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State Nat'l Ins. Co. v. County of Camden

United States District Court, D. New Jersey

March 31, 2014

STATE NATIONAL INSURANCE COMPANY, Plaintiff,
v.
THE COUNTY OF CAMDEN, Defendant/Counterclaimant

Page 569

Appearances: ROBERT J. MORROW, HUNTON & WILLIAMS LLP, NEW YORK, NY; WALTER J. ANDREWS, MICHAEL S. LEVINE, HUNTON & WILLIAMS LLP, MCLEAN, VA, On behalf of State National Insurance Company.

WILLIAM M. TAMBUSSI, JOSEPH T. CARNEY, WILLIAM F. COOK, BROWN & CONNERY, LLP, WESTMONT, NJ, On behalf of the County of Camden.

OPINION

Page 570

NOEL L. HILLMAN, United States District Judge.

Presently before the Court are the motions of State National Insurance Company (" State National" ) for summary judgment on three issues: (1) the adequacy of the County of Camden's (" County" ) defense and investigation of the underlying Anderson lawsuit [543]; (2) whether the insurance contract entered into between

Page 571

the County and State National required State National to defend and investigate the Anderson litigation [544]; and (3) whether State National acted in bad faith or breached any duty of good faith and fair dealing owed to the County [545].[1] For the reasons expressed below, all three motions will be denied.

BACKGROUND

On October 20, 2008, State National filed a declaratory judgment action against the County asking this Court to declare that it is not liable to provide insurance coverage for a multi-million dollar state court judgment in favor of Nicholas Anderson. Anderson sued the County for injuries he sustained when he drove off the road and into a guardrail owned and maintained by the County. Briefly summarized, State National contends in its complaint that the County's delay in notifying it of the lawsuit, its repeated representation that the case was within the County's $300,000 self-insured retention, its errors in investigating and defending the case, and its re-valuation of the case four days into trial, breached the insurance contract's notice provision and the adequate investigation and defense condition to coverage.

The state court case reached its final resolution on November 5, 2010, with Anderson and the County reaching a settlement.[2] Over the course of the past five years, State National's declaratory judgment action spawned numerous counterclaims, third-party and fourth-party complaints, and an intervening plaintiff complaint. At this point, all the claims between all the parties have been resolved, through motion practice or settlement, except for the certain claims between State National and the County.

State National's claims against the County include (1) a claim seeking declaratory judgment that there is no coverage for the underlying Anderson claim under State National's insurance policy with the County; (2) a claim for breach of the duty of good faith based on the County's alleged failure to settle the Anderson claim within the County's self-insured retention of $300,000; and (3) a claim for breach of the duty of good faith for the County's alleged failure to tender the self-insured retention.

Page 572

The County's counterclaims against State National include (1) a claim for breach of contract of the State National Policy; (2) a claim for a declaratory judgment that there is coverage for the underlying Anderson claim under the State National Policy; and (3) a claim that State National committed bad faith with respect to its handling of the Anderson matter, thereby exposing the County to a verdict of over $20 million in excess of the State National Policy limits.

The claims between State National and the County are trial-ready, with numerous pre-trial motions pending regarding bifurcation and the adequacy and admissibility of experts and evidence. Prior to deciding those trial-related motions and proceeding to trial, however, the Court must resolve State National's motions for summary judgment on three issues.[3] State National seeks summary judgment on (1) whether the insurance contract entered between the County and State National required State National to defend and investigate the Anderson litigation; (2) the adequacy of the County's defense and investigation of the underlying Anderson lawsuit; and (3) whether State National acted in bad faith or breached any duty of good faith and fair dealing owed to the County. The County has opposed the motions. Each will be addressed in turn.

DISCUSSION

A. Subject matter jurisdiction

This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332 because there is complete diversity of citizenship between the parties and the amount in controversy exceeds $75,000. State National is incorporated under the laws of the State of Texas with its principal place of business in Fort Worth, Texas, and the County of Camden is a governmental entity existing under the laws of the State of New Jersey.

B. Summary judgment standard

Summary judgment is appropriate where the Court is satisfied that the materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations, admissions, or interrogatory answers, demonstrate that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 330, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(a).

An issue is " genuine" if it is supported by evidence such that a reasonable jury could return a verdict in the nonmoving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is " material" if, under the governing substantive law, a dispute about the fact might affect the outcome of the suit. Id. In considering a motion for summary judgment, a district court may not make credibility determinations or engage in any weighing of the evidence; instead, the non-moving party's evidence " is to be believed and all justifiable inferences are to be drawn in his favor." Marino v. Industrial Crating Co., 358 F.3d 241, 247 (3d Cir. 2004)(quoting Anderson, 477 U.S. at 255).

Initially, the moving party has the burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met this burden, the

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nonmoving party must identify, by affidavits or otherwise, specific facts showing that there is a genuine issue for trial. Id. Thus, to withstand a properly supported motion for summary judgment, the nonmoving party must identify specific facts and affirmative evidence that contradict those offered by the moving party. Anderson, 477 U.S. at 256-57. A party opposing summary judgment must do more than just rest upon mere allegations, general denials, or vague statements. Saldana v. Kmart Corp., 260 F.3d 228, 232, 43 V.I. 361 (3d Cir. 2001).

C. Analysis

1. State National's motion on the duty to defend and investigate (Docket No. 544)

One of the County's pending counterclaims against State National is that State National breached the parties' insurance contract. The County claims that one element of that breach was State National's failure to provide a defense to the County in the underlying Anderson litigation, as well as State National's failure to investigate Anderson's claims. To refute the County's position, State National contends that the language of the policy is clear and unambiguous: under the Self-Insured Retention (" SIR" ) Endorsement to the Commercial General Liability Coverage Form (" CGL Form" ) governing the $10 million policy, the County was obligated to defend itself against, and independently investigate, all claims brought against the County that implicated the insurance policy. Because the Anderson litigation triggered the policy, it was the County's sole obligation under the SIR endorsement to investigate Anderson's claims and provide a defense to those claims. Accordingly, State National argues that it cannot be held to have breached the investigation and defense terms of the insurance contract.

To specifically support its position, State National points to the County's general duties under the CGL Form, as well as the County's duties under the SIR endorsement. Under the CGL Form, State National covenants that it " will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' . . . to which this insurance applies. [State National] will have the right and duty to defend any 'suit' seeking those damages. . . . [State National's] right and duty to defend ends when we have used up the applicable limit of insurance in the payment of judgments or settlements" under the policy. (Docket No. 606-1 at 14.) In the event of any " occurrence, claim or suit," the County's relevant duties under the CGL Form are as follows: (1) the County must see to it that State National is notified as soon as practicable of an " occurrence," or an offense which may result in a claim, or a claim is made or " suit" brought against the County; (2) the County must cooperate with State National in the investigation, settlement, or defense of the claim or " suit" ; and (3) the County will not, except at its own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without State National's consent. (Docket No. 606-1 at 20-21.)

The SIR endorsement modifies the CGL Form. (Docket No. 606-1 at 49.) The SIR endorsement provides:

1. In consideration of the premium charged and as a condition to the issuance and continuation of the Policy, it is agreed that the NAMED INSURED shall retain, as a self-insured retention, per occurrence and as respects combined insured damages and insured allocated costs and expenses of investigation, defense, negotiation and settlement applicable to such damages, the sum of [$300,000.] The

Page 574

company's limit of liability, as stated elsewhere in the Policy, shall apply solely in excess of the NAMED INSURED'S self-insured retention. . . .
2. In the event that any combined insured damages and insured allocated costs and expenses, as aforementioned, exceed, per occurrence, the NAMED INSURED'S self-insured retention and involve the liability of the company, then, solely as respects each such occurrence, the company will pay, in addition to its otherwise applicable limit of liability [$10,000,000.00], all supplementary payments . . . .
4. In the event of any occurrence which, in the opinion of the INSURED, is likely to give rise to liability under this Policy, no costs or expenses, other than for immediate first aid to others, shall be incurred by any INSURED, except at his or her own cost, peril and expense, without the written consent of the company. The NAMED INSURED shall be obligated to
A. provide an adequate defense and investigation of any action for or notice of any actual, potential or alleged damages, and
B. accept any reasonable offer or settlement within the NAMED INSURED'S self-insured retention,
and, in the event of any NAMED INSURED'S failure to comply with any part of this paragraph, the company shall not be liable for any damages or costs or ...

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