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There is extensive case law in New Jersey about when an adjoining property owner can be liable for an injury resulting from a fall on a public sidewalk. In Qian v. Toll Brothers, 2015 N.J. LEXIS 825 (Aug. 12, 2015), the New Jersey Supreme Court dealt with the issue of liability of whether a homeowner’s association could be liable to the plaintiff who fell not on a public sidewalk, but rather the private common sidewalk owned by the homeowner’s association. The trial court and Appellate Division both found that the Supreme Court’s Luchejko v. City of Hoboken case controlled and dismissed the case. The Supreme Court disagreed and reversed.

In Qian, the plaintiff and her husband lived in a home in the Villas, purchased by their son, whose name was on the deed. The Villas was an over 55 age restricted community, consisting of 102 detached single family homes on 32.5 acres of land. Homeowners at the Villas took title only to their dwelling units. All other areas, including the sidewalks and walkways, were common property owned by the Homeowners Association (“Association”) or the Recreation Association (responsible for the recreation facilities).

All homeowners were obligatory members of the Association. They were charged monthly assessments to pay for the maintenance of the common areas which included services for snow and ice removal. The Association formation documents and its by-laws stated that the Association had the obligation to maintain the common areas. Indeed, it had contracted with the co-defendant Landscape, Inc. for the removal of snow and ice from roadways, parking areas, driveways, and sidewalks.

On the date of the accident, freezing rain fell. The plaintiff alleged that, while on her way home, she slipped and fell on ice on a common area sidewalk within the Villas. She sued the Association, the management company, the developer, and the snow removal company. This appeal only concerned her claim against the Association and the management company.

After examining the facts, the Supreme Court found that its prior decision of Luchejko did not apply. In Luchejko, it found that a condominium association had no liability for an injury that occurred on the public sidewalk in front of its condominium building.

The Supreme Court distinguished Luchejko from the Qian case because its Luchejko decision did not address the condominium’s duty to maintain a private sidewalk or walkway that fell within the common elements of the condominium’s property. Liability of a landowner for a sidewalk injury would depend upon whether the sidewalk was classified as public or private. This classification would be determined based upon who owns it, not how it is used.

The Court found that nothing in the Qian record remotely suggested that this interior sidewalk was controlled or the responsibility of the township (which would make it a public sidewalk). The abutting roadway was private and had not been dedicated to the township. Moreover, the Association documents classified the sidewalks and interior roads within the Villas as common property, i.e., private property.

There is statutory limited immunity available to a homeowner’s association if it provides in its by-laws that the association is not liable for a civil action brought by a unit owner to respond in damages for a bodily injury to the unit owner occurring on the premises of the common areas in the community. By conferring this limited immunity, the Supreme Court found that implicit in this legislation was the belief that the condominium association could have tort liability for its common areas.

Thus, while the condominium association in Luchejko had no common law duty to take reasonable measures to clear the public sidewalk of snow and ice, common law premises liability law did impose such a duty on the Association in Qian to keep its private sidewalks reasonably safe. Thus, the Court found that the Appellate Division erred in affirming the grant of summary judgment in favor of the Association and its management company.

However, the Court did remand back to the trial court to decide the issue whether the plaintiff should be deemed a unit owner for purposes of the immunity provision in the Association’s by-laws. That issue was not reached before summary judgment was granted and the Court found that it must be further explored by the trial court.

An issue that often arises in claims involving a construction project is the scope of coverage for alleged defective work of the contractor or a subcontractor. In the reported decision of Cypress Point Condo Ass’n v. Adria Towers, LLC, 2015 N.J. Super. LEXIS 114 (App. Div. July 9, 2015), the Appellate Division ruled that the consequential damages of the subcontractor of the developer was potentially covered under the developer’s insurance policy.

In Cypress Point, the plaintiff condominium association brought suit against the developer, its insurance companies, and various subcontractors. It claimed that there should be insurance coverage under the developer’s policies for the damages caused by the subcontractor’s defective work.

The question on appeal is whether consequential damages to the common areas of the condominium complex and to the unit owners’ property, caused by the subcontractors’ defective work, constitute “property damage” and an “occurrence” under the policy. The plaintiff alleged that the subcontractors failed to properly install the roof, flashing, gutters and leaders, brick and EIFS facade, windows, doors, and sealant. This faulty workmanship amounted to what has typically been considered in the construction industry as defective work, not covered by policies. However, the paintiff has not argued that the replacement costs constitute “property damage” and an “occurrence” under the policy.

But, the faulty workmanship also caused consequential damages to the “common areas and unit owners’ property [including] damage to steel supports, exterior sheathing and interior sheathing and sheetrock, insulation and other interior areas of the building, both visible and latent[.]” Some unit owners experienced “water infiltration at the interior window jambs and sills[,]” and “roof leaks.” Other unit owners “experienced significant damage to the interior of their units, including exterior wall sheathing, wall cavity insulation, insulation sheetrock, wall finishes, wood flooring, and trim.”

The court pointed out that there was clearly property damage in that the damages constituted physical injury to tangible property. The interior strucutes were alleged to have been damaged by water infiltration from the fualty workmanship. Further, here was an occurrence because the insruers do not reasonably contend that the subcontractors expected or intended for their faulty work to

As to whether there exists “property damage,” the consequential damages clearly constitute “physical injury to tangible property.” The faulty workmanship damaged “the common areas and unit owners’ property[.]” The interior structures, including the drywall, insulation, wall finishes, and wood flooring, were damaged by water infiltration from the faulty workmanship. As a result, the consequential damages constitute “property damage” as defined under the policy.

As to whether there exists an “occurrence,” the consequential damages amount to an unexpected and unintended “continuous or repeated exposure to substantially the same general harmful conditions.” The insurers do not contend, and we cannot reasonably believe, that the subcontractors [*10]  either expected or intended for their faulty workmanship to cause “physical injury to tangible property.” Thus, the consequential damages constitute an “occurrence” as defined in the policy.

The court found a difference for coverage purposes for the defective work of a subcontractor versus a contractor.

Plaintiff Heather Champagne-Brady claimed to have been injured when her vehicle collided with a motorcycle operated by Anthony Gallo. She was stopped, waiting to turn left, when defendant Gerard Inaugurato was stopped and waved her on to make the left turn in front of him. At that point, she collided with the Gallo motorcycle. In Champagne-Brady v. Gallo, 2015 N.J. Super. Unpub. LEXIS 1581 (July 1, 2015), her suit was dismissed because it was the second suit involving the same automobile accident and its filing violated the entire controversy doctrine.

Gallo filed his lawsuit first for his injuries stemming from the accident on July 9, 2010. Champagne-Brady was personally served with the Gallo complaint and she turned the case over to her insurance carrier, GEICO, which provided her an attorney to defend her. He filed an answer and a third party complaint against Inaugurato. He later settled the suit about 1 year later for the $15,000 policy limit.

Champagne-Brady filed a complaint against Gallo and Inaugurato for her own injuries on April 23, 2012 (about 8 months after the Gallo case settled). In response, both Gallo and Inaugurato filed motions for summary judgment raising the entire controversy doctrine. Both motions were granted by the trial judge and her complaint was dismissed.  This appeal followed.

The entire controversy doctrine embodies the principle that the adjudication of a legal controversy should occur in one litigation in only one court and that all parties in that litigation must present all of their claims and defenses that are related to the underlying controversy. Court Rule 4:30A provides that “non-joinder of claims required to be joined by the entire controversy doctrine shall result in the preclusion of the omitted claims to the extent required by the entire controversy doctrine.” In determining whether a subsequent claim should be barred under this doctrine, the court looks at whether the claims arise from related facts or the same transaction or series of transactions.

Here, the Appellate Division noted that there is no dispute that Champagne-Brady’s claims against Gallo and Inaugurato arise from the same set of facts or transaction, namely the auto accident of May 4, 2010, that was the subject of Gallo’s earlier proceeding against Champagne-Brady. Therefore, she was required to proceed with her claim unless an exclusion applied.

She argued to the Appellate Division that there was no adjudication or arbitration of the issues in the first suit because it settled and, hence, it should not be barred by the entire controversy doctrine. However, the court found that the doctrine can apply when a prior action based on the same transaction facts has been tried or settled. Here, Champagne-Brady litigated Gallo’s complaint for one year before it settled. She had ample opportunity to present her own claim. To allow her to present her claim after the first case was litigated for one year would be a waste of judicial resources. Thus, the Appellate Division uphold the dismissal of her lawsuit.

Champagne-Brady argued that she did not know of the status and settlement of the first case. However, her personal counsel should have advised her to join her affirmative claim in defending the initial action or risk its loss altogether. Her remedy, if any, is against her personal counsel.

The plaintiffs Sheldon and Shirley Kavesh discovered mold growth in their home, located on their attic’s interior plywood surfaces. They submitted a claim to their homeowner’s carrier, the defendant Franklin Mutual Insurance Company, for the remediation of the mold. The carrier denied the claim, stating that it was not covered by the policy. In Kavesh v. Franklin Mutual Ins. Co., 2015 N.J. Super. Unpub. LEXIS 1378 (App. Div. June 10, 2015), the plaintiffs appealed, claiming that this claim should have been covered by their policy.

The policy contained a specific exclusion for damage or loss covered by mold. However, it did provide limited coverage for mold if the loss was caused by fortuitous direct physical damage or destruction.

The defendant inspected the home and found no evidence of a roof leak or other water penetration to the attic. It determined that the mold resulted as a result of a high humidity condition which had caused condensation in and on the plywood roof sheathing.

The defendant also retained an expert who inspected the roof of the home. He noted that there were no water stains or water damage. He cited the absence of ventilation, the installation of an ice and water shield, and the placement of a fan as contributing factors to higher levels of condensation in the front slope of the attic where the mold was found. He found no exterior water entry, no missing shingles or roof damage, and no pipe, fixture, or appliance leaks causing the mold. He opined that the origin and spread of the mold on the roof sheathing in the attic cannot be attributed to any individual weather event.

The trial judge found that there was no basis under the terms of the policy to impose liability and dismissed the complaint. The plaintiffs appealed, claiming that the cause of the mold growth was a genuine issue of material fact that should have precluded the entry of summary judgment. The Appellate Division disagreed, upholding the trial court’s decision.

The plaintiffs dispute that the cause of the mold was condensation but provided no other explanation. They provided no evidence that the mold condition was a direct result of any loss that would bring the claim within the basic terms of the policy.

In construing the terms of the policy, the court found that its terms were not ambiguous. The plain language of the policy stated that mold is not covered, except for mold damage that is a direct result of a covered loss. The policy distinguished between mold and mold that is a consequence of a covered loss.

The Appellate Division rejected the plaintiff’s argument that mold growth by itself was a material intrusion into the home that met the requirement of “physical damage.” The plain language and express purpose of the policy was to generally deny coverage for mold damage but provide limited coverage for mold damage when resulting from some other covered cause of loss. The court found the absence of any material dispute of fact that would bring the claim within the policy and, hence, determined that there was no reason to disturb the trial court’s determination.

This week’s article was written by my Litigation Department associate, Charles F. Holmgren, Esq.

Defendant BackTrack Reports, Inc.’s business is to produce background research reports pertaining to the financial industry that provide its clients information on potential investment opportunities. In one such report, a report it drafted on Plaintiff NuWave Investment Corp., BackTrack published statements from Hyman Beck & Co. and its employees that NuWave’s principals considered defamatory. NuWave filed suit against several defendants for defamation. At trial, with only BackTrack remaining as a defendant, the jury found BackTrack liable for NuWave’s damages and awarded NuWave both “presumed damages” and “actual damages.” BackTrack appealed the verdict on several grounds including the trial judge’s instructions on presumed and actual damages awards.

Damages in defamation cases fall into three categories: actual, punitive and nominal. Actual damages, otherwise known as compensatory damages, are intended to compensate the plaintiff for the wrong done by the defamatory speech. These may include harm such as damage to one’s reputation and his standing in the community. Actual damages must be based on evidence of actual harm and cannot include damages ‘presumed’ by the jury. Nominal damages, on the other hand, include those that may be presumed by the jury and serve the purpose of vindicating the character of a plaintiff who has not or cannot prove a compensable loss and are not appropriate when a jury has made a finding of any actual harm.

Here, the Supreme Court in its opinion NuWave Investment Corp. v. Hyman Beck & Co., 114 A.3d 738 (N.J. 2015), found, the trial judge incorrectly instructed the jury that presumed damages could be awarded to compensate NuWave for harm done by the BackTrack to their reputation. Harm done to one’s reputation can only fall under actual damages which NuWave must establish through evidence. By permitting a jury to presume harm to the NuWave’s reputation, the Court held, enabled the jury to exercise undue discretion in awarding damages that may not have reflected the evidentiary proof the NuWave submitted.

Defendants 48 Branford Place Associates and Palladium Associates were sued due to the death of Andre Henry and serious injuries of Benverneuto Webster arising from a shooting at a ballroom/night club operated by Palladium. Neither Palladium, nor 48 Bradford obtained liability insurance coverage for assault and battery. In Stephens v. 48 Branford Place Associates, 2015 N.J. Super. LEXIS 69 (Law Div. April 24, 2015), the plaintiff amended the complaint to add claims against several insurance carriers and insurance brokers for the defendants.

After amending the complaint, some of the carriers and brokers moved to dismiss the amended complaint, arguing that an injured party has no right to sue an insurance company of the defendant without an assignment. The trial court agreed that no direct claim against the insurance company existed.

The court cited to several Appellate Division decisions that supported this position. The cases cited in favor of such a claim were factually distinguished by this court.

However, the court pointed out that the law is not the same as to brokers. New Jersey does permit an injured third party to assert a claim against a broker as an intended beneficiary of the agreement to purchase the appropriate coverage. Because of the importance of liability insurance, members of the general public are deemed to be third party beneficiaries of an agreement between a business proprietor and its insurance broker to procure coverage.

Thus, there are two separate lines of cases that distinguish between third party claims against insurance carriers and insurance brokers. The law is clear that while an injured third party may not maintain a direct claim against a defendant’s insurance company without an assignment from the insured, an action is permitted against the broker.

Accordingly, the trial court granted the motion to dismiss filed by the insurance companies but denied the motion requesting a dismissal of the amended complaint by the brokers.

This week’s blog was written by my Litigation Department associate, Voris M. Tejada, Esq.

The State of New Jersey, as plaintiff, sued following the failure of an underground high temperature hot water (“HTHW”) system at a state prison.  In State v. Perini Corp., 2015 N.J. LEXIS 388 (N.J. 2015), the Supreme Court of New Jersey addressed whether the State’s Complaint was barred by the ten-year limitations period set forth in the statute of repose.

In February 1995, the State executed a contract with defendant Perini Corporation to design and build the South Woods State Prison (the “Project”).  Perini then designated various other entities as contractors for specific portions of the work to be performed on the Project.  The Project consisted of twenty-six buildings, and was designed to be constructed in three phases.  The buildings received heat and hot water from an underground HTHW system.

The HTHW system was designed to serve the entire Project, and included a central plant from which the hot water was distributed to the various buildings that comprised the Project.  A certificate of substantial completion for Phase I of the Project was issued on May 16, 1997, which included the central plant and housing for the first inmates.  However, the remainder of the Project was not substantially complete until May 1, 1998.  The various buildings comprising the Project were connected to the HTHW system as they were completed.

Soon after the Project was completed, the HTHW system experienced a series of widespread failures.  As a result, the State filed suit against Perini and the other contractors involved in the design and construction of the HTHW system.  The State filed its Complaint on April 28, 2008, more than ten years after it began using the HTHW system and housing the first inmates, but less than ten years after the HTHW system was connected to all of the buildings constructed under the contract.

The defendants moved for summary judgment, arguing that the State’s Complaint was barred by New Jersey’s statute of repose.  The issue before the Court was whether the running of the statute commenced when the HTHW system began to supply heat and hot water to the buildings completed in Phase I, or whether the ten-year limitations period was triggered by substantial completion of the entire Project.

New Jersey’s statute of repose, codified at N.J.S.A. 2A:14-1.1(a), provides in relevant part that “[n]o action…to recover damages for any deficiency in the design, planning, surveying, supervision or construction of an improvement to real property,…shall be brought against any person performing or furnishing [such services], more than 10 years after the performance or furnishing of such services and construction.”  As a threshold matter, the Court found that the HTHW system was an improvement to real property, and that the work performed thus fell within the scope of the statute of repose.  However, the statute was not applicable to the State’s claims against the defendant manufacturer of the pipes and fittings used in the HTHW system.  Manufacturers and sellers of standardized products are instead covered by the statute of limitations applicable to the Products Liability Act.

Viewing the facts in the light most favorable to the State, the Court concluded that the statute of repose did not bar the State’s Complaint against the defendants.  The HTHW system was designed to supply heat and hot water to every building in the Project. The central plant could be viewed as the origination point of the system, but it was not independent of the underground pipes that were connected to it to bring heat and hot water to every facet of the prison complex.  As an improvement designed to service every building in the facility, it was complete only when the HTHW system was connected to every building it was designed to serve.  The Court thus concluded that the ten-year limitations period of the statute of repose started running on May 2, 1998, the day after the final certificates of substantial completion were issued for the final buildings served by the HTHW system.  Because the State filed suit on April 28, 2008, the statute of repose did not bar its Complaint.

Charitable immunity (hospitals).  Kuchera v. Jersey Shore Family Health Center, 2015 N.J. LEXIS 290 (March 31, 2015). The plaintiff slipped and fell while attending a free eye screening clinic at the Jersey Shore Family Health Center, a nonprofit charitable clinic in the Meridian Health systems. The Supreme Court found that this health care facility was not subject to the charitable immunity pursuant to N.J.S.A. 2A:53-7 (which would have made it immune from suit) but, rather, was subject to the limited liability afforded to nonprofit entities organized exclusively for hospital purposes pursuant to N.J.S.A. 2A:53A-8 (not immune from tort liability but subject to a $250,000 cap on damages).

Civil Procedure (consolidation).  Moraes v. Didi Wesler & Simony Wesler, 109 A.3d 218 (App. Div. 2015). The plaintiff Telma Moraes was injured in two different automobile accidents that occurred almost two years apart. She then sued for her injuries suffered in her second accident and filed a motion to consolidate the two lawsuits. The trial court denied the motion but the Appellate Division found that the trial court abused its discretion in refusing to consolidate the cases and reversed and remanded the cases back to be consolidated for discovery and trial.

Consumer Fraud Act (insurance products). Khan v. Conventus Inter-Insurance Exch., No. L-1253-13 (Law Div. Aug. 23, 2013)(approved for publication on April 29, 2015). Before the court could certify the plaintiff’s claim as a class action, the court had to determine whether the plaintiff’s claim that the defendant’s sale (and the plaintiff’s purchase) of medical malpractice insurance applied to the Consumer Fraud Act. The court found that, while the CFA generally applies to insurance as “merchandise” that is “offered, directly or indirectly to the public for sale,” the purchase of medical malpractice insurance requires one to be a doctor who must have “special qualification or licensure to purchase.” Thus the CFA did not apply.

Expert (net opinion rule).  Townsend v. Pierre, 2015 N.J. LEXIS 273, (March 12, 2015). The New Jersey Supreme Court addressed the net opinion rule in the context of an automobile accident negligence case. The Court ruled that the expert’s report was properly barred as a net opinion because it was contradicted by the facts in the record.

Expert.  James v. Ruiz, 2015 N.J. Super. LEXIS 46 (App. Div. March 25, 2015). The plaintiff was injured in an automobile accident and sued the other driver. The key issue was whether he suffered a permanent injury so as to meet the verbal threshold. Both sides presented competing expert testimony on that question. Court ruled that expert witness may not be questioned about whether his findings are consistent with report of non-testifying expert.

Insurance Coverage (counsel fees). Occhifinto v. Olivo Constr. Co.. LLC, 2015 N.J. LEXIS 508 (May 7, 2015). The plaintiff claimed the defendant, Keppler Contractors and others poorly constructed an addition to his warehouse and sought damages against it. Keppler’s insurance company filed a declaratory judgement action against Keppler challenging their requirement to defend it in the liability action. The plaintiff, on Keppler’s behalf, defended the declaratory judgment action and claimed the insurance company was required, by rule, to pay the counsel fees he incurred in defending the declaratory judgment action should he prevail. Though winning the declaratory judgment action, which required the insurance company to defend Keppler, the court reserved decision on counsel fees until after the liability action. The plaintiff lost the liability action but sought to recover counsel fees. After the trial court denied counsel fees, and the Appellate Division affirmed, the Supreme Court found that by obtaining a favorable ruling on the declaratory judgment action, the plaintiff was a successful claimant and was therefore entitled to counsel fees.

Municipal Court (civil reservation).  Maida v. Kuskin, 2015 N.J. LEXIS 278, (March 19, 2015). The New Jersey Supreme Court addressed the civil reservation municipal court practice in the context of a defendant who did not request the civil reservation until later in the day, after his guilty plea had been accepted.  The Supreme Court reviewed the whole process and found that a request for a civil reservation must be made in open court and contemporaneously with the court’s acceptance of defendant’s guilty plea.

Negligence (duty).  Peguero v. Tau Kappa Epsilon, 439 N.J. Super. 77 (App. Div. 2015). The question of the legal duty owed is not always clear under New Jersey law, particularly, if the claimed injury does not fall within the analysis of traditional premises liability law. The plaintiff was shot by another guest while attending a party at a fraternity. The Appellate Division had to decide whether a fraternity owed a party attendee a legal duty to prevent him from harm. The court held that there was no such duty owed by the fraternity to the plaintiff.

PIP (duty to arbitrate).  State Farm Indemnity v. National Liability & Fire Ins. Co., 2015 N.J. Super. LEXIS 33 (App. Div. March 4, 2015). The insurance companies had a dispute over contribution for PIP under N.J.S.A. 39:6A-11. An issue existed as to whether the accident victim was a resident relative of the National insured. National contended that this residency issue must be decided by the court to determine if coverage existed as a prerequisite to the obligation to arbitrate.  The Appellate Division held that this issue is not too complex for the arbitrator and the entire dispute should be submitted to arbitration.

Remittitur.  Mickens v. Misdom, 438 N.J. Super. 531 (App. Div. 2015). In a damages only trial, the jury found a permanent injury under N.J.S.A. 59:9-2(d) and awarded $2,400,000 for a low impact herniated disc injury incurred in an auto accident. The defendant moved for a new trial or remittitur, which the trial court denied. The trial judge denied the motion based upon his assessment of the evidence and feel of the case. The Appellate Division affirmed, finding it was not shocking to the judicial conscience.

Statute of Limitations (incapacity).  Giannakopoulos v. Mid State Mall, 438 N.J. Super. 595 (App. Div. 2014). Plaintiff suffered severe injuries due to an auto accident in Mid State’s Mall. His complaint was dismissed due to his failure to properly serve it upon Mid State and amend as to Maser within the statute of limitations. Due to issues as to the plaintiff’s incapacity caused by the accident and the lack of prejudice to the defendants, the Appellate Division ruled that the trial court erred in dismissing the complaint. The trial court should have held a hearing as to the plaintiff’s incapacity to determine if it tolled the statute of limitations.

Tort Claims Act (immunity for failure to provide adequate medical exam).  Parsons v. Mullica Twp. Board of Education, 2015 N.J. Super. LEXIS 47 (App. Div. March 30, 2015). The minor plaintiff failed her eye screening test conducted by the nurse at the Mullica Township Elementary School. However, the school failed to notify her parents and the delay in notification resulted in a 2 year delay in the diagnosis and treatment of her right eye amblyopia and proximately caused the loss of sight in her right eye. The defendant was found immune under N.J.S.A. 59:6-4 for failure to provide an adequate physical or mental examination.

Tort Claims Act (permanency threshold).  Jung v. Village of Ridgewood, 2015 N.J. Super. Unpub. LEXIS 53 (App. Div. Jan. 8, 2015). While the Title 59 permanency threshold, N.J.S.A. 59:9-2, is a well-known defense against bodily injury claims asserted against public entities, less publicized is the monetary threshold in that statutory section. No pain and suffering award can be asserted against a public entity unless the medical expenses incurred are in excess of $3,600. This requirement resulted in a dismissal of the parents’ emotional distress claim filed due to the death of their son.

Tort Claims Act (late notice of claim). Beyer v. Sea Bright, 2015 N.J. Super. LEXIS 84 (App. Div. May 19, 2015). The plaintiff had 90 days from the accrual of his claim for assault against the Sea Bright Police in early August, 2013 to file a tort claims notice with Sea Bright. Though he retained an attorney to pursue his claim against Sea Bright in September, the attorney became very ill, was hospitalized and in December, after the 90 days had expired, he advised the plaintiff he could no longer handle his case. The trial court found the plaintiff did not meet the Tort Claims Act’s requirement for extraordinary circumstances for failure to file a time claim in both his motion to file a late tort claim notice and his motion for reconsideration. The Appellate Division disagreed and found the plaintiff showed extraordinary circumstances because the attorney’s illness and subsequent incapacity was not the same as inadvertence, negligence, inattentiveness or ignorance in pursuing a claim.

UM (bad faith).  Badiali v. NJM, 220 N.J. 544 (2015).  UM carrier’s decision to reject an arbitration award in an uninsured motorist claim was found to be “fairly debatable,” which barred the insured from recovering counsel fees and other consequential damages under a theory of bad faith. Prospectively, the New Jersey Supreme Court held that any reference in a policy of insurance to the statutory $15,000 policy limit as the basis for rejecting an arbitration award applies only to the amount that the insurance company is require to pay, not to the total amount of the award.

UM (bad faith).  Wadeer v. NJM, 2015 N.J. LEXIS (Feb. 18, 2015). Plaintiff’s claim that his insurer acted in bad faith by failing to settle his UM claim was found barred when filed in a subsequent suit by the New Jersey Supreme Court based upon res judicata because the claim was raised in the first suit. However, it was not barred by the entire controversy doctrine. The plaintiff was not entitled to attorneys’ fees under R. 4:42-9, nor under offer of judgment rule.

The plaintiff Veronica Gilmore was bowling with her friends on New Year’s Eve 2009 when she fractured her wrist as a result of a slip and fall after she released her ball and stepped back. She did not notice anything on the floor before she approached the lane, but noticed her clothes were “slimy damp” from an unknown substance after she got up from her fall. She sued the defendant bowling alley for her injuries in Gilmore v. Nationwide Bowling Corp., 2015 N.J. Super. Unpub. LEXIS 710 (April 2, 2015 App. Div.)  The trial court dismissed her case and she appealed, claiming that the trial court erred in its decision.

Gilmore claimed that the trial court had erred in ruling that no rational fact-finder could find that she had slipped and fell due to a foreign substance on the floor because the bowling alley allowed beverages in the area of the accident. Further, in this appeal, she claimed that she had offered evidence that the defendant had actual or constructive notice of the foreign substance and failed to remove it to prevent her accident.

As a business invitee, the bowling alley owed the plaintiff a duty to keep the bowling lane free of foreign substances in the lane where she bowled. However, she presented no facts to support her argument that she fell on a foreign substance that was spilled on the floor by one or more messy patrons drinking or carrying beverages in the prohibited area of the bowling alley. She offered no proof as to what she fell on, except her assertion that it was a liquid.

Further, the plaintiff failed to link another bowler’s spilled drink, which was cleaned up one hour before her accident, as the cause of her accident. She likewise failed to offer any evidence that the spill of ice was the cause of her fall.

The Appellate Division noted that the mere occurrence of prior spills does not prove that the defendant was negligent in allowing a foreign substance on plaintiff’ bowling lane and such negligence was a proximate cause of plaintiff’s fall. Plaintiff was not able to offer any proof that the defendant had a reasonable opportunity to discover and clean up the substance that caused her fall. The appeals court found that the plaintiff was speculating as to how the foreign substance got on the floor, that the defendant should have known of its existence, and that the defendant had a reasonable opportunity to clean it up prior to her fall. Thus, the Appellate Division affirmed the trial court’s order, dismissing the complaint.

In the prior case of Procopio v. Government Employees Insurance Company, 433 N.J. Super. 377 (App. Div. 2013), the Appellate Division ruled that, in a suit alleging both a claim for UIM benefits and a bad faith claim against the carrier, discovery of the bad faith claim should be stayed until the conclusion of the UIM claim. The issue in Wacker-Ciocco v. Government Employees Insurance Co., 2015 N.J. Super. LEXIS 38 (App. Div. Mar. 16, 2015) was whether the disclosure of some bad faith-related materials merits a denial of a motion to sever the bad faith claim and an order requiring discovery as to the bad faith claim.

In Wacker-Ciocco, the plaintiff Lori Wacker-Ciocco had an auto policy with GEICO that provided UIM benefits in the amount of $300,000/accident. She was seriously injured in a motor vehicle accident when she was rear ended by a vehicle operated by John Laratta and incurred medical expenses that exceeded $300,000. Laratta’s policy only had liability coverage of $100,000. Plaintiff sought and obtained GEICO’s permission to settle her claim with Laratta for $99,000. Thereafter, she made a demand to GEICO for $200,000 in UIM benefits and arbitration of her claim.

Plaintiff’s complaint included a claim for UIM benefits and a bad faith claim against GEICO. Plaintiff filed a motion to compel the depositions of the GEICO UIM claims adjustors and documents related to the bad faith claim. GEICO filed a motion to sever the bad faith claim and stay discovery on that issue. However, it also submitted certain claims records to plaintiff’s counsel.

Finding that GEICO had provided claims materials to the plaintiff, the trial judge denied GEICO’s motion to sever and stay the bad faith claim, compelled the depositions of GEICO’s UIM adjustors and ordered GEICO to answers discovery and provide a full electronic and paper claim file. The trial judge reasoned that “the cat was out of the bag.”

In Procopio, the Appellate Division had noted the potential prejudice to the carrier’s defense by the disclosure of privileged materials. If an insured in attempting to prove the validity of his or her claim could obtain the insurer’s investigative files, showing exactly how the company processed the claim, how thoroughly it was considered and why it took the action it did merely be alleging the insurer acted in bad faith, then there would be an open invitation to all plaintiffs to include such allegations with every breach of contract claim. Thus, in Procipio, the court concluded that the benefits of simultaneous discovery were substantially outweighed by the burden exacted on the carrier.

Here, the Appellate Division noted that, as a preliminary matter, the insured who alleges bad faith by the insurer must establish the merits of his or her claim for benefits. If there is a valid question of coverage, i.e., the claim is “fairly debatable,” the insurer bears no liability for bad faith. If the insured is unable to establish a right to the coverage claimed, the bad faith claim must be dismissed.

To establish bad faith, the insured must show the lack of a reasonable basis for denying the claim or unreasonably delaying its processing, and the insurer’s knowledge or reckless disregard that it was acting unreasonably. This claim cannot be sustained by evidence of negligence, mistake, or delay in payment without some showing of the insurer’s wrongful intent.

Plaintiff argued that Procopio was distinguishable because the motion to sever the bad faith claim was made after proof of her bad faith claim was produced in information provided by GEICO in discovery. GEICO, however, argued that Procopio does not turn on whether some bad faith related discovery had been provided.

The Appellate Division agreed with GEICO’s position and concluded that the trial court erred in denying GEICO’s motion to sever and stay discovery as to the bad faith claim. The disclosure of some bad faith-related discovery did not resolve the issue of potential prejudice to GEICO. Thus, the Appellate Division reversed the trial court’s order and found that GEICO was entitled to sever and stay discovery as to the bad faith claim.