A Capehart Scatchard Blog

Payment of Insurance Settlement by Carrier Does Not Entitle Insured to Attorneys Fees

By on March 19, 2014 in Blog with 0 Comments

T. Glennon, Inc. (“TGI”) sued its excess insurance carrier, the Hartford Casualty Insurance Company (“Hartford”), for attorneys fees incurred in its lawsuit brought to determine coverage for an intentional wrong employee workplace personal injury suit filed against TGI. In Johnson v. Plasser American Corp., 2014 N.J. Super. Unpub. LEXIS 372 (App.Div. 2014), TGI argued that, as a result of Hartford’s contribution to the settlement, it was a “successful claimant” in a lawsuit on an indemnity policy and, hence, entitled to fees under New Jersey Court Rule 4:42-9(a)(6).

In this unpublished Appellate Division decision, the court held that Hartford’s contribution to the settlement to the underlying tort action, standing alone, did not render TGI a “successful” claimant. Instead, the court needed to determine whether TGI was entitled to coverage under the policy. After examining the terms of Hartford’s policy, the court decided that Hartford had no duty to defend or indemnify. Thus, it found that TGI was not entitled to fees.

The underlying action involved a significant personal injury when TGI’s employee, Charles Johnson, was working and the hydraulic line of a nearby tamping machine burst, disabling the machine’s brakes, which then struck him and crushed his legs. Johnson claimed that his employer TGI knew that the machine was in disrepair and refused to repair it. Johnson claimed that TGI’s actions met the standard for an intentional wrong under the Workers Compensation Act.

TGI had a $1 million underlying policy with NJM and a $4 million umbrella policy with Hartford. TGI was defended by NJM in the underlying matter. Ultimately, Hartford agreed to contribute its $4 million policy, presuming that NJM agreed to contribute its $1 million policy, for a total settlement of $5 million. As soon as the settlement was agreed upon, TGI then claimed that it should be entitled to its attorneys fees of $71,000 spent in the coverage action against Hartford.

The Appellate Division rejected this claim. First, it found that TGI was not entitled to a defense under the Hartford policy because its underlying policy was never exhausted through payment of its policy limits. The obligation to provide a defense for an excess carrier is predicated on the exhaustion of underlying coverage and, therefore, the termination of the duty to defend by the underlying carrier.

The court also rejected TGI’s arguments that Hartford’s duty to defend was triggered when NJM’s limits were functionally exhausted when NJM expressed a willingness to pay its policy limits.

Last, the court analyzed Hartford’s duty to indemnify. It found that the Hartford policy would have excluded coverage in any event under its expected or intended exclusion. Thus, on this basis as well, TGI was not entitled to fees.


About the Author

About the Author:

Ms. Ramos is an Executive Committee Member and Co-Chair of the Litigation Department at Capehart Scatchard, P.A. located in Mount Laurel, New Jersey. She is an experienced litigator with over 30 years experience handling diverse matters. Practice areas include tort defense, business litigation, estate litigation, tort claims and civil rights defense, construction litigation, insurance coverage, employment litigation, shareholder disputes, and general litigation.

For the years 2020-2023, Ms. Ramos was selected for inclusion in The Best Lawyers in America© in the practice area of Litigation - Insurance. The attorneys on this list are selected based upon the consensus opinion of leading lawyers about the professional abilities of their colleagues within the same geographical area and legal practice area. A complete description of The Best Lawyers in America© methodology can be viewed via their website at: https://www.bestlawyers.com/methodology.

In 2021, Capehart Scatchard and Ms. Ramos received the “Best Law Firm” ranking in the area of Litigation – Insurance (Metro, Tier 3) published by U.S. News & World Report and Best Lawyers®. Law firms included on the list are recognized for professional excellence with consistently impressive ratings from clients and peers. To be eligible for a ranking, a firm must have at least one attorney who has been included in the current edition of Best Lawyers in America, which recognizes the top five percent of practicing lawyers in the United States. Betsy Ramos (Litigation – Insurance) was recognized for this prestigious award in the 2021 edition. For a description of the “Best Law Firm” selection methodology please visit: https://bestlawfirms.usnews.com/methodology.aspx.

“Best Law Firms” is published by Best Lawyers in partnership with U.S. News & World Report. For a description of the selection methodology please visit: https://bestlawfirms.usnews.com/methodology.aspx.

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