New Jersey Grants Summary Judgment to Insurer in Coverage Dispute by Another Insurer Seeking Reimbursement of Defense and Indemnification Costs for a Mutual Insured

In Ace American Insurance Company v. Penn National Insurance Company, the New Jersey Superior Court, Bergen County, considered a coverage dispute between two insurers providing insurance to a mutual insured for reimbursement of defense and indemnification costs associated with the settlement of a suit against the insured general contractor. The court held that the suit was barred by the applicable six-year statute of limitations, which began to accrue when an enforceable settlement was reached in the underlying action, and granted summary judgment in favor of the defendant insurer.

In this case, Ace provided general liability insurance to the insured, while Penn National provided business automobile coverage. Ace, among other insurers, defended the insured against a suit filed in Camden County Superior Court. Penn National disclaimed coverage to the insured in the underlying action on November 18, 2011; Ace and several other insurers settled the matter on January 19, 2012. Trial was set to begin on January 23, 2012 and, after Ace advised the court of the settlement, the parties placed the settlement on the record on the erstwhile trial date. Ace brought this action against Penn National on March 12, 2018 alleging that Penn National should have defended and indemnified the insured and that it was responsible to reimburse Ace for its defense and indemnity costs.

Penn National filed a summary judgment motion, arguing that Ace did not commence the action within six years of either the date of Penn National’s disclaimer or the date on which Ace and the other insurers settled the underlying matter, which is beyond the time allowed under the applicable statute of limitations to file suit. Ace countered that Penn National did not correctly calculate the accrual of the six-year statute of limitations in an action for reimbursement of defense and indemnification. It argued that the the the time for filing the reimbursement action against Penn did not accrue until the filing of the stipulation of dismissal on April 20, 2012. Since Ace’s Complaint was filed in March of 2018, Ace took the position that the action was timely filed.

In its analysis, the court agreed with the parties that actions based on contractual claims must be brought within six years after the cause of the action has accrued. The court examined the factual record and found it incontrovertible that an enforceable and final settlement of the underlying record was reached on January 23, 2012. Some of the facts supporting this conclusion included the actions of the court in the underlying matter in cancelling the January 23, 2012 trial and placing the settlement on the record, Ace’s internal emails acknowledging the settlement, and Ace’s Complaint setting forth the date of settlement. The court held that Penn National showed that the requirements for a valid settlement existed on January 23, 2012 and rejected Ace’s argument that the execution of final written settlement documents was essential to the formation of the contract of settlement. Accordingly, the court granted Penn National’s motion for summary judgment and dismissed Ace’s Complaint with prejudice.

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