If you are involved in New Jersey coverage, then you know that the duty to defend has some unique aspects.  There’s Merchants v. Eggleston (N.J. 1962), which requires that an insured, if being defended under a reservation of rights, must consent to the lawyer retained by the insurer.  And there’s Burd v. Sussex (N.J. 1970), which allows, in some circumstances, an insurer to decline to defend and, instead, reimburse the insured for defense costs at the conclusion of the case.  And, what’s more, the reimbursement is only to the extent of covered claims.  [How Burd plays out in practice can vary.]

New Jersey’s unique treatment of the duty to defend was in play in Yurcisin v. Fleming, No. A-3750-20 (N.J. Super. Ct. App. Div. Mar. 21, 2022).  The opinion is much more wide-reaching than a typical case involving the duty to defend, but it was at the core of the decision.

At issue was coverage for Ryan Fleming, under a New Jersey Manufacturers homeowners policy, for assaulting Colin Yurcusin at a house party.  Fleming acknowledged at his plea hearing, for second degree assault, that Yurcusin was simply minding his own business when he purposely struck him six times in the face.  This admission was to be inadmissible in any civil proceeding.

NJM denied coverage to Fleming on the basis that his actions were intentional and the insurer filed a coverage action.  Fleming retained counsel to defend him in Yurcusin’s personal injury action.   

The procedural comings and goings are a little complicated.  Keeping it simple, the trial court held that a defense was owed as there was a genuine issue of material fact whether Yurcusin’s injuries were caused by Fleming’s negligent, reckless or intentional conduct.

The case went to the Appellate Division, where the court addressed what to do in a situation where the insured is sued on alternate theories of liability, such as, here, negligent and intentional torts.

The court turned to Burd for guidance and chirped in with this: “Our Supreme Court has explained that when there are covered and uncovered claims alleged in a complaint, the insurer has two options: (1) it can ‘assume the defense if the insured agreed, with a reservation of its right to dispute coverage’; or (2) it can ‘refuse to defend and dispute its obligations later, so as to ‘translate its obligation into one to reimburse the insured if it is later adjudged that the claim was one within the policy covenant to pay. ‘”

The court also noted that the Burd court “recognized that it might be appropriate to decide the coverage question, and thus the insurer’s duty to defend, before trial of the underlying claim.”

The court concluded that this was one such case: “The trial court directed that the declaratory judgment action shall be tried before the personal injury action. We discern no abuse of discretion by so ruling. Under these circumstances, the better course is for the declaratory judgment action to be decided on the merits before the personal injury action. Whether coverage exists for the occurrence is a legal issue to be decided by the court, not a jury.”

Having reached this decision, the court stayed the underlying personal injury case and concluded that no defense was owed since “the declaratory judgment action has not yet been tried and the issue of whether the incident was a covered occurrence remains undecided.”