KLRW Shareholder Kevin Wolff was recognized in the July 21, 2023 edition of Business Today, as one of the top 10 most influential insurance lawyers in New Jersey. A link to the article appears here:

https://businesstoday.news/top-10-most-influential-insurance-lawyers-in-new-jersey-2023/

Please join us in congratulating Kevin on this outstanding achievement.

The insured sold blinds to Home Depot, whose employees used a cutting machine that the insured supplied and maintained to cut the blinds to the lengths desired by Home Depot’s customers. The underlying action involved a Home Depot employee who worked in Nassau County and who severed parts of her fingers while using the insured’s machine to cut window blinds for a customer.

The injured worker sued the insured under a theory of product liability. Admiral denied coverage for the suit under the New York Counties Exclusion. The insured filed a declaratory judgment action in the Superior Court of New Jersey, seeking a declaration of coverage. The Law Division granted summary judgment to Admiral, ruling that the New York Counties Exclusion applied. The Appellate Division reversed, ruling that the New York Counties Exclusion did not apply because the insured’s activities had no causal relationship to the injured worker’s allegations or causes of action.

The Supreme Court reversed. It stated that the duty to defend is normally decided by comparing the allegations of the complaint to terms of the insurance policy. However, when the issue of coverage will not be decided by the trial of the underlying tort action, the court must consider facts outside of the injured claimant’s complaint. In such a case, the court should specify that its coverage analysis includes facts outside of the complaint that are necessary to determine the duty to defend. Next, the Supreme Court ruled that the terms “related to” and “in any way connected with” are interpreted broadly and do not require a showing of causation. Instead, they require only that the insured’s acts and the claimant’s injuries be “linked in some way, even if they are only tangentially related.” The Court also ruled that the New York Counties Exclusion’s use of the term “or” in a list of coverage phrases separated by commas meant that the exclusion is triggered if at least one of the coverage phrases is satisfied. Because the insured’s activities were connected to the claimant’s injuries, the New York Counties Exclusion barred coverage. The Supreme Court therefore ruled that Admiral had no duty to defend the insured in the bodily-injury action. In so ruling, the Supreme Court relied on facts obtained through discovery in the declaratory-judgment action that were not part of the complaint, such as the insured’s regular maintenance of the cutting machine and its training of Home Depot employees to use its machine.

If you would like more information on this decision or on insurance coverage issues generally, please do not hesitate to call Justin Kinney, Mike Chuven, or Tim Smith

Kinney Lisovicz Reilly & Wolff pc

Kinney Lisovicz Reilly & Wolff PC represents clients in federal and state courts and handles an extensive variety of matters, including insurance coverage, civil litigation, premises liability, product liability, construction defect, food-borne illnesses, toxic exposure, contract and breach of contract, professional liability, employment litigation, auto and trucking, criminal defense, and appeals.

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Sanchez filed a personal-injury suit and Calopina failed to notify KnightBrook of it. KnightBrook became aware of the suit, assigned counsel, and reserved its rights to deny coverage based on Calopina’s “continued refusal to cooperate with defense counsel.” Calopina did not cooperate and failed to appear for a court-ordered deposition. Thereafter, KnightBrook disclaimed coverage based on a violation of the policy’s duty-to-cooperate clause. Sanchez filed an amended complaint for UM benefits against Liberty Mutual Insurance Company. Liberty moved for summary judgment, arguing that Sanchez failed to prove that Calopina was uninsured. After motion practice, the trial court found that Liberty’s obligation to pay UM benefits depended on whether KnightBrook validly disclaimed coverage.  

Sanchez and KnightBrook filed dueling declaratory-judgment actions, and KnightBrook moved for summary judgment, seeking a confirmation of its denial of coverage. The trial court granted summary judgment to KnightBrook, ruling that KnightBrook was entitled to disclaim coverage due to Calopina’s failure to cooperate. The trial court held that KnightBrook was prejudiced by the loss of her testimony. On appeal, the Appellate Division reversed, finding that KnightBrook failed to demonstrate appreciable prejudice. The Appellate Division held that KnightBrook failed to show that it suffered an irretrievable loss of substantial rights, such as the loss of information that KnightBrook needed to make a coverage determination. The Appellate Division further held there was ample evidence to allow KnightBrook to defend against the claims in the personal injury action on the issues of liability, medical causation, and damages. KnightBrook had photographs of the damage to both vehicles and obtained the police report containing statements made by Sanchez and Calopina. The Appellate Division distinguished Hager v. Gonsalves, 398 N.J. Super. 529, 536 (App. Div. 2008), because there the Appellate Division found that the insured’s failure to cooperate rendered the insurer unable to determine whether it owed coverage to the tortfeasor driver as a permissive user of the insured vehicle.

This case is another example of the high burden courts place on an insurer to prove appreciable prejudice based on the insured’s failure to cooperate. Should you have any questions about this case, please do not hesitate to contact Kevin Wolff or Julia Talarick.

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