Your teenaged son is involved in a fight with a classmate. You notify your homeowners insurance company of the fight. Several months later, you receive a letter from an attorney representing the classmate which you turn over to your insurance company. Over a year after that, the classmate files a lawsuit against your son, which you forward to your insurance company. Then for the first time, your insurance company advises you that there is no coverage for the lawsuit because it involves an intentional tort which is excluded from the policy. What do you do?
In the case of Griggs v. Bertram, decided by the New Jersey Supreme Court in 1982, the parent retained counsel at his own expense and filed a third party complaint against his insurance company. Griggs and Bertram settled without the involvement of the insurance company. The parent then sought reimbursement of the settlement payment from the insurance company.
The Court found that the insurance company should have promptly disclaimed coverage but did not. It also held that the insurance company was legally responsible to reimburse its insured for the settlement payment so long as the amount was reasonable and paid in good faith. The Court particularly noted that ď[a]n insured tortfeasor should be able to reach an agreement relieving it of liability when its carrier wrongfully declines to defendĒ. But in order to prevent collusion between the victim and the aggressor, the latter is obligated to show that the settlement was reasonable and in good faith.
If your insurance company refuses to defend and indemnify you in the event of a claim, it is crucial that you retain experienced counsel to review the matter and advise you. We have had many matters in which coverage was initially disclaimed to our client, but where the insurance company agreed to provide coverage after we became involved in advocating for our client.