme Court Finds Third Party Lacks Standing to Bring Bad Faith Claim

NEW JERSEY


Bad Faith

New Jersey Appellate Division Rejects Bad Faith Claim When Insurer Settles Less Than All Underlying Claims for Policy Limit

Masgay-Doitch v. Khatri, 2015 N.J. Super. Unpub. LEXIS 2134 (App. Div. Sept. 3, 2015)

The New Jersey Appellate Division upheld the trial court's ruling in favor of the insurer finding the insurer did not act in bad faith by paying to settle multiple claims arising from a single accident within the policy limit. The appellate panel found that the underlying settlement was favorable to the policyholders and that the policyholders knew when they authorized the settlement that any claims not subject to the global settlement would not thereby be resolved.

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Insurer Bad Faith
New Jersey District Court Rejects Policyholder's Attempt to Amend Complaint to Add Bad Faith Claim

Mitra v. Principal Ins. Co., 2015 U.S. Dist. LEXIS 89532 (D.N.J. July 7, 2015)

New Jersey Magistrate Judge denies policyholder's motion for leave to file an amended complaint to add a bad faith cause of action. The Court classified the additional claim as "futile" because the bad faith claim would not have survived a motion to dismiss.

The policyholder's psychiatric medical license was revoked on July 10, 2014 by the New Jersey Board of Medical Examiners after the policyholder was found to have improperly prescribe medication for his patients. His medical license had previously been temporarily suspended on September 30, 2013. On February 3, 2014, the policyholder submitted a Disability Claim Notice to the insurer, claiming total disability and inability to perform in his specialty as a physician, beginning October 9, 2013, as a result of depression.

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Policy Assignment
New Jersey Appellate Division Allows Assignment of Rights under Occurrence-Based Policy

Givaudan Fragrances Corp. v. Aetna Cas. & Sur. Co., 2015 N.J. Super. LEXIS 131 (App. Div. Aug. 12, 2015)

The New Jersey Appellate Division finds that a policyholder may assign to a third party its rights under an occurrence-based insurance policy after the subject loss has occurred. 

The opinion began by detailing the policyholder's complicated corporate history. This overview explained that the policyholder had originally been incorporated in 1924 and was renamed in 1965. In the 1990's, a series of complex corporate mergers, transfers and reformations resulted in the formation, in 1997, of a new corporation that was split into 1998 into two separate affiliated corporations under the same parent corporation. One affiliated corporation included the Policyholder's "Fragrances" business; the other affiliated corporation was comprised of the Policyholder's "Flavors" business. The Fragrances business assumed its predecessors' environmental liability but did not inherit insurance policies previously issued by the Defendant Insurers.

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Bad Faith
New Jersey Supreme Court Finds Third Party Lacks Standing to Bring Bad Faith Claim

Ross v. Lowitz, 2015 N.J. LEXIS 819 (N.J. Aug. 6, 2015)

New Jersey Supreme Court finds that a third party married couple may not bring bad faith action against insurers who issued homeowners' coverage to their neighbor, even when the insurers were responsible for the remediation of contamination that had leaked off the policyholder's land onto plaintiffs' property.

The policyholder bought a home from a third party and confirmed that the storage tank buried under the property displayed no leakage. But when the policyholder sold the property, leakage was discovered from the tank. The policyholder notified his insurers of the leak, and the insurers arranged and paid for the remediation of the leaked oil on the policyholder's property. Later, another third party purchased a home close to the property with the leaking tank. That third party eventually discovered that oil from the policyholder's property had migrated to his property. The contamination prevented the third party's deal to sell his house from proceeding, and he brought the present suit along with his wife.

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