In a non-published opinion, the Appellate Division of the New Jersey Superior Court vacated a trial court’s dismissal of a plaintiff’s declaratory judgment against an insurer after conducting a de novo review and finding that the trial court committed plain error in entering summary judgment in favor of the insurer. As set forth below, the procedural background of Sanchez v. Fernandez is quite convoluted, but at the end of the day, the Appellate Court found that the trial court committed plain error in granting summary judgment to the insurer regarding coverage when issues of material fact existed.
Plaintiff was injured in a dog bite incident on the insured’s property. The insured did not own the dog; instead, it was owned by her cousin, who was living with her at the house. The home was covered under a policy issued by Providence Mutual Fore Insurance (“Providence”). The policy defined “an Insured,” in part, as “you and residents of your household who are your relatives.” The terms “resident” and relatives” were not defined in the policy.
Plaintiff filed a personal injury suit for negligence against the insured and her cousin. She then amended her Complaint to add a count seeking a declaration of the insured’s rights under the Providence policy. Providence moved to dismiss plaintiff’s count for failure to state a claim on the basis of the long-standing principle that a plaintiff may not bring a claim against an insurer without first obtaining a judgment against the insured. The court agreed with Providence and granted the motion to dismiss.
Next, Providence filed its own declaratory judgment action seeking an order that it had no duty to defend or indemnify the insured’s cousin. Plaintiff filed and Answer and counterclaim seeking a declaration of coverage for the cousin. The declaratory and personal injury cases were then consolidated. The cousin failed to answer Providence’s complaint and default judgment was entered against him in favor of Providence. And again, the plaintiff’s counterclaim was dismissed for failure to state a claim. Providence then filed a summary judgment motion asking the court to declare that the default judgment of non-coverage under the policy entered against the cousin was binding on all parties. The granted Providence’s motion, finding that through the litigation both the insured and her cousin both acted consistently with a finding that the cousin was not an insured under the policy. In doing so, the court rejected plaintiff’s opposition to the default and reasoned that plaintiff did not present any evidence that the court did not consider.
On appeal, the Appellate Division agreed with Providence that “an injured person possesses no direct cause of action against the insurer of the tortfeasor prior to recovery against the latter.” The Court further recognized that such claims only arise where an injured party obtains a final judgment against the named insured. But, then the court pivoted. While finding that plaintiff’s arguments were unpersuasive, the court noted that it can, in the interests of justice, notice plain error that was not brought to the attention of either the trial or appellate courts.
The Court conducted a de novo review of the trial court’s order granting summary judgment against the cousin based on his failure to answer Providence’s complaint. The Court found that the trial court cited, but failed to consider undisputed facts in its possession; namely, the fact that the cousin was related to the insured and resided in the house at the time of the dog bite incident. The Court determined that these facts go directly to the question of whether the cousin was an insured under the policy and that they were raised by plaintiff during oral argument. Plaintiff had argued that Providence should have been required to submit proof on the merits of coverage before summary judgment could be entered, but the trial court instead drew an inference of no coverage based on the words and actions of the insured and her cousin. Holding that a genuine issue of material fact existed as to coverage, the Court concluded that summary judgment granting Providence declaratory relief under the policy should have been denied because it clearly led to an unjust result and was plain error. The orders were vacated and the case remanded to the trial court for further proceedings.
Clark & Fox is a firm of experienced lawyers with diverse international practices that focuses on representing the interests of the insurance industry. Information about all of Clark & Fox’s locations, attorneys, and practice areas is available on http://www.clarkfoxlaw.com/
For more information, please contact:
John M. Clark, CEO/President: jclark@clarkfoxlaw.com
