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General Security Property & Casualty Insurance Co. v. New Hampshire Insurance Co.


March 4, 2010


On appeal from Superior Court of New Jersey, Law Division, Somerset County, No. L-1712-05.

Per curiam.


Argued November 10, 2009

Before Judges Wefing, Grall and Messano.

General Security Property & Casualty Insurance Company ("General") appeals from a trial court order granting summary judgment to defendant New Hampshire Insurance Company ("New Hampshire"). After reviewing the record in light of the contentions advanced on appeal, we affirm.

Plaintiff General filed a declaratory judgment action, seeking to compel New Hampshire to contribute toward the settlement of a personal injury action filed following a motor vehicle accident. The trial court rejected General's arguments, as do we.

On August 21, 2001, a Mack truck driven by Ivan Soltoff collided on Route 29 in West Amwell with a minivan driven by Edward Devaney. Devaney's wife and two children were passengers in the van. They were all injured in the accident, and their medical bills exceeded $250,000. The truck had a placard on its door, "LMO Trucking." The placard also listed LMO's registration number with the Department of Transportation. Leonard M. Olschewski is the principal of LMO Trucking.

LMO, however, did not own the Mack truck. It was owned by Hub Leasing, which, in turn, leased the truck to Theo, Inc. Hub Leasing and Theo, Inc. both have the same principal, John Theoharis. Hub Leasing, Theo, Inc. and LMO Trucking all operate from the same address in Lawrenceville.

Theo, Inc., the truck's lessee, was insured through plaintiff General under a policy providing $1 million in coverage. The truck involved in the Devaney accident was specifically listed as a covered vehicle under this policy. The General policy had the following "other insurance" clause: "This Coverage Form's Liability Coverage is primary for any covered 'auto' while hired or borrowed by you.... This Coverage Form's Liability Coverage is excess over any other collectible insurance for any covered 'auto' while hired or borrowed from you by another 'trucker.'"

LMO was insured through defendant New Hampshire under a policy providing $500,000 of coverage. The New Hampshire policy specified that it only provided coverage for those vehicles listed on the schedule of covered autos. The truck involved in the Devaney accident was not included in the schedule of covered autos.

Olschewski, LMO's principal, reported the happening of the accident to his insurance agent. In November 2001, a claims representative for defendant New Hampshire wrote to John Theoharis asking him to have the driver, Ivan Soltoff, complete an information form about the accident. The letter referred to "our insured, LMO Trucking/Theo[,] Inc."

Three months later, in February 2002, the claims representative wrote to the attorney representing the Devaneys in connection with their claims. She informed the attorney that investigation had revealed that the truck involved in the accident was owned by Hub, not LMO, and had been leased to Theo. She stated that New Hampshire was denying coverage for his clients' claims and referred him to plaintiff, General. That same month, she wrote LMO, telling it that the truck was not insured under LMO's policy with New Hampshire and that General was handling the claim.

The Devaneys filed suit on August 16, 2002. They named as defendants Ivan Soltoff; Leonard M. Olschewski, d/b/a LMO Trucking; Hub Leasing, Inc.; and Theo, Inc. Defendant New Hampshire assigned counsel to represent its insureds.

Approximately five months after the Devaneys filed suit for damages, in January 2003, New Hampshire's attorney wrote to LMO Trucking, advising that the New Hampshire policy did not provide coverage for this accident in light of the fact that the Mack truck was not named as a covered auto. The attorney told LMO the claim should be covered by General's policy and that he was requesting General to retain counsel for LMO and file a substitution of attorney.

General, however, declined to do so, despite repeated requests from New Hampshire. New Hampshire wrote at least five separate letters between January 2003 and September 2003, asking General to take over the defense of LMO and Olschewski.

By June 2004, General settled the Devaneys' claims. In their briefs, the parties place the settlement at $1 million, General's policy limit. New Hampshire refused to contribute anything toward this settlement.

General then filed this suit, seeking to compel New Hampshire to contribute toward the settlement. On appeal, General no longer contends that the Mack truck was insured under the New Hampshire policy. It argues that New Hampshire should be estopped from denying coverage, and it puts forth three contentions in support of its position that the trial court erred in granting judgment to New Hampshire.

General argues that New Hampshire should be estopped from denying coverage because it notified Theo, Inc. that it was an insured under the New Hampshire policy in November 2001, and more than a year passed before it advised Theo, Inc. that it was not insured under the New Hampshire policy. Plaintiff cites to Griggs v. Bertram, 88 N.J. 347 (1982), for the proposition that failure to disclaim coverage in a timely manner will estop a carrier from denying coverage even if the claim is outside the policy limits.

The Griggs case involved a fight between two high school students that took place in May 1974. Id. at 353. The defendant sent a notice to his insurance carrier of a potential claim stemming from an alleged injury incurred by the plaintiff in the fight. Ibid. The carrier sent an investigator to interview the defendant, who admitted to punching the plaintiff. Ibid. In January 1976, the plaintiff filed a complaint.

Ibid. The defendant promptly sent the complaint to his carrier, who on February 23, 1976, disclaimed coverage, relying on a policy provision excluding intentional torts. Id. at 354. The trial court found that the carrier had to pay the settlement reached by the plaintiff and the defendant, because the carrier's failure to notify its insured of its intention to disclaim estopped it from denying coverage. Ibid. The Appellate Division and then the New Jersey Supreme Court affirmed on the estoppel issue.

An insurer has a reasonable time to investigate after notification of an accident, but once such reasonable opportunity has passed, the carrier has a duty to inform its insured of its intention to disclaim. Id. at 357. "Unreasonable delay in disclaiming coverage, or in giving notice of the possibility of such a disclaimer, even before assuming actual control of a case or a defense of an action, can estop an insurer from later repudiating responsibility under the insurance policy." Ibid.

The Court continued:

These obligations upon the insured to turn over claims promptly, to abstain from any conduct that might interfere with the contractual rights of the insurer and to affirmatively cooperate with the insurance carrier, in turn, impose commensurate duties upon the insurer. Upon receiving notice of a possible claim against its insured, an insurer has the duty to investigate the matter within a reasonable time. [Id. at 360.]

An insurer also has the duty to timely notify the insured of the results of the investigation. Id. at 361. Because eighteen months elapsed between notice of the incident and the disclaimer, the carrier failed in this duty. Ibid.

Plaintiff also cites to Harr v. Allstate Insurance Co., 54 N.J. 287, 306 (1969), for the proposition that when a carrier misrepresents the scope of coverage to the insured it is estopped from denying coverage. Harr, however, was about a misrepresentation by the insurer regarding the scope of coverage at the time the contract for coverage was entered into. Id. at 309-10. The carrier was estopped from denying coverage because of detrimental reliance by the insured, the detriment being the insured did not purchase additional coverage. Id. at 307. Harr is clearly distinguishable from the present factual context.

Here, we can perceive no basis to estop New Hampshire from denying coverage with respect to Theo, Inc. because of the letter of November 2001. An element of the doctrine of estoppel is that a party reasonably relied upon a statement that another seeks to subsequently disavow. Theo, Inc. could not reasonably have relied on the letter of November 2001 because it never purchased insurance from New Hampshire.

This is not an instance in which an insurance company is attempting to deny coverage because of fine print within the policy. Rather, New Hampshire denied coverage because Theo, Inc. was never its insured.

Plaintiff also argues that defendant's failure to investigate the facts promptly to determine its coverage responsibilities upon notification of the accident, and failure to send a reservation of rights to LMO and Olschewski estop it from declining coverage. These failures, it alleges, prejudiced LMO because defendant then controlled LMO's defense. It asserts that once LMO's defense was controlled by defendant without a reservation of rights, defendant cannot disclaim coverage. It points to the fact that New Hampshire assigned counsel to represent LMO and Olschewski through the course of this suit.

Counsel assigned by New Hampshire to represent LMO and Olschewski remained in the Devaney litigation, however, only because General refused to acknowledge its responsibilities to take over their defense. We can perceive no reason in logic or policy why General's conduct should be rewarded by compelling New Hampshire to contribute toward a claim which it did not cover.

Finally, we reject, as did the trial court, plaintiff's assertion that it was entitled to proceed against New Hampshire by way of subrogation. General contends that it is entitled to rely upon the prejudice experienced by LMO and Olschewski as a result of New Hampshire's initial declaration of coverage. Initially, it is difficult to perceive the prejudice, in light of the fact that LMO and Olschewski received a defense throughout the litigation and were indemnified for the settlement.

It was, however, as we have noted, plaintiff's own actions that created a risk to LMO and Olschewski. Plaintiff should not be allowed to benefit from its refusal to assume their defense.

The order under review is affirmed.


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