In a June 26, 2008 opinion from the Appellate Division in the case of Metta v. American Empire Surplus Lines Ins. Co. , the court again affirmed the principle that insurance coverage follows indemnity. Often times, parties seeking additional insured status take the position that when a party is added to another’s CGL policy, they are entitled to the same coverages as the primary insured, without respect to the circumstances underlying a given loss. To the contrary, the court in Metta held that under the pertinent contract, the insured was to indemnify the additional insured only for the insured’s negligence. Thus the court held that since those damages, if any, had not been determined, final resolution had to abide the outcome of the underlying B/I case.
It is important to remember this point of law in determining whether to accept an adversary’s tender demand. Very rarely will it be that one party has agreed to indemnify another for the latter’s negligence. Thus, the Metta court would advise that an additional insured should only be provided coverage where the primary insured is found negligent. However, all too many times, especially in the case of snow removal contracts and the like, tender demands are accepted prematurely and it is ultimately found that the contractor was not negligent. The carrier is then left to pay the judgment against an entity it does not insure.
Tompkins McGuire frequently advises insurers and TPAs on indemnity issues and related insurance coverage concerns. For more information, please contact Joseph Cobuzio, Esq.
A tavern may be liable for negligence if it makes no effort to keep a visibly drunk patron safe, even though his drinking may have been done elsewhere. In a case of first impression, the Appellate Division held in Bauer v. Nesbitt, decided March 20, 2008, that a bar owner can be sued for failing to prevent a patron from getting into a car with another patron who was visibly intoxicated and later caused the passenger’s death. The court held that if the bar’s employees should have recognized that the passenger was drunk, even if he was not served alcohol there (the passenger only drank a Coke at the bar), there was a duty to protect him from foreseeable injury as the result of an automobile accident by insuring he did not drive and that he did not ride as a passenger with a patron who was similarly impaired. This is the first decision holding that if a patron becomes visibly intoxicated and the bar’s employees know or should have known, the patron should not be permitted to leave without trying to find safe transportation.
In a decision rendered March 5, 2008, the Appellate Division agreed with the Firm that a CGL policy exclusion which seemingly denied coverage for any subcontractor’s employee sustaining injury on a construction site with the insured – whether or not the insured had retained that subcontractor – was invalid. In Pyramid Construction, LLC v. Essex Insurance Company, Docket No.: A-4290-06T3, the court found that the following language was inherently ambiguous and nullified the protections of the policy:
[T]here is no coverage under this policy for ‘bodily injury’ or ‘property damage’ sustained by any contractor, self-employed contractor, and/or subcontractor, or any employee, leased worker, temporary worker or volunteer help of same.
This particular language had never been passed upon by a New Jersey court. The court’s decision was based primarily on the fact that immediately above the quoted language, was a requirement that the insured’s subcontractors meet certain insurance requirements, or coverage would not apply. The obvious question then was why require subcontractors to carry certain insurance, when they were not covered in the first place? Under the facts of the particular case, the insured was itself a subcontractor on a construction site where a worker was killed. The worker was not an employee of any of the insured’s subcontractors, but the carrier denied coverage anyway, exposing the insured to a potential multi-million dollar verdict. With this ruling by the Appellate Division, TMWB, lead by partner Joe Cobuzio, ensured a defense and indemnification for the insured.
TMWB regularly handles declaratory judgment actions on behalf of both insurers and insureds in the State and Federal courts of New Jersey.
Passengers in stolen cars who are unaware the vehicles are being driven without the owner’s permission may collect PIP and UIM insurance if they’re injured in an automobile accident, the Appellate Division has ruled. In Hardy v. Abdul-Martin, the appeals court reversed a grant of summary judgment to an insurance company that denied coverage in such a circumstance under an exclusion in the insurance contract. The court said, “A passenger cannot be expected to inquire upon entry into a vehicle, as to the status of the car and driver, unless existing facts place the passenger on notice that the use of the car is questionable.”
A coalition of medical groups led by the Medical Society of New Jersey has succeeded in getting a temporary delay in the enforcement of a new list of fee limits for treatment of injured motorists under personal injury protection (PIP) coverage. Not surprisingly, the doctors have the support of the Association of Trial Lawyers of America-New Jersey. The significantly reduced fees were to take effect Monday October 1st, but the Appellate Division last Friday granted the stay pending arguments in Alliance for Quality Care v. New Jersey Department of Banking and Insurance. Doctors complained last year when the Department of Banking and Insurance (DOBI) proposed a fee schedule that for the most part used Medicare figures rather than “the reasonable and prevailing fees of 75 percent of practitioners within the region” as stated in the statute. DOBI officials said they used the Medicare figures because they couldn’t find out doctors’ current charges; it remains to be seen whether the courts – or the legislature – will accept that explanation.
Tompkins McGuire will keep you updated as this important case makes its way through the courts.
Governor Jon S. Corzine has signed a bill, supported by both the New Jersey State Bar Association and the Association of Trial Lawyers of America-New Jersey, banning “step-down” clauses in commercial auto insurance policies. The clauses, in effect sanctioned by the New Jersey Supreme Court’s 2005 decision Pinto v. New Jersey Manufacturers Insurance Co., said drivers not specifically listed in a commercial policy would be limited to the uninsured and under-insured motorist benefits in their personal policies, not the policy of the company for which they were driving. The practice was argued as unfair to both the business paying premiums for full coverage and to new employees who, through no fault of their own, weren’t listed on the policy. The bill, S-1666, was passed unanimously by both houses of the legislature and was sponsored by Senator Nicholas P. Scutari (D-Union), a trial lawyer whose practice includes personal injury.