Encompass Insurance v. Quincy Mutual (NJ Sup. Court 2014 – App. Div)

Practice Areas: Appellate Practice, Automobile Liability/UM/UIM, Insurance Coverage and Bad Faith

In Encompass Insurance Company v. Quincy Mutual Fire Insurance Company, Quincy Mutual appealed an order denying their motion for summary judgment and granting summary judgment to Encompass. This declaratory judgment action stemmed from an underlying automobile accident. The defendant driver was a real estate agent associated with Levinson Realty Associates, Inc., and was returning from a title closing with a commission check made out to Levinson.

Encompass, the carrier for the defendant driver, filed the declaratory judgment action against Quincy Mutual, the carrier which issued a Business Owners’ Liability Policy to Levinson. Through summary judgment, the trial court ruled that Quincy Mutual’s policy was applicable as primary insurance in the underlying action due to Levinson’s vicarious liability. The appellate court affirmed, agreeing with the trial judge that the driver was acting as an employee of Levinson and that in general real estate agents are considered employees of the broker. The court relied on the Brokers Act which provides that the agent is “employed by and operates under the supervision of” the broker.

Quincy Mutual’s cross-claim for indemnification of Levinson by Casey was also dismissed by the trial court and the appellate court affirmed, holding that New Jersey follows the rule not permitting an employer to seek indemnity from an employee for acts of negligence causing the employer losses.

Finally, the appellate division vacated and remanded the trial court’s denial of counsel fees to Encompass. Counsel fees may be awarded in an action on a liability or indemnity policy of insurance, and the trial court erred in stating that there was no bad faith to support counsel fees as bad faith is not a requirement in such a fee application.

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