STATE NATIONAL INSURANCE COMPANY v. THE COUNTY OF CAMDEN
Filing
723
OPINION. Signed by Judge Noel L. Hillman on 11/26/2014. (dmr)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
STATE NATIONAL INSURANCE
COMPANY,
Plaintiff,
v.
CIV. NO. 08-5128(NLH)(AMD)
OPINION
THE COUNTY OF CAMDEN,
Defendant.
APPEARANCES:
ROBERT J. MORROW
HUNTON & WILLIAMS LLP
200 PARK AVENUE
NEW YORK, NY 10166
WALTER J. ANDREWS
MICHAEL S. LEVINE
HUNTON & WILLIAMS LLP
1751 PINNACLE DRIVE
SUITE 1700
MCLEAN, VA 22102
On behalf of State National Insurance Company
WILLIAM M. TAMBUSSI
JOSEPH T. CARNEY
WILLIAM F. COOK
BROWN & CONNERY, LLP
360 HADDON AVENUE
P.O. BOX 539
WESTMONT, NJ 08108
On behalf of the County of Camden
HILLMAN, District Judge
In October 2008, State National Insurance Company (“State
National”) filed a declaratory judgment action against the
County of Camden, seeking a determination that it did not owe
coverage to the County under an excess liability insurance
contract for a multi-million dollar state court jury verdict
against the County.
State National contended 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 revaluation of the case four days
into trial, breached the insurance contract’s notice provision
and the adequate investigation and defense condition to
coverage.
After six years of extensive litigation and motion
practice before the Court, the claims between State National and
the County were settled in October 2014.
In June 2009, State National amended its initial complaint
to add legal malpractice claims against Donna Whiteside, inhouse counsel for the County who handled the underlying state
court case.
State National claimed that Whiteside committed
legal malpractice by not properly defending the County and State
National’s interests.
In March 2010, and again in June 2010,
the Court rejected State National’s attempts to assert legal
malpractice claims against Whiteside.
Despite the recent
settlement of the claims between State National and the County,
or perhaps because of, State National has again sought to renew
2
its legal malpractice claims against Whiteside. 1
For a comprehensive explanation of the Court’s prior
decisions on the unviability of State National’s legal
malpractice claims against Whiteside, the Court will refer the
parties to its two prior Opinions, Docket Numbers 226 and 272.
Briefly summarized, the Court found that “no matter what
Whiteside did, her conduct cannot be held to be the proximate
cause of State National’s
226 at 10.)
. . . alleged damages.”
(Docket No.
The Court recognized that the relationship between
State National and the County was contract-based, and the breach
of that contract was the basis for State National’s declaratory
judgment action against the County.
The Court observed,
If it is found that the County, by and through its
lawyer employee, breached the insurance contract
with State National . . ., [State National] will not
be required to pay under the policy. Despite any
alleged malpractice by Whiteside that [State
National] wish[es] she atone for, it is the County,
and not State National . . . , that has to pay for
that negligence. The County accepted this potential
outcome by conducting its own defense. Conversely,
if it is found that the County, by and through its
lawyer employee, did not breach the insurance
contract, then there cannot be any malpractice upon
which State National . . . can base a declination
of coverage.
1
State National has brought its motion pursuant to Federal Civil
Procedure Rule 60(b)(6), which provides, “On motion and upon
such terms as are just, the court may relieve a party or a
party's legal representative from a final judgment, order, or
proceeding for . . . (6) any other reason justifying relief
from the operation of the judgment.”
3
[State National] attempt[s] to separate the
County and Whiteside into two distinct and
independent defendants. The problem is that the
County, as a non-person entity, obviously cannot
act--its actions are those of its employees. In
other words, when [State National] contend[s] that
the County breached its obligations under the
insurance policy, it was Whiteside, and perhaps
other County employees, who perpetrated that alleged
breach. It is the County--through Whiteside--that
allegedly failed to conduct an adequate
investigation or provide a proper defense. Because
the County and Whiteside are one-in-the-same, and
[State National] had a contract with the County,
[State National] cannot maintain separate and
independent causes of action against Whiteside.
(Docket No. 226 at 11-12.)
In March 2014, this Court issued another Opinion addressing
various legal issues, including the issue of the existence of
disputed facts as to whether the County’s defense of the state
court litigation was “adequate” as required by the terms of the
SIR endorsement to the insurance policy.
18.)
(See Docket No. 655 at
The Court found that it could not independently weigh the
County’s actions in its defense and investigation of the state
court case to determine whether they were “adequate” under the
SIR endorsement, particularly because the insurance contract did
not define what an “adequate defense” entails.
(Id. at 22.)
The Court found that the determination of whether the defense
was “adequate” was for the jury.
(Id.)
this footnote:
4
The Court also included
State National contends that the term “adequate” must
be given its plain and ordinary meaning, which,
according to Black’s Law Dictionary, is “what is
needed” and “of moderately good quality,” and is
“legally sufficient.” State National further contends
that the Court previously found that the County must
prove more than that it did not commit legal
malpractice in order to demonstrate its compliance
with the “adequate defense” condition in the SIR
endorsement. (State National Reply, Docket
No. 613 at 6.) The Court did not make such a specific
finding, and instead observed that the “adequate
defense and investigation provision does not require
the County to generally opine on the adequacy of its
abilities to defend and investigate all law suits
against it in order to meet the condition for
coverage[;] the policy requires that the County
demonstrate that in handling the Anderson lawsuit, it
took certain steps and made certain decisions, and
that conduct was ‘adequate.’” The Court also noted,
“even if the County can prove that its in-house
counsel did not commit legal malpractice, it still
must prove that its defense and investigation,
although not considered malpractice, were adequate.
Stated differently, the condition precedent still
applies even if the elements of legal malpractice
cannot be met.” (Docket No. 474 at 8, 8 n.1.) What is
an “adequate defense” as required by an insurance
policy condition to coverage can be more burdensome
than proving legal malpractice, or less burdensome, or
the same. The Court did not decide that distinction,
and, in denying State National’s prior motion for
summary judgment on the adequacy of the County’s
defense, the Court suggested that “in order to prove
that the County’s conduct was negligent such that it
caused the breach of the insurance contract
provisions, the aid of expert testimony is ordinarily
required.” (Docket No. 393 at 3 n.1.) The Court leaves
it to the parties’ proofs, expert or otherwise, to
support their respective positions on what constitutes
an “adequate defense” under the insurance policy
endorsement.
(Id. at 22-23 n.11.)
5
In State National’s current motion to revive its
malpractice claims against Whiteside, State National argues that
this footnote in the March 2014 Opinion altered the basis on
which its malpractice claims were dismissed in March 2010, and
created a potential for State National to incur damages caused
by Whiteside’s alleged malpractice.
When the Court noted, “What
is an ‘adequate defense’ as required by an insurance policy
condition to coverage can be more burdensome than proving legal
malpractice, or less burdensome, or the same,” State National
interprets this observation as a “new” ruling that allows a
claim for malpractice to be viable even if Whiteside provided an
adequate defense.
State National argues that where, in March
2010, the Court found that “a finding of legal malpractice
necessarily foreclosed a finding of an ‘adequate’ defense,” the
Court’s March 2014 decision “creates a potential for a finding
that Donna Whiteside did indeed commit legal malpractice while
still implicating coverage under the Policy.”
(Docket No. 663-1
at 13.)
The Court’s footnote in the March 2014 did not create a
“new” ruling as to State National’s ability to lodge legal
malpractice claims against Whiteside.
The footnote addressed
State National’s argument that the County must prove more than
that it did not commit legal malpractice in order to demonstrate
6
its compliance with the “adequate defense” condition in the SIR
endorsement.
In responding to that argument, the Court
reaffirmed its statement in the body of the Opinion that it was
for the jury to decide whether the County’s defense was
“adequate,” and that the Court had never previously decided that
issue itself.
Even though State National interprets the March 2010
decision to mean that the Court found that “a finding of legal
malpractice necessarily foreclosed a finding of an ‘adequate’
defense,” (State National Brief, Docket No. 663-1 at 12), the
Court actually stated, “if it is found that the County, by and
through its lawyer employee, did not breach the insurance
contract, then there cannot be any malpractice upon which State
National
. . .
can base a declination of coverage.”
State
National’s inverse interpretation is contrary to the true
meaning of the Court’s observation, which the Court further
clarified in the March 2014 Opinion.
There, the Court found
that whether the County provided an “adequate defense” in the
context of an insurance policy provision was for the jury to
determine, and that the facts and expert testimony presented to
the jury on the issue of a contractual “adequate defense”
provision could also possibly support a legal malpractice claim
was irrelevant and immaterial.
Reading the entire footnote
7
altogether in its proper context, along with the Court’s other
decisions, demonstrates that the Court has consistently viewed
State National’s putative legal malpractice claims against
Whiteside as not viable. 2
The general purpose of Rule 60(b) is “to strike a proper
balance between the conflicting principles that litigation must
be brought to an end and that justice must be done.”
Coltec
Industries, Inc. v. Hobgood, 280 F.3d 262, 271 (3d Cir. 2002)
(citation omitted).
2
More specifically, Rule 60(b)(6) is a
State National states that the reason it is seeking to renew
its claims against Whiteside is that the Court’s March 2014
Opinion creates the potential for State National to face
potential damages as a consequence of Whiteside’s alleged
malpractice. Aside from the fact that the Court’s March 2014
Opinion did not create a “new” ruling, it is unclear what
potential damages State National now faces, particularly because
the County and State National have settled their claims. In
supplemental briefing filed after the settlement, State National
points out that it expressly exempted from the settlement its
potential claims against Whiteside, and argues that its damages
are legal fees as a result of her malpractice. In response to
State National’s arguments, it is worth noting that a recent New
Jersey Appellate Division case reaffirmed that “claims by nonclients against attorneys are permitted sparingly,” and that
there is a “high threshold in suits brought by non-clients
against attorneys.” O'Dowd v. Mandelbaum, 2014 WL 5482403, 7
(N.J. Super. Ct. App. Div. Oct. 31, 2014) (citing LoBiondo v.
Schwartz, 970 A.2d 1007, 1029 (N.J. 2009)). Regardless of that
standard, however, the Court has not, and will not, alter the
reasoning of the decision that dismissed State National’s legal
malpractice claims against Whiteside. As the Court has stated
before in this case, a difference of opinion with the Court's
decision should be dealt with through the normal appellate
process. Florham Park Chevron, Inc. v. Chevron U.S.A., Inc.,
680 F. Supp. 159, 162 (D.N.J. 1998).
8
catchall provision that “provides for extraordinary relief and
may only be invoked upon a showing of exceptional
circumstances.”
Id. (citations omitted).
In its last effort to
have Whiteside “left holding the proverbial bag,” (Docket No.
226 at 11), State National has not demonstrated the exceptional
circumstances necessary for the revival of its claims against
Whiteside.
It is time for this litigation to be brought to an
end.
An appropriate Order will be entered.
Date: November 26, 2014
At Camden, New Jersey
s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
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