SEPTEMBER 2014 BAD FAITH CASES: INSURER DID NOT PROVE INSURED ENTERED SETTLEMENT IN BAD FAITH OR UNREASONABLY; INSURED DID NOT HAVE TO PROVE BAD FAITH TO RECOVER ATTORNEYS’ FEES (New Jersey Federal)
In The Travelers Property Casualty Co. of America v. USA Container Co., the insured was subject to suit over a spoiled overseas delivery of corn syrup to a European buyer. The carrier declined coverage, but during settlement negotiations between the insured and plaintiff, did make a limited offer to contribute to a settlement, subject to a right of reimbursement. The insured declined, and settled.
The insurer later claimed it should not have to reimburse the full settlement, in the context of its declaratory judgment action. The court found that the insurer failed to produce evidence that the settlement was entered in bad faith or was unreasonable, and thus it was liable for the full amount.
The court then analyzed the 7 factor test for determining whether the unsuccessful insurer in the declaratory judgment action was liable for attorneys’ fees under N.J. Ct. R. 4:42-9(a)(6), and observed that the insured need not establish bad faith to recover fees; rather, the presence of bad faith was only one factor to consider.