Aug 13, 2015

SPSK's Appellate and Environmental and Real Estate Practice Groups Successfully Defend Insurer Against a Direct Action Suit

John M. Bowens and Sandra Calvert Nathans successfully defended State Farm Fire & Casualty Co. (“State Farm”) against a direct action suit filed by a property owner whose property was impacted by fuel oil from State Farm’s insured’s leaking underground storage tank.

Plaintiffs, John and Pamela Ross, sought damages directly from State Farm for the breach of good faith and fair dealing in the remediation of their property which had become contaminated by the migration of fuel oil.  The Trial Court granted summary judgment to State Farm based upon the prohibition of a direct action suit against a tortfeasor’s insurers.  The Appellate Division upheld the Trial Court’s decision and the Supreme Court granted certification.

The New Jersey Supreme Court found that an insurer’s duty of good faith and fair dealing has never been applied in New Jersey to recognize a bad-faith claim by an individual or entity that is not the insured or an assignee of the insured’s contract rights.  The factual record did not demonstrate that the parties to the insurance contract had any intention to make plaintiffs, the then-neighbors of the insured, a third-party beneficiary of their agreement.  The insurers’ duty of good faith and fair dealing extended to their insured, not to plaintiffs.  The New Jersey Supreme Court unanimously found no basis for plaintiffs’ bad-faith claims against State Farm and NJM in this case.

Should you have any questions concerning this case or any other environmental matter, you may contact John M. Bowens at jmb@spsk.com or Sandra Calvert Nathans at scn@spsk.com.

View attachment for the Supreme Court decision.

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