In Fedway Associates, Inc. v. Engle Martin & Associates, Inc., the Superior Court of New Jersey’s Appellate Division affirmed the Trial Division’s decision to grant summary judgment to Defendants Engle Martin & Associates (Adjusters); Matson, Drisocoll & D’Amico, LLP; and Certain Underwriters at Llyod’s of London (Lloyd’s) in a case seeking a declaration that the Insurer was obligated to provide excess insurance coverage for a claim arising from Superstorm Sandy. The complaint alleged that the Insured was obligated to repair and restore its leased premises. While meeting this obligation the Adjusters misappropriated the cost of repairs between insurers and claimed that Lloyd’s and the Adjusters made misrepresentations that fraudulently caused the Insured to enter into a settlement. The Trial Court granted Lloyd’s and the Adjusters summary judgment. The Appellate Division agreed with the Trial Court and found that summary judgment should be granted to Lloyd’s and the Adjusters on all claims.

​The Insured, a large liquor wholesaler and distributor,/ suedLloyd’s and the Adjusters when its leased office buildings and warehouses suffered significant damage from flooding due to Superstorm Sandy. The insured had primary flood-loss coverage through a primary insurer, and excess coverage for such losses from other insurers including Lloyd’s. Lloyd’s provided aneighth layer of insurance which covered stock and inventories, subject to the terms and conditions of the primary insurancepolicy. The Insured submitted claims to its carriers for the Sandy-related losses. The Insured later hired a contractor to perform certain repair and restoration work on the leased premises. The Insured eventually reached a global settlement with all its insurers including Lloyd’s, which discharged Lloyd’sfrom any and all claims and demands for property damage or losses arising from the storm. After the settlement, the Insured sought to recover the contractor costs from the office lessor’s insurers. The lessor made a settlement with its insurer that hadno provisions for payment to the contractor. The Insured then attempted to reopen its claim with Lloyd’s to recover the contractor costs, but Lloyd’s refused.

The Trial Court granted summary judgment to Lloyd’s and the Adjuster on all claims. On appeal, the Insured argued that that: (1) the trial court erred by granting summary judgment based on the settlement because a genuine issue of fact existed as to whether the settlement was a product of fraud; (2) even if the settlement was enforceable against Lloyd’s it was not enforceable against the Adjusters; (3) the trial court erred by granting summary judgment for fraud and negligence claims;and (4) the court erred by awarding Lloyd’s attorney’s fees and costs.

​The Appellate Division affirmed the Trial Court’s ruling on all claims except the award of attorney’s fees and costs. The Court found that the Insured failed to present evidence to support a claim of fraud regarding the execution of the settlement. The record showed that the Insured was aware that it was settling all its insurance claims for Sandy-related losses, and that the contractor costs were not included in that settlement. Before entering the settlement, the Insured was informed that it had to seek recovery of the contractor costs from the lessor’s insurance coverage, and that Lloyd’s would not agree to make a settlement with the Insured contingent upon that claim.

The Court also found that all fraud claims failed. The Court determined that when the Adjusters claimed that the contractorcosts would be covered under the lessor’s insurance, those were opinions rather than statements of fact. The Court found that such statements generally cannot form the basis of a claim for fraud. Furthermore, fraud claims cannot ordinarily be based on representations of future conduct. Any statements made by the Adjusters about future actions regarding the contractor costswere not actionable because they were not statements of presently existing or past facts. The Insured also failed to show that it justifiably relied upon Adjuster’s representations that the contractor costs would be covered by the lessor’s insurance when it settled all its claims. The record showed that the Insured was advised that the lessor’s insurance claims were separate from the global settlement and that the Adjusters had no control over the settlement of those claims.

Finally, the Appellate Division also found that summary judgment was appropriate for the Insured’s negligence claim against the Adjusters. The Court found that the Insured failed to provide enough evidence that Adjusters breached a duty to exercise reasonable care in the adjustment of the Insured’s claims. In the case of complex subject matter, there is a need for expert testimony to support a claim of negligence. Both the Trial Court and Appellate Division found that complex insurance schemes are type of negligence claim where expert testimony would be necessary, and that the Insured’s failure to present expert testimony was grounds for summary judgment in the Adjusters’ favor.

For those reasons, the Appellate Division found that the Trial Court’s grant of summary judgment on all claims was appropriate. However, the Appellate Division did reverse the Trial Court’s grant of attorney’s fees and costs to the Insurer because there was no finding that the Insured pursued its initial claims in bad faith.

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