Myron Corp. v. Atlantic Mutual Ins. Corp., A-5528-07T2; App. Div. (Reisner, J.A.D.) (June 5, 2009)
Plaintiff policyholder obtained a commercial policy from defendant insurer. As part of the policyholder’s business, it sent various faxes to business throughout the country which prompted lawsuits against it for violation of a federal statute against junk faxes. The policyholder requested defense and indemnification from the insurer for the out-of-state lawsuits. The insurer defended the policyholder, but commenced two declaratory judgment actions in Illinois seeking a declaration that there was no coverage under its policy. The first Illinois cases was dismissed for lack of diversity and abstention was granted in the second on the ground that New Jersey was a forum with more substantial ties. The policyholder then commennced an action in New Jersey to determine whether or not the insurer had duty to defend and indemnify the policyholder in the out-of-state lawsuit. The New Jersey court held that the insurer had a duty to defend and indemnify the policyholder in the out-of-state litigation.
The policyholder then sought to recover counsel fees and costs in defending against insurer’s two out-of-state declaratory judgment actions under Rule 4:42-9(a)(6). The New Jersey Appellate Court held that because the policyholder prevailed on its coverage lawsuit, it was entitled to counsel fees for defending the two out-of-state declaratory judgment actions filed against it by the insurer. The right of policyholder to obtain counsel fees stems directly from the success of its coverage action in New Jersey, therefore there is no extraterritorial application of the counsel fees rule to allow recovery of counsel fees for the out-of-state actions. Further the Appellate Court held that allowing the policyholder to collect counsel fees also furthers the important purposes of the rule since unless the policyholder can recover its counsel fees for out-of-state litigation in this situation, an insurer could wear down the insured financially through forum-shopping.
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By Sarah X. Fang and Richard J. Cohen
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https://www.goldbergsegalla.com/attorneys/Cohen.html