FEBRUARY 2017 BAD FAITH CASES: INSURER NOT REQUIRED TO REIMBURSE PRIVATE DEFENSE COUNSEL (New Jersey Appellate Division)
A default was taken against the insured, who hired his own counsel to defend the matter, without notice to the insurer. The court found this a breach of the insured’s duty. However, once put on notice of the suit and default, the insurer took prompt action to vacate the default and settle the matter.
Among other things, the insured sued for bad faith on the basis of the insurer’s refusal to reimburse private counsel’s legal fees. The court granted summary judgment, as the insurer never denied coverage, there was no reason to hire private counsel had the insured put the insurer on notice, and there was no permission from the insurer to hire that counsel as required by the policy.