Does A Homeowner’s Insurance Carrier Have The Duty To Defend When The Policy Contains Exclusion? - By: Samuel D. Bornstein

If you have a homeowner’s policy of insurance, this may interest you. Homeowner’s policies of insurance are contractual agreements for the insurer to defend and to indemnify the homeowner in certain circumstances.

Most policies have exclusions, too, which enumerate certain events which are not covered by the policy and for which the homeowner cannot expect to be defended and indemnified. These policies are often referred to as agreements of adhesion, that is they are read in favor of the insured; coverage is in the public interest and most individuals have no real opportunity to bargain effectively with large insurance carriers.

A recent decision of the Supreme Court in Flomerfelt v. Cardiello, 23-8606, illustrates how courts resolve disputes in the interpretion of insurance contracts. Plaintiff sustained serious injuries after she overdosed on alcohol and drugs during a party hosted by the insured. She claimed the homeowner provided her with drugs and alcohol when she was visibly intoxicated and failed to promptly summon the rescue squad when she was found unconscious on his porch.

The insurance carrier declined coverage because a clause in the policy excepted claims “arising out of the use . . .transfer or possession” of controlled dangerous substances.

The trial court denied a motion by the insurance carrier for judgment. It reasoned that there was no conclusive proof that plaintiff’s injuries were caused exclusively by drugs, and might have been caused, in whole or part, by the consumption of alcohol, for which there would be coverage under the homeowner’s insurance policy.

The Appellate Division reversed, giving a broad interpretation to the phrase “arising out of” the use of controlled dangerous substances. The Supreme Court granted certification.

YOU BE THE JUDGE: Should an exclusionary clause in a homeowner’s policy of insurance be broadly interpreted?

The Supreme Court reversed. It concluded that the phrase “arising out of” was ambiguous since it was not explained or defined. For the exclusion to apply, the injury had to “originate in” or “grow out of” or have a “substantial nexus” to the excluded act of drug use, transfer or possession. The carrier had a duty to defend because plaintiff alleged she was damaged by both the use of drugs and by the use of alcohol. The insurer’s duty to defend continued as long as there was a potentially covered claim.

The decision points out that a courtroom can bring justice and may be the only way to protect your rights. Our law Firm knows courtrooms; we have harnessed the power of the law in courtrooms to bring justice for our clients for decades in Wayne, Hackensack, Carteret, Freehold, West Orange, West New York, Paterson, Morristown, Pequannock, Butler, Newark and throughout Bergen County, Morris County, Passaic County, Essex County and Hudson County. Please contact us to discuss how we can help you protect your rights in a new lawsuit or provide a Asecond opinion@ about your pending lawsuit. There is no obligation for the initial consultation. Copyright Samuel D. Bornstein, P.A. 2008-2010.

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About the Author

Author, Samuel D. Bornstein, is associated with the law firm (and has 40 years of experience in representing individuals and a wide variety of businesses from Fortune 100 companies that need specialized assistance to smaller companies that look to the firm as their "in house" lawyer for general day-to-day advice. The firm is experienced with transactional work and litigation, emphasizing corporate and partnership operations, employment.

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