Wade Clark Mulcahy LLP

In Watford Specialty Insurance Company v. MDF 92 River Street, LLC, the New Jersey Appellate Division recently addressed a coverage dispute arising from incident in which a bar patron was injured when he was allegedly thrown down a flight of stairs by bouncers while trying to remove him from the bar. The patron sued the bar and the bouncers for assault and battery and negligence, later amending the Complaint to include a claim of wrongful eviction. The bar owner sought coverage under its CGL policy. The Policy contained an Assault and Battery endorsement which, among other things, provided an eroding $1 million liability limit for such claims. The policy also contained personal and advertising coverage for, among other things, the wrongful eviction from occupancy of a room, dwelling or premises that a person occupies.

The insurer Watkins advised that coverage was limited to less than $200,000 as the liability limit for assault and battery claims under the endorsement had been eroded by payment of several other claims. An arbitrator issued a net award of $450,000 against the defendants for plaintiff’s “wrongful eviction and assault” claims. Plaintiff confirmed the award, obtained a judgment against the bar owner, and secured an assignment of rights from the owner.

Watkins paid the remainder of the liability limit to plaintiff and sought declaratory judgment that its obligation was limited by the terms of the Assault and Battery endorsement. Plaintiff argued that he was entitled to difference between the judgment and the amount paid by Watkins since the erosive limits under the endorsement did not apply to his wrongful eviction claim under Coverage B.

The trial court denied plaintiff’s motion for summary judgment and granted Watkin’s cross motion, finding that Watford had satisfied its obligations under the Policy and that any unsatisfied part of the judgment was not covered by the policy. In doing so, the trial court relied on certain caselaw holding that individuals who do not have a possessory interest in rental property were not covered by a wrongful eviction provision in a landlord’s policy.

The Appellate Division affirmed, holding that the underlying plaintiff’s claims emanated from the alleged assault, and crucially, he lacked a possessory interest or the right of occupancy at the bar to trigger coverage for his wrongful eviction claims. Accordingly, the liability limit set forth in the Assault and Battery endorsement applied and Watford had no further coverage obligation because the limit had been fully eroded. The Court agreed that Watford had met all its obligations under the policy and did not have to pay the balance of the judgment obtained against the bar owner.

The takeaway from Watkins is that a possessory interest or right of occupancy is required for an insured to obtain coverage for a wrongful eviction claim where the policy language contains that requirement. The Watkins court conducted a careful analysis of the policy language and facts of the case to reach the correct decision and reject the insured’s creative and result-oriented arguments in favor of coverage.

Thank you to Bryan Gonzalez-Mejia for his contribution to this post. Please contact Andrew Gibbs with any questions.