In Laverde v. Sirius American Insurance Company, there was a fire at the insured’s business and it made a claim for business personal property loss and lost income under a businessowner’s policy. The policy had a coverage limit of $150,000 for the property loss (which the claim exceeded) and covered lost net income. The carrier recognized that the property claim exceeded the personal property limit of $150,000 but asserted that the income claim was fraudulently inflated, that obviated its obligation to pay for either claim – even the uncontested property claim.
The policy provided: “This policy is void if, either before or after a loss or occurrence or claim, any insured misrepresents or knowingly conceals any material fact or circumstance, commits fraud, or swears falsely relating to any aspect of this insurance (including the information we relied upon in issuing this contract). However, if we specifically choose not to declare this policy void, we do not provide insurance thereto, or for the benefit of, any such insureds.”
The court described the dispute over the accuracy of the lost income claim as “hotly contested” and involving serious questions of material facts.
The court recognized the duty of good faith in first party insurance claims, and stated that the insured must show the absence of a reasonable basis for denying the benefits of the policy to establish a breach of that duty. Using the “fairly debatable” standard, “a claimant who could not have established as a matter of law a right to summary judgment on the substantive claim would not be entitled to assert a claim for an insurer’s bad-faith refusal to pay the claim.” Under that standard, the carrier prevailed and it was granted summary judgment on the bad faith claim, as the carrier “clearly established at least a reasonable basis for denying the claim.” The court observed that the insured’s “failure to prevail on his own substantive summary judgment motion is fatal to his bad-faith claim for damages.”
The court further observed that under the circumstances, the insured could not establish the egregious circumstances necessary to gain punitive damages and summary judgment was granted on that issue as well.
Lastly, the Court addressed the summary judgment motion on the insured’s request for counsel fees. It observed that under New Jersey Court Rule 4:42-9(a)(6), a party could obtain counsel fees “in an action upon a liability or indemnity policy of insurance, in favor of a successful claimant.” However, New Jersey’s courts had “consistently limited this rule to a situation in which an insurer refuses to indemnify or defend its insured’s third-party liability to another entity or person.” Thus, this Rule “does not authorize the allowance of a counsel fee to an insured in a direct suit brought against his insurance carrier to enforce casualty-type direct insurance,” i.e., it “did not allow for counsel fees in a direct first-party suit against an insurance carrier.” Such were the factual circumstances in this case, counsel fees were not warranted and summary judgment was granted to the carrier.
Date of Decision: August 28, 2009
Laverde v. Sirius Am. Ins. Co., NO. 08-1946, 2009 U.S. Dist. LEXIS 77 (D.N.J. 2009) (Linares, J.)