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NJ: Attorney Fee-Shifting Applies to Out-of-State Coverage Disputes

August 2, 2010 | Posted in : Coverage of Fees, Fee Dispute, Fee Entitlement / Recoverability, Fee Issues on Appeal, Fee Jurisprudence, Fee Shifting, Prevailing Party Issues

A recent law.com story, “N.J. Fee-Shifting Rule Held Applicable to Out-of-State Coverage Disputes reports that a New Jersey court rule that allows insureds prevailing in coverage disputes to recover legal fees applies when that litigation takes place out of state, the New Jersey Supreme Court says.  The 6-1 decision in Myron Corp. v. Atlantic Mutual Insurance Co. allows Myron Corporation, a business-to-business personalized gift company based in New Jersey to recover about $160,000 in legal fees incurred battling its liability carrier, Atlantic Mutual Insurance Corp., in a federal court in Illinois.  The coverage dispute was a putative class action file by Stonecrafters, Inc., an Illinois business that claimed Myron blasted it with junk faxes in violation of the federal Telephone Consumer Protection Act of 1991 and Illinois consumer protection law.

Atlantic Mutual and Myron worked out a settlement of Myron’s claim for counsel fees for the Stonecrafters case and the New Jersey coverage litigation, but Atlantic refused to pay anything toward the approximately $160,000 Myron spent on the Illinois coverage litigation.  In reversing, the Appellate Division said the fee rule should apply because “[w]e agree with Myron that, unless the insured can recover its counsel fees for out-of-state litigation in this situation, an insurer could wear down the insured financially through forum shopping.”  Judge Susan Reisner, Joseph Lisa and Paulette Sapp-Peterson found Myron entitled to fees because it fended off an effort to litigate coverage elsewhere and then obtained a favorable result on the merits.