Alert

No Coverage for Claim Expenses Where Insured Did Not Obtain Prior Written Consent of Insurer

September 18, 2013

The United States District Court for the District of New Jersey, applying New Jersey law, has held that a policy provision requiring written consent of the insurer in order for claims expenses incurred by the policyholder to be reimbursed is unambiguous.  Paulus Sokolowski & Sartor, LLC v. Cont’l Cas. Co., No. 12-7172 (D.N.J. Aug. 30, 2013).  Wiley Rein represented the insurer.

The insured, a design and engineering firm, was retained during the construction of a residential townhouse community.  The developer of the community and the community’s condominium association later sued the firm for professional negligence, seeking damages for construction defects at the site.  The firm sought coverage under its architects and engineers professional liability policy.  The insurer provided a defense and ultimately settled the claims against the firm.  The firm later sought reimbursement for claim expenses it incurred when its employees assisted the insurer and its engineering expert.  The insurer denied the request for reimbursement on the grounds that the firm had not obtained written consent prior to incurring the expenses and that the firm had a duty to assist in the defense.  The firm filed suit in New Jersey state court, which the insurer removed to federal court.

The court dismissed the firm’s breach of contract claims, determining that the policy provision requiring the insurer’s written consent prior to the policyholder incurring claim expenses was unambiguous, and that the firm’s complaint had conceded that there had been no explicit consent from the insurer.  In reaching this conclusion, the court noted that interpretive principles calling for insurance policies to be interpreted against the insurer are less applicable where the policyholder is a large business with the resources to bargain for particular policy provisions, as was the case with the insured.  The court additionally dismissed the firm’s claims for unjust enrichment and quantum meruit because the express written contract covered the issues in dispute.

The court also dismissed the firm’s claims for breach of the duty of good faith and fair dealing, breach of fiduciary duty, and bad faith.  The court concluded that the firm had failed to allege facts demonstrating that the insurer had bad motive or intention and that the implied covenant of good faith and fair dealing could not override the express terms of a contract.  The court further held that the insurer did not owe the firm a fiduciary duty in the context of reimbursing claim expenses.

Read Time: 2 min
Jump to top of page

Wiley Rein LLP Cookie Preference Center

Your Privacy

When you visit our website, we use cookies on your browser to collect information. The information collected might relate to you, your preferences, or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. For more information about how we use Cookies, please see our Privacy Policy.

Strictly Necessary Cookies

Always Active

Necessary cookies enable core functionality such as security, network management, and accessibility. These cookies may only be disabled by changing your browser settings, but this may affect how the website functions.

Functional Cookies

Always Active

Some functions of the site require remembering user choices, for example your cookie preference, or keyword search highlighting. These do not store any personal information.

Form Submissions

Always Active

When submitting your data, for example on a contact form or event registration, a cookie might be used to monitor the state of your submission across pages.

Performance Cookies

Performance cookies help us improve our website by collecting and reporting information on its usage. We access and process information from these cookies at an aggregate level.

Powered by Firmseek