OCTOBER 2014 BAD FAITH CASES: NEW JERSEY TRIAL JUDGE DISMISSES BAD FAITH CLAIM WHERE DISPUTED FACTS WOULD NOT PERMIT INSURED TO OBTAIN SUMMARY JUDGMENT ON SUBSTANTIVE COVERAGE CLAIMS (New Jersey Law Division, Bergen County)

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In Omega Financial Services v. Aspen Specialty Insurance Company, a New Jersey Superior Court Law Division case, the court addressed whether a mortgage broker’s claims for indemnification were excluded under its professional liability policy, as well as the insured’s bad faith claim.  The insurer had filed a motion for summary judgment.

After a close analysis on the coverage issues, including whether the insured subjectively and objectively knew that the claim at issue could arise at the time it filled out its application failing to indicate the existence of the claim at issue, the court found summary judgment for the insurer inappropriate.  There were disputed issues of fact that a jury would have to decide as to the insured’s knowledge, as well as the nature of a putative regulatory investigation.

For the same reasons, however, the insured’s bad faith claim could not proceed. An insured claiming bad faith must be able to establisha right to summary judgment on the substantive coverage claim, as a predicate to assert a claim for insurer bad faith in refusing to pay.  No jury could reasonably find that the insured could have established a right to summary judgment as a matter of law on its claim for payment “based on the closely contested issues of fact in this case.”

The insured detailed its efforts to investigate the claim prior to denial, and the court’s “close rulings” in denying the insurer summary judgment “underscore the reasonableness of [the insurer’s] denial of coverage, and the extent to which [the insured] is relying on the deferential summary judgment standard to proceed to trial.”

Date of Decision:  September 22, 2014

Omega Fin. Servs. v. Aspen Specialty Ins. Co., DOCKET NO.: BER-L-7903-12, SUPERIOR COURT OF NEW JERSEY, LAW DIVISION, BERGEN COUNTY, 2014 N.J. Super. Unpub. LEXIS 2333 (N.J.L.Div. September 22, 2014) (Polifroni, J.)

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