New Jersey Mfrs. Ins. Co. v. Consolidated Mut. Ins. Co.

• Decision Date: 09 July 1973
• Citation: 308 A.2d 76,124 N.J.Super. 598
• Parties: NEW JERSEY MANUFACTURERS INSURANCE COMPANY, Plaintiff, v. CONSOLIDATED MUTUAL INSURANCE CO., a corporation, and New Jersey Lumber& Supply Co., Inc., t/a Danny Do-It Lumberama, Defendants.
• Court: New Jersey Superior Court

Page 598

124 N.J.Super. 598

308 A.2d 76

NEW JERSEY MANUFACTURERS INSURANCE COMPANY, Plaintiff, v. CONSOLIDATED MUTUAL INSURANCE CO., a corporation, and New

Jersey Lumber& Supply Co., Inc., t/a Danny Do-It

Lumberama, Defendants.

Superior Court of New Jersey,

Law Division.

July 9, 1973.

Peter D. Manahan, Newark, for plaintiff (Hughes, McElroy, Connell, Foley & Geiser, Newark, attorneys).

Gerald Kaplan, East Orange, for defendant Consolidated Mutual Ins. Co. (Lieb, Teich & Berlin, East Orange, attorneys).

Barry F. Zotkow, Oakland, for defendant New Jersey Lumber & Supply Co., Inc., t/a Danny Do-It Lumberama (Hirschklau & Wasserman, oakland, attorneys).

POLOW, J.C.C., Temporarily Assigned.

On April 5, 1973 an opinion was rendered in this court declaring that an insurance policy issued by plaintiff covered the accident in question. That decision resolved the dispute between two insurance carriers, each having contended that the other carrier covered the particular risk involved. Accordingly the obligation was imposed upon plaintiff to defend the action for damages at its own expense on behalf of its assured.

The insured also sought to recover its expenses in defending the carrier's declaratory judgment suit to determine which carrier had the obligation to defend the negligence claim. This particular question was not resolved in the written opinion previously rendered and will be dealt with here.

Prior to September 13, 1971 there was no authority in this State to support the award of counsel fees incurred by an assured in an action against his own insurance carrier to enforce his right to be defended and compel coverage, Vornado, Inc. v. Liberty Mut. Ins. Co., 106 N.J.Super. 111, 254 A.2d 325 (Ch.Div.1969); McMinn v. Damurjian, 105 N.J.Super. 132, 251 A.2d 310 (Ch.Div.1969), although there was clear authority to award costs of defending a claim where the insurer had improperly failed or refused to provide the defense. Gerhardt v. Continental Ins. Co., 48 N.J. 291, 225 A.2d 328 (1966).

R. 4:42--9, since September 13, 1971, has provided that 'no fee for legal services shall be allowed * * * except * * * (6) In an action upon a liability or indemnity policy of insurance, in favor of a successful claimant.'

The present rule does not 'mandate' the allowance of counsel fees in every such action. Felicetta v. Commercial Union Ins. Co., 117 N.J.Super. 524, 285 A.2d 242 (App.Div.1971). It rather reposes in the trial court an area of discretion so that under circumstances where the assured may have acted in bad faith and contributed substantially to the necessity for the litigation by reason of misrepresentations, an allowance may be refused. Felicetta, supra, at 529--530, 285 A.2d 242.

Absent such bad faith or misrepresentations by the assured, the purposes to be served in adoption of the rule must be examined in exploring the exercise of discretion to award counsel fees against an insurance company. One purpose assuredly was to discourage groundless disclaimers by carriers. Felicetta, supra, at 528, 285 A.2d 242. If that were the sole reason for the rule amendment, plaintiff would be well justified in its opposition to imposition of counsel fees since the declaratory judgment in this case recognized the arguability of plaintiff's position and the reasonableness of plaintiff's action in seeking a judicial interpretation of its obligations under the policy.

However, against the background of concern of the bench and bar leading up to consideration and modification of this provision of the rules (See Gerhardt, supra, 48 N.J. at 301, 225 A.2d 328), I find that another compelling motivation for this change was the desire of providing more equitably for the assured the benefits bargained for in his contract of insurance without unanticipated expense over and...