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L.C.S., Inc. v. Lexington Insurance Co.

August 02, 2004


On appeal from Superior Court of New Jersey, Law Division, Middlesex County, L-2308-01.

Before Judges Wefing, Collester and Fuentes.

The opinion of the court was delivered by: Collester, J.A.D.


Argued February 2, 2004

On December 23, 1996, Thomas M. Cosgrove filed a three count complaint against D'Jais Bar, Inc., Larry R. Fore, a bouncer, and two fictitious employees, seeking damages for injuries he suffered in the early hours of July 4, 1995, while a patron at D'Jais Bar located at 18th and Ocean Avenues in Belmar. Count one alleged

5.... Defendant Fore without warning or right struck Plaintiff Cosgrove in the face with a closed fist.

6. Plaintiff Cosgrove fell to the ground and was rendered unconscious as a result of being struck by Defendant Fore.

7. Plaintiff Cosgrove suffered bodily injury as a result of being struck by Defendant Fore including a broken arm and a concussion.

8. As a direct and proximate result of the acts of defendant Fore, as aforesaid, plaintiff Thomas M. Cosgrove suffered severe and permanent injuries.

9. The act by Defendant Fore constitutes assault, contrary to N.J.S.A. 2C:12-1(b)(1). Count two incorporated all allegations of count one and alleged

2. The acts of Defendant Fore, and John Doe I and John Doe II occurred in the negligent performance of their duties as an employee [sic] of the defendant D'Jais Bar. Count three incorporated all allegations of counts one and two and alleged

2. The defendant D'Jais Bar was negligent in the hiring, training, employment and supervision of its"bouncers" and employees.

3. The injuries of the plaintiff, Thomas M. Cosgrove, occurred as a direct consequence of the negligence of defendants aforesaid.

On September 17, 1997, L.C.S., D'Jais' corporate parent, forwarded a copy of the Cosgrove complaint to its insurance carrier, Lexington Insurance Company. On October 22, 1997, AIG Claims Services Inc., the authorized representative of Lexington Insurance Company, notified L.C.S. and Larry Fore that coverage was disclaimed and that the company would not provide a defense to the Cosgrove complaint or indemnify for any resulting settlement, verdict or judgment. The disclaimer was based on a endorsement to the policy entitled"ASSAULT AND BATTERY EXCLUSION," which provided as follows:

This insurance does not apply to"Bodily Injury,""Property Damage,""Personal Injury,""Advertising Injury," or"Medical Expenses" arising out of assault and battery or out of any act or omission in connection with the prevention or suppression of such acts, whether caused by or at the instigation of or direction of the Insured, his employees, patrons or other persons. The letter specified that coverage was denied as to count one because it alleged an intentional assault by Fore on Cosgrove. Coverage on count two was disclaimed on the grounds that the alleged negligence of Fore in the performance of his duties as an employee"arises from the assault and/or its prevention or suppression." As to the count three, the disclaimer letter stated that"D'Jais Bar is not afforded coverage, since the negligent hiring, training, employment or supervision of Larry Fore arises out of the assault or any act or omission in connection with the prevention or suppression of such acts."

The penultimate paragraph of the disclaimer letter invited the insured to contact Lexington concerning any"additional developments" or provide any information which the insured believed rendered the disclaimer"invalid, incorrect or improper." On December 3, 1997, Kip Connor, L.C.S.'s principal, responded. He enclosed handwritten statements by D'Jais employees who were on duty on July 5, 1995, and asserted that Cosgrove groped a woman patron and then attacked Fore, who in turn struck Cosgrove in self-defense.

After reviewing Connor's letter and enclosures, Lexington responded on December 9, 1997, by reaffirming its denial of coverage. At that point L.C.S. retained counsel at its own expense to defend the Cosgrove complaint. Following discovery, trial began on June 26, 2000, and concluded on July 19, 2000, culminating in a settlement of $25,000, which was attributed by counsel to the second count of the complaint.

On March 2, 2001, L.C.S. filed a complaint against Lexington seeking damages for breach of the insurance contract and extracontractual damages based on the allegation that Lexington acted in bad faith by refusing to defend the negligence counts of the Cosgrove complaint. Cross-motions were filed for summary judgment. L.C.S. submitted the certification of its trial attorney in the Cosgrove matter in which he explained the reasons for the settlement.

Prior to the trial, I took the depositions of the plaintiff, Thomas Cosgrove. Annexed hereto are relevant portions of Mr. Cosgrove's deposition*fn1 testimony concerning the incident in question. Mr. Cosgrove was unable to conclusively identify at his deposition as to whether he was intentionally assaulted during the incident or was the victim of the negligent conduct of a D'Jais employee.

At trial, Mr. Cosgrove's testimony was consistent with his deposition testimony in that he did not actually state whether he was intentionally assaulted or negligently injured while being escorted from the bar. The testimony of Mr. Cosgrove's witnesses were similarly unclear concerning the causes of injuries.

During the plaintiff's case-in-chief, this case was settled for $25,000. The case was specifically settled only on Count Two of plaintiff's Complaint, alleging negligence. The balance of ...

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