NOVEMBER 2017 BAD FAITH CASES: FEDERAL DISTRICT COURT WOULD NOT ABSTAIN IN DECLARATORY JUDGMENT MATTER BASED ON ALLEGED FRAUD IN INSURANCE APPLICATION (New Jersey Federal)
An insurer brought a declaratory judgment action seeking policy rescission based upon alleged misstatements concerning the insured’s business in the application process. The insured was subject to a liability suit in state court, and asked the federal court to abstain from hearing this federal action.
The federal court refused. It cited recent Third Circuit case law making clear that there is no policy favoring blanket abstention of insurance declaratory judgment actions; and focused on the fact that the two cases were not parallel proceedings and were not substantially similar.