DECEMBER 2012 BAD FAITH CASES: COURT FINDS THAT ARBITRATION CLAUSE IS UNENFORCEABLE AS WRITTEN (New Jersey Appellate Division)

In Allied Professionals Ins. Co. v. Jodar, the appellate division heard a carrier’s appeal stemming from the trial court’s reformation of an arbitration clause in the insured’s policy. The insured party, who was defending an underlying medical malpractice claim, previously purchased a policy requiring her to arbitrate any related claims in Orange County, California. After seeking coverage for the malpractice claim, she was denied coverage because of alleged material misrepresentations, relating to the underlying action, in her policy renewal. The court deemed the arbitration clause in the insured’s policy unenforceable as written because it diminishes the insured’s right to fully participate and is contrary to public policy where insured risk was located in New Jersey. As such, the appellate court affirmed, requiring the parties to arbitrate the coverage dispute in New Jersey.
Date of Decision: November 27, 2012
Allied Professionals Ins. Co. v. Joanna Jodar, No. A-1303-11T4, Superior Court of New Jersey, Appellate Division (App. Div. Nov. 27, 2012) (Alvarez, Nugent, Ostrer JJ.)