Appellate Division Holds Duty to Defend Converts to Duty to Reimburse

Aug 17, 2018

In a case involving insurance coverage, the Appellate Division recently held that an insurer’s duty to defend should have been converted to a duty to reimburse pending resolution of a coverage action, where a plaintiff alleged personal injuries from multiple causes – some covered and some excluded under the policy.  Wear v. Selective Ins. Co., - N.J. Super. – (App. Div. 2018).

Plaintiff, Theresa Wear, worked in a building owned by defendant Woodbury Medical.  She claimed to suffer injuries due to exposure to alleged toxic conditions in the building.

Selective Insurance issued a commercial policy to Woodbury Medical.  It contained a specific exclusion for bodily injury caused by the ingestion of any “fungi” within a building structure, regardless of whether any other cause, event, material or product contributed concurrently or in any sequence to such injury or damage.  The aforementioned language in the exclusion is known as an anti-concurrent or anti-sequential clause.

After a complex procedural history, the Appellate Division held that it was premature to order Selective to assume responsibility for the insured’s defense since it was unclear, based on the anti-concurrent and anti-sequential language in the exclusion whether any claims would be covered.  Therefore, it held that the duty to defend should be converted to a duty to reimburse pending resolution of the coverage action, citing the precedential opinion in Grand Co II Condo v. Ginsberg, 291 N.J. Super. 58 (App. Div. 1996). 

Importantly, the court noted that in a situation where two or more identifiable causes – one a covered event and one excluded – may contribute to a single property loss, there is coverage absent an anti-concurrent or anti-sequential clause in the policy.  Simonetti v. Selective Ins. Co., 372 N.J. Super. 421 (App. Div. 2004).