NEW JERSEY SCHOOLS INSURANCE GROUP v. MEADOWBROOK INSURANCE GROUP et al
OPINION. Signed by Judge Renee Marie Bumb on 5/11/2017. (TH, )
[ECF No. 32]
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
NEW JERSEY SCHOOLS INSURANCE
Civil Action No. 16-1199
MEADOWBROOK INSURANCE GROUP,
Gregory J. Giordano, Esq.
Lenox, Socey, Wilgus, Formidoni,
Brown, Giordano & Casey, LLC
136 Franklin Corner Road, Bldg B2
Trenton, New Jersey 08648
Attorney for Plaintiff New Jersey
Schools Insurance Group
Michael P. Luongo, Esq.
Goldberg Segalla LLP
1700 Market St.
Philadelphia, Pennsylvania 19103
Attorney for Defendants Brokers Risk
Insurance Company, Lloyds of London,
Certain Underwriter at Lloyds, London
BUMB, United States District Judge:
This matter is before the Court upon a motion by Defendant
Certain Underwriters at Lloyds, London (“Underwriters”) to
dismiss Counts II and V of the Second Amended Complaint filed by
Plaintiff New Jersey Schools Insurance Group (“NJSIG”).
reasons set forth herein, the motion will be granted.
The following facts are taken from the Second Amended
(Compl. [ECF No. 26]).
On June 1, 2011, Luis
Rodriguez was struck by a school bus owned and operated by
Jersey City Public Schools (“Jersey City”), resulting in
personal injuries to Mr. Rodriguez.
Mr. Rodriguez filed a
personal injury action against Jersey City in the New Jersey
Superior Court, Law Division, Union County (the “Rodriguez
Jersey City was insured by Plaintiff NJSIG for the claims
in the Rodriguez Action under a policy with a coverage limit of
Munich Insurance Company provided indemnity coverage
for an additional $500,000.
Defendant Star Insurance Company
insured Jersey City under an Excess Liability policy with
coverage in excess of the $1 million provided by NJSIG and
Munich Insurance Company.
Underwriters insured NJSIG under a
Trustees Errors and Omissions Liability Insurance for Self
Insured Funds policy bearing number LTEO-0006976 (the “Policy”).
The Rodriguez Action settled at mediation on July 21, 2004.
The settlement resulted in a General Release in which all claims
by Mr. Rodriguez against Jersey City, NJSIG, and others were
released in exchange for the settlement payment of $1.9 million.
On September 29, 2014, over two months after the settlement,
NJSIG notified Star and Meadowbrook of the settlement and
requested payment of $900,000 under the Star policy.1
24, 2014, Meadowbrook denied coverage under the Star policy on
the basis that it did not receive notice that the claim against
Jersey City would exceed the $1 million attachment point of the
Star policy and that it had not provided consent to the
settlement within its policy limits.
Prior to receiving
Meadowbrook’s denial, however, (and “[w]ithout waiving the
position that Star was notified that the claim exceeded $1
million), (Compl. ¶ 28), NJSIG notified Underwriters on October
7, 2014, through its representative, Brokers’ Risk Placement
Service, Inc. (“Brokers’ Risk”), of a claim under the Policy.
NJSIG alleges that its notice to Underwriters made clear that
NJSIG had committed an error by failing to notify Star of the
settlement and that the settlement payment needed to be issued.
Moreover, NJSIG alleges that it was under threat of litigation
by Rodriguez to enforce the settlement if payment of the
settlement amount was not forthcoming.
In its complaint, Plaintiff NJSIG alleges that it had
previously notified Meadowbrook/Star on March 5, 2013, “that the
potential claim value or ‘reserve’ triggered coverage on their
policy,” but that the notice was classified as “incident only.”
(Compl. ¶¶ 11-12.)
On November 7, 2014, Brokers’ Risk, on Underwriters’
behalf, denied coverage to NJSIG under the Policy.
part, Underwriters denied coverage because no claim had been
made against NJSIG as required under the Policy.
alleges the denial was “based on a narrowly circumscribed and
distorted interpretation of ‘claim’ that purportedly required
litigation against NJSIG in order to trigger coverage under the
. . . Policy.”
(Compl. ¶ 33).
NJSIG also alleges that the
denial was made without conducting any investigation and that
Brokers’ Risk/Underwriters had no debatable reason to deny
coverage under the Policy.
Underwriters contends that Counts II and V fail to state a
claim because Underwriters had a legally permissible basis to
deny coverage to NJSIG or, at a minimum, Underwriters’ denial of
coverage was debatable.
See, e.g., Badiali v. New Jersey Mfrs.
Ins. Grp., 220 N.J. 544, 554 (2015) (“[T]o establish a firstparty bad faith claim for denial of benefits in New Jersey, a
plaintiff must show that no debatable reasons existed for denial
of the benefits.” (internal citations omitted)).
MOTION TO DISMISS
A Rule 12(b)(6) motion to dismiss for failure to state a
claim upon which relief may be granted must be denied if the
plaintiff’s factual allegations are “enough to raise a right to
relief above the speculative level, on the assumption that all
the allegations in the complaint are true, (even if doubtful in
Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1965
(2007)(internal citations omitted).
Moreover, “[w]hile a
complaint attacked by a Rule 12(b)(6) motion to dismiss does not
need detailed factual allegations, . . . a plaintiff’s
obligation to provide the ‘grounds’ of his ‘entitle[ment] to
relief’ requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will
not do." Id. at 1965 (internal citations omitted).
A district court must accept any and all reasonable
inferences derived from those facts.
Unger v. Nat’l Residents
Matching Program, 928 F.2d 1392 (3d Cir. 1991); Glenside West
Corp. v. Exxon Co., U.S.A., 761 F. Supp. 1100, 1107 (D.N.J.
1991); Gutman v. Howard Sav. Bank, 748 F. Supp. 254, 260 (D.N.J.
Further, the court must view all allegations in the
complaint in the light most favorable to the plaintiff. See
Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Jordan v. Fox,
Rothschild, O’Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir.
Therefore, in deciding a motion to dismiss, a court should
look to the face of the complaint and decide whether, taking all
of the allegations of fact as true and construing them in a
light most favorable to the non-movant, the plaintiff has
alleged “enough facts to state a claim for relief that is
plausible on its face.”
Twombly, 127 S. Ct. at 1974.
allegations in the complaint, matters of public record, orders,
and exhibits attached to the complaint are taken into
consideration. Chester County Intermediate Unit v. Pennsylvania
Blue Shield, 896 F.2d 808, 812 (3d Cir. 1990).
Count II alleges a breach of the implied covenant of good
faith and fair dealing.
Specifically, NJSIG alleges that
Underwriters “breached the duty of good faith and fair dealing
in its determination as to the liabilities due to NJSIG under
Count V alleges bad faith.
Plaintiff alleges that Underwriters “lacked any reasonable basis
for denying coverage and/or knew or recklessly disregarded the
lack of a reasonable basis for denying the claim.”2
Although this is a motion to dismiss and not a motion for
summary judgment, the Court is permitted to rely upon facts if
they are contained in documents that are integral to the
In re Burlington Coat Factory Sec. Lit., 114 F.3d
1410, 1426 (3d Cir. 1997) (noting that district courts may
consider a document integral to or explicitly relied upon in the
Although Plaintiff alleges bad faith denial of benefits
and breach of the implied covenant of good faith and fair
dealing as separate causes of action, it is unclear that each
count stands on its own. Because the pleadings do not support
Plaintiff’s allegations of bad faith for either cause of action,
the Court need not delve into such discussion.
complaint without converting a motion to dismiss into a motion
for summary judgment).
Here, in response to NJSIG’s claim for
coverage, Underwriters sent a denial letter explaining that
coverage was not triggered under the Policy because no thirdparty “Claim,” as that term is defined in the Policy had been
made against NJSIG.
The Policy’s insuring agreement provides,
in pertinent part:
For a CLAIM first made against the INSURED during the
POLICY PERIOD and reported to the Company during the
POLICY PERIOD and alleging a WRONGFUL ACT first
committed or allegedly committed on or subsequent to
the RETROACTIVE DATE:
A. The Company will pay on behalf of an INSURED any
LOSS which the INSURED shall become legally obligated
B. The company will pay on behalf of an INSURED any
CLAIMS EXPENSE incurred in defense of any CLAIM
defended by the Company in connection with a LOSS
covered under this Policy.
(Pl.’s Opp. Br. Ex B at 23 [ECF No. 34-1].)
Policy contains a notice of claim provision:
THE INSURED [NJSIG] shall, as a condition precedent to
any right to coverage under this Policy, give to the
Company notice in writing as soon as practicable,
during the POLICY PERIOD, or within sixty (60) days
after the end of the POLICY PERIOD:
(a) of any CLAIM first made against the INSURED during
the POLICY PEROOD;
(b) of any circumstances which may subsequently give
rise to a CLAIM for which coverage is provided
hereunder. If any CLAIM for which coverage is
provided hereunder is subsequently made against the
INSURED arising out of the circumstances reported
under this subdivision 5.(b), it shall be deemed to
have been made during the POLICY PERIOD.
(Id. at 41 [ECF No. 34-1].)
Most importantly, “Claim” is defined under the Policy:
CLAIM – shall mean a written demand upon one or more
INSURED(S) for LOSS and alleging a WRONGFUL ACT.
(Id. at 40.)
Clearly, on the face of the Policy, the unambiguous
definition of “Claim” requires that a written demand be made
against the insured.
NJSIG, however, has not alleged anywhere
in the Second Amended Complaint that any third party made a
demand, written or otherwise, against NJSIG based on the events
of the settlement of the Rodriguez Action.
Nor does NJSIG
allege anywhere in the Second Amended Complaint that it advised
Underwriters that it was under “threat of litigation” by
As Underwriters’ letter makes clear, Underwriters
expressly asked NJSIG to keep it advised as the matter
NJSIG does not allege that it ever provided such
In the event discovery shows that NJSIG did provide such
notice to Underwriters, NJSIG may seek leave to amend the
Complaint. On the face of the pleadings, however, NJSIG makes
no such claim.
Accordingly, based on the pleadings, it cannot be said that
Underwriters’ denial of coverage was not fairly debatable.
Accordingly, Counts II and V will be dismissed.
s/Renée Marie Bumb
RENÉE MARIE BUMB
UNITED STATES DISTRICT JUDGE
Dated: May 11, 2017
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