JANUARY 2013 BAD FAITH CASES: COURT REJECTS BAD FAITH CLAIM IN ABSENCE OF CARRIER’S DUTY TO DEFEND AND INDEMNIFY THE INSURED CLAIMAINT (New Jersey Federal)

In Evanston Ins. Co. v. Crocilla, the carrier brought a declaratory judgment action against its insured, seeking a declaration that it did not have a duty to defend the insured masseuse in an underlying state court suit stemming from sexual assault allegations against the insured in her professional capacity. Following the carrier’s denial of coverage under a policy exclusion, the insured counter-claimed for bad faith and the parties both filed for summary judgment.
The carrier highlighted policy language that excluded coverage for any suit “arising out of or caused in whole or in part by” (1) the actual or alleged physical contact of a sexual nature, (2) assault and/or battery, (3) any dishonest, fraudulent, criminal or malicious act, or (4) violation of any statute or governmental rule or regulation. The insured countered that the carrier must continue to defend her as long as a potentially covered claim exists. The court found for the carrier, reasoning that the exclusionary language precludes defense and indemnification in relation to the underlying suit. Given the court’s ruling for the carrier on coverage, the insured’s bad faith claim was void.
Date of Decision: December 26, 2012
Evanston Ins. Co. v. Crocilla, No. 12-101, 2012 U.S. Dist. LEXIS 181767, U.S. District Court for the District of New Jersey (D.N.J. Dec. 26, 2012) (Hillman, J.)