CERTAIN UNDERWRITERS AT LLOYDS, LONDON v. GOOD NIGHT NURSING AGENCY, LLC
3:21-cv-07666
D.N.J.Apr 18, 2022Background
- In Feb. 2018 an infant died while under the care of a caregiver (Almarie Macintosh) whom Good Night Nursing Agency had referred to the family; Nursing Agency appears not to have been the caregiver’s direct employer.
- About three months after the death, Nursing Agency’s CEO applied to plaintiffs (various Lloyd’s syndicates, collectively "Underwriters") for professional/general liability insurance with retroactive coverage; the application repeatedly asked whether the applicant knew of any facts likely to give rise to a claim and Nursing Agency answered “no.”
- Underwriters issued a policy effective May 2018 (retroactive to Jan. 2013) without knowledge of the infant’s death; in July 2018 Nursing Agency first informed Underwriters’ claim administrator of the death, which led to an investigation concluding Nursing Agency likely concealed the incident.
- The infant’s family sued Nursing Agency and the caregiver in state court; Underwriters were dismissed from that state action and are not defending Nursing Agency there.
- Underwriters filed this federal declaratory-judgment action in March 2021 seeking rescission (or a declaration of no coverage); Nursing Agency was served but failed to appear, and Underwriters moved for default judgment.
- The District Court found jurisdiction, concluded Underwriters sufficiently pleaded equitable fraud/material misrepresentation, and entered default judgment rescinding the policy as void ab initio.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject-matter & personal jurisdiction | Diversity exists: insurers (foreign) v. NJ LLC; amount in controversy satisfied by policy limits and potential exposure | No appearance; no challenge raised | Court exercised diversity jurisdiction; personal jurisdiction proper over NJ LLC |
| Service of process | Process server personally served managing agent; compliance with Fed. R. Civ. P. 4(h)(1)(B) and NJ law | No response/objection | Service held proper |
| Sufficiency of pleadings — equitable fraud / material misrepresentation | Application false: answered “no” to knowledge of circumstances likely to give rise to claims shortly after infant’s death; CEO certified accuracy and materiality; misrepresentation was material and knowingly made; reliance by Underwriters | No response/defense raised | Complaint pleads facts sufficient for equitable fraud; rescission warranted (policy void ab initio) |
| Appropriateness of default judgment | Default appropriate under Chamberlain factors: plaintiff prejudiced, no plausible defense, defendant’s inaction culpable | No appearance/argument | Default judgment appropriate and entered; policy rescinded |
Key Cases Cited
- Hritz v. Woma Corp., 732 F.2d 1178 (3d Cir. 1984) (district court has primary discretion to enter default judgment)
- Chamberlain v. Giampapa, 210 F.3d 154 (3d Cir. 2000) (factors for default-judgment analysis)
- United States v. $55,518.05 in U.S. Currency, 728 F.2d 192 (3d Cir. 1984) (default-judgment standard discussion)
- Auto-Owners Ins. Co. v. Stevens & Ricci Inc., 835 F.3d 388 (3d Cir. 2016) (measuring amount in controversy in declaratory-judgment insurance actions)
- Reifer v. Westport Ins. Corp., 751 F.3d 129 (3d Cir. 2014) (factors for exercising federal declaratory-judgment jurisdiction amid parallel state proceedings)
- Kelly v. Maxum Specialty Ins. Grp., 868 F.3d 274 (3d Cir. 2017) (insurer’s declaratory action often distinct from underlying state tort suits)
- Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942) (abstention principles applicable to declaratory-judgment actions)
- First Am. Title Ins. Co. v. Lawson, 827 A.2d 230 (N.J. 2003) (proof required for misrepresentations on insurance applications; subjective-knowledge inquiry)