Divided New Jersey Supreme Court Upholds Intentional Acts Exclusion

Posted on June 20, 2008 by Mike Aylward

The availability of coverage for negligent supervision claims brought against the parents of troubled teenagers has been a persistent source of litigation and controversy under homeowner's policies.  As courts have increasingly found that independent theories of negligence against parents are an "occurrence" despite the intentional nature of their children's acts, homeowners' insurers have countered with new exclusions for intentional or criminal acts.  In true Clintonian fashion, the effect of such exclusions sometimes turns on whether the exclusion applies to the intentional or criminal acts or "an," "any" or "the insured.

The New Jersey Supreme Court has become the latest court to hold that an exclusion that applies to the intentional acts of "an" insured bars coverage for claims by "any" insured, including the claims of parents whose negligent supervision allegedly failed to prevent their son from sexually assaulting a neighbor's child.  In Villa v. Short, A-7-07 (N.J. June 10, 2008), the court ruled 4-2 that an exclusion for the criminal or intentional acts of an insured "plainly excludes coverage for all insureds when any insured commits an intentional or criminal act."  The court declined to find ambiguity in the policy based on the effect of a severability of interests clause Iwhich requires that each insured's rights be considered separately by the insurer).

Two dissenting justices argued that the insured's interpretation of the exclusion was reasonable, as evidenced by courts in other states that have held such exclusions not to apply to claims against "innocent insureds," and that the language must therefore be deemed ambiguous and should be interpreted in favor of coverage for the insured.
Tags: , , , , , ,

Asbestos IBNR Outside New Jersey Statute For Liquidation of Insolvent Insurers

Posted on December 20, 2007 by Mike Aylward

The New Jersey Supreme Court has ruled that thousands of asbestos claims and other long-tail liabilities that have been incurred but not yet reported do not qualify for inclusion in the distribution of the estate of an insolvent insurer as N.J.S.A. 17:30C-8(a)(1) provides that “no contingent claim shall share in the distribution of the assets of an insurer” except as such claims have become “absolute against the insurer.” In In The Matter of Liquidation of Integrity Ins. Co., No. A-91-06 (N.J. December 13, 2007), the court rejected the Liquidator’s argument that IBNR claims become “absolute” once their value is susceptible of being estimated. Instead, the majority declared that “because the process by which the Liquidator proposes to estimate IBNR claims of necessity entails looking outside of each claim to other similar claims in respect of their very existence, nature and extent and cost, IBNR claims fail to satisfy that most basic element of requirements in order to be “absolute”: [that each] stand on its own and not by reference to any other claim.” Two dissenting justices argues that the majority’s analysis created an unreasonable “Hobson’s choice” for the Liquidator, as it must either pay out the limited assets of the Estate now and leave future claimants without relief or delays payments indefinitely while the Estate meanwhile “hemorrhages” administrative costs.

Tags: , , , ,