JANUARY 2015 BAD FAITH CASES: APPELLATE DIVISION REITERATES FACTORS FOR TRIAL COURTS TO CONSIDER IN DETERMINING WHETHER TO AWARD FEES UNDER R. 4:42-9(a)(6) (New Jersey Appellate Division)

In Encompass Insurance Company v. Quincy Mutual Fire Insurance Company, the court addressed the standards for awarding counsel fees under Rule 4:42-9(a)(6) to a successful claimant in a declaratory judgment action. The court made clear that insurer bad faith is not a perquisite, but it is a factor trial courts may consider.

The trial court has broad discretion and may consider an insurer’s good faith refusal to pay demands, the excessiveness of a plaintiff’s demands, the bona fides of either party, the insurer’s justification for litigating the matter, the insured’s conduct in substantially contributing to the necessity for the litigation, the parties’ general conduct, and the totality of the circumstances.

The court also observed that fees can be awarded if the claimant is the insured or the insurer. In this case, the dispute was between insurers, and the court observed that in suits between insurers, as opposed to a claim between insured and insurer, it does no violence to the general principles of R. 4:42-9(a) to have each party bear its own legal fees, if the totality of the circumstances so suggests. Date of Decision: November 14, 2014

Encompass Ins. Co. v. Quincy Mut. Fire Ins. Co., DOCKET NO. A-3000-12T4, SUPERIOR COURT OF NEW JERSEY, APPELLATE DIVISION, 2014 N.J. Super. Unpub. LEXIS 2684 (November 14, 2014) (Hayden and Leone, JJ.)