T. Glennon, Inc. (“TGI”) sued its excess insurance carrier, the Hartford Casualty Insurance Company (“Hartford”), for attorneys fees incurred in its lawsuit brought to determine coverage for an intentional wrong employee workplace personal injury suit filed against TGI. In Johnson v. Plasser American Corp., 2014 N.J. Super. Unpub. LEXIS 372 (App.Div. 2014), TGI argued that, as a result of Hartford’s contribution to the settlement, it was a “successful claimant” in a lawsuit on an indemnity policy and, hence, entitled to fees under New Jersey Court Rule 4:42-9(a)(6).
In this unpublished Appellate Division decision, the court held that Hartford’s contribution to the settlement to the underlying tort action, standing alone, did not render TGI a “successful” claimant. Instead, the court needed to determine whether TGI was entitled to coverage under the policy. After examining the terms of Hartford’s policy, the court decided that Hartford had no duty to defend or indemnify. Thus, it found that TGI was not entitled to fees.
The underlying action involved a significant personal injury when TGI’s employee, Charles Johnson, was working and the hydraulic line of a nearby tamping machine burst, disabling the machine’s brakes, which then struck him and crushed his legs. Johnson claimed that his employer TGI knew that the machine was in disrepair and refused to repair it. Johnson claimed that TGI’s actions met the standard for an intentional wrong under the Workers Compensation Act.
TGI had a $1 million underlying policy with NJM and a $4 million umbrella policy with Hartford. TGI was defended by NJM in the underlying matter. Ultimately, Hartford agreed to contribute its $4 million policy, presuming that NJM agreed to contribute its $1 million policy, for a total settlement of $5 million. As soon as the settlement was agreed upon, TGI then claimed that it should be entitled to its attorneys fees of $71,000 spent in the coverage action against Hartford.
The Appellate Division rejected this claim. First, it found that TGI was not entitled to a defense under the Hartford policy because its underlying policy was never exhausted through payment of its policy limits. The obligation to provide a defense for an excess carrier is predicated on the exhaustion of underlying coverage and, therefore, the termination of the duty to defend by the underlying carrier.
The court also rejected TGI’s arguments that Hartford’s duty to defend was triggered when NJM’s limits were functionally exhausted when NJM expressed a willingness to pay its policy limits.
Last, the court analyzed Hartford’s duty to indemnify. It found that the Hartford policy would have excluded coverage in any event under its expected or intended exclusion. Thus, on this basis as well, TGI was not entitled to fees.
