INSURANCE AND BONDING ISSUES  

2009 found very few court decisions focusing on insurance and bonding claims and issues. The overall leaning of the court decisions, however, was in favor of the insureds and/or bond beneficiaries.  Of particular importance were the courts interpretations extending coverage obligations to costs incurred following an insured loss to bring the building up to current code requirements and the removal of deductibles from insurance subrogation waivers (although the latter determination was through an unpublished decision). 

COVERAGE EXTENDED TO CODE UPGRADE COSTS

            DEB Associates v. Greater New York Mutual Insurance Co., 407 NJ Super 287 (App. Div. 2009)  

            The court affirmed a decision that held the insurance company responsible for the costs associated with code upgrades following a wind storm covered event causing covered losses.  The court determined that “but for wind damage” to a portion of a covered building the insured would not have had to bring other undamaged areas of the building up to current code. 

            DEDUCTIBLES EXCLUDED FROM SUBROGATION WAIVER

            Carlson Restaurants Worldwide, Inc. v. Designline Construction Services, Inc., et al, (App. Div. September 2009) Unpublished.

            Following a fire that occurred after construction of the restaurant, the Owner made claim against the contractor and its subcontractor who had been involved in the construction for payment of its $500,000 deductible.  The Defendants argued that a waiver of subrogation provision within the contract whereby the parties had agreed to each limit such claims to their own respective policies prevented the claim.  The Appellate Division noting that the New Jersey Courts had not ruled on whether such a clause would prevent suit for a deductible, found that the waiver provision applied only to where claims were covered by property insurance.  The Court reasoned that to the extent that a claim is covered by a deductible it is not a claim that is “covered by property insurance”.   

COUNSEL FEE CLAIM SUBJECT TO “ADJUDICATION”

            J. Fletcher Creamer & Son, Inc. v. Pennsylvania Manufacturers Association Insurance Co. et al, (App. Div. 2009) Unpublished.

            In this case the insured contractor was seeking counsel fees for its defense of a claim against it for property damage.  Two carriers had initially refused to defend or to cover at least portions of the claim.  The Court found that where the underlying case had settled with both carriers participating, a hearing would be required to determine coverage responsibility.  This would be needed since the settlement did not represent an “adjudication” and therefore there had been no “successful litigant” which finding would be the trigger to whether counsel fees were due and owing.

COUNSEL FEES SUBJECT TO TREBLING IN INSURANCE FRAUD

Liberty Mutual Ins. Co. v. Land  (App. Div. March 2009)  Unpublished.

            In this case centering upon the carrier’s claim that it’s insured and their nephew in his capacity as a public adjuster engaged in a fraudulent claim under the homeowner policy, the Court upheld the jury verdict in favor of the carrier, including the treble damages penalty and counsel fee provisions under the Insurance Fraud Protection Act.  The jury findings had included the finding that the defendants, following a tree collapse on the home, acted to increase the resulting physical damage by breaking windows, skylights and the like.  The Court found as part of the statutory penalties, that counsel fees would be deemed “damages” that would then be subject to statutory trebling.

BOND PROVISION SETTING VENUE ALLOWED ON PUBLIC BOND

Eastern Concrete Material, Inc. v. Colonial Surety Co. (App. Div. October 2009)  Unpublished.

This appeal dealt with a number of procedural issues including the trial court granting a motion that was never made.  Of significance, however, is the Appellate Court’s determination that a performance bond submitted on a public project may include a venue clause even though the prescribed statutory bond under NJSA 2A:44-143 includes no such limitation.  The Court reconfirmed the determination from Gloucester City BOE v American Arbitration Ass’n, that a surety could not rely upon bond restrictions that were not present in the statutory language. It found however that a venue provision did not impact a claimant’s ability to enforce the surety’s obligation under the bond. As such the venue provision was not a prohibited restriction in the bond. The court, however, went on to deny the surety’s motion to change venue based after finding  the request was untimely.

                                                                 CURETON CLARK, P.C.

                                                                  James H. Landgraf, Esq.