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New Jersey Insurer May Be Off the Hook for Defense Obligation Due to Anti-Concurrent Language in Exclusion

August 9, 2018

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In <a href="https://www.njcourts.gov/attorneys/assets/opinions/appellate/published/a5526-15a0033-16.pdf?cacheID=aOgrpY5">Wear v. Woodbury Medical Center Associates, LLP</a>, plaintiff, a nurse, alleged she suffered injuries due to exposure to mold and other fragments from the HVAC system at Woodbury Medical Center.
Woodbury tendered its defense to Selective Insurance Company who disclaimed coverage on the basis of the "fungi or bacteria" exclusion in their policy issued to Woodbury.  That clause excluded coverage for bodily injury resulting from the presence of fungi or bacteria.  The exclusion also contained anti-concurrent and anti-sequential language that stated the exclusion applied "regardless of whether any other cause, event, material or product contributed concurrently or in sequence to any such injury or damage."  Woodbury then filed a declaratory judgment action against Selective, seeking a defense and indemnification in the Wear lawsuit.  The trial judge ruled Selective had to immediately fund the defense and reimburse Woodbury for amounts already spent.
On appeal, the Appellate Division ultimately held  the anti-concurrent and anti-sequential language in the exclusion was not ambiguous, and barred coverage.  While noting that New Jersey law construes exclusions narrowly, the court accepted Selective's argument that there was no coverage because the complaint did not allege   Plaintiff suffered divisible injuries or that the exposure to mold was the principal cause of her symptoms. Under New Jersey law, where an insurer did not undertake the defense at the inception of the litigation, the duty to defend may be converted into a duty to reimburse pending the outcome of the coverage litigation.  Therefore, the court held that Selective may have to ultimately pay for the defense, but that that decision was on hold until the coverage litigation was completed.
Selective took a firm position with respect to coverage early on the litigation and may be ultimately rewarded as a result.  Many exclusions in insurance policies contain similar anti-concurrent and anti-sequential language in exclusions and insurers would be wise to consider their application where the controlling complaint does not allege divisible injuries.
Thanks to Doug Giombarrese for his contribution to this post.
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