MICHAEL ABBOUD VS. NATIONAL UNION FIRE INSURANCE Â COMPANY OF PITTSBURGH, PA(L-680-14, MONMOUTH COUNTY AND STATEWIDE)
163 A.3d 353
| N.J. Super. Ct. App. Div. | 2017Background
- Michael Abboud (40% owner/executive of Monarch Medical PET Services, LLC) sued Monarch and several fellow executives alleging oppressive conduct and breaches of fiduciary duty; defendants counterclaimed alleging self-dealing, breach of loyalty, and seeking, among other relief, declaration permitting forced withdrawal of Abboud's membership.
- Monarch held a multi-part insurance policy from National Union including D&O and EPL coverages; Monarch and some individual defendants obtained a reservation-of-rights partial coverage under the EPL section early in the litigation.
- Abboud notified National Union of the counterclaims against him under the D&O section only in November 2013 (after Monarch/defendants had obtained coverage letters); National Union did not respond to that notice.
- Abboud sued National Union for declaratory judgment seeking defense and indemnity under the D&O coverage and argued denial was barred by waiver/estoppel and his reasonable expectations; he also argued the insured-vs-insured exclusion required a showing of collusion to apply.
- National Union moved for summary judgment, asserting the D&O insured-vs-insured exclusion barred coverage; the Law Division granted summary judgment for National Union, rejecting Abboud’s collusion, estoppel, reasonable-expectations, and premature-discovery arguments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the D&O insured-vs-insured exclusion bars coverage for counterclaims by Monarch and its executives against Abboud | Abboud: exclusion should not apply unless insurer proves collusion among insureds | National Union: plain-language exclusion bars coverage when claim is brought by the company or by an individual insured who is not an employee | Court: exclusion is unambiguous; applies here and bars coverage (no collusion requirement) |
| Whether reasonable-expectations doctrine overrides plain policy language | Abboud: enforcement frustrates his reasonable expectations of D&O coverage | National Union: policy language is clear; insured is commercial/sophisticated; doctrine inapplicable | Court: doctrine narrowly applied; no evidence of objectively reasonable expectation to overcome clear language; rejection affirmed |
| Whether National Union was estopped/waived from denying coverage by failing to respond to Abboud’s November 2013 notice | Abboud: insurer’s silence amounted to waiver/estoppel | National Union: no detrimental reliance; insurer did not induce Abboud to change position | Court: estoppel requires detrimental reliance; Abboud failed to show it; estoppel not available |
| Whether summary judgment was premature for lack of discovery and whether coverage might exist under EPL section | Abboud: discovery incomplete; EPL might provide coverage | National Union: record sufficient; Abboud identified no discovery that would create triable issue; EPL not pleaded/raised earlier | Court: Abboud failed to specify needed discovery; appellate court declines to consider EPL argument not raised below |
Key Cases Cited
- Templo Fuente de Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 224 N.J. 189 (2016) (rules for interpreting insurance policies and when to consult extrinsic evidence)
- Flomerfelt v. Cardiello, 202 N.J. 432 (2010) (insurer bears burden to show exclusion applies; exclusions enforced if specific and clear)
- Doto v. Russo, 140 N.J. 544 (1995) (reasonable-expectations doctrine and its limits for insurance contracts)
- Zacarias v. Allstate Ins. Co., 168 N.J. 590 (2001) (denying reasonable-expectations relief where policy language was not confusing to average policyholder)
- Level 3 Commc'ns, Inc. v. Fed. Ins. Co., 168 F.3d 956 (7th Cir. 1999) (insured-vs-insured exclusion aimed at collusive suits and intra-family corporate disputes; no collusion requirement necessary)
- Biltmore Assocs., LLC v. Twin City Fire Ins. Co., 572 F.3d 663 (9th Cir. 2009) (discussion of D&O expectations as protecting against outsider claims, not intra-company claims)