NJ Court Permits Deposition of Coverage Counsel and Adjuster in Coverage Case

In a coverage dispute between a primary and excess carrier, a motion judge refused to quash a subpoena served upon coverage counsel and the senior litigation specialist of the excess carrier. New Jersey Manufacturers Insurance Company v. National Casualty Company, — N.J.Super. –, 2010 WL 1706012 (App.Div. 2010). Despite potential privilege issues, the Appellate Division affirmed noting that the order only required counsel and the specialist to appear for depositions. No ruling was made with respect to any specific questions that might be asked.

The coverage case emerged from underlying litigation that involved a 1998 automobile accident in which a husband was killed and his wife severely and permanently injured. That case was tried two times ultimately resulting in a verdict of $1.64 million in damages and prejudgment interest of $580,322.

The excess carrier sought contribution from the primary carrier for more than its $1 million policy limit on grounds that it acted in bad faith when it failed to settle the claim within its policy limit. In an earlier appeal of summary judgment for the primary carrier, the Appellate Division ruled that there should have been an evidentiary hearing to determine if the primary carrier had acted in good faith. In response, the primary insurer launched into discovery of the excess carrier’s conduct relating to settlement negotiations.

At issue was whether the primary carrier had a realistic possibility to settle the action or whether the matter could have been resolved with a contribution from the excess carrier. If the excess carrier would not have contributed in the amount required to settle the case, then the primary carrier could show that the settlement could not have been achieved. Thus, the unusual depositions of counsel and litigation specialist were allowed.

See New Jersey Manufacturers Insurance Company v. National Casualty Company, http://www.judiciary.state.nj.us/opinions/a0737-09.pdf

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