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Voorhees v. Preferred Mutual Insurance Co.3/20/1991
We do not read Burd v. Sussex Mutual Insurance Co., 56 N.J. at 394, 267 A.2d 7, as requiring a hearing to determine whether Voorhees' acts were intentional or only reckless or negligent. Our Supreme Court in Burd said that in the event the insurer declines to defend its insured because of a perceived conflict and a judgment is entered, "the carrier may be heard
upon the coverage issue in a proceeding upon the policy" and it "will have to reimburse the insured for the cost of the defense if the tort judgment is held to be within the covenant to pay." Ibid. We need not delve into the question concerning what type of hearing was contemplated by the Court. Here, the Sisto suit was settled and no judgment was entered against the insured. Based on the small amount of the settlement, Voorhees can fairly argue that Sisto's claims, which encompassed both intentional and reckless or negligent conduct, were "wholly defeated." Id. at 393, 267 A.2d 7. In that situation the insurer "may fairly be required to reimburse the insured for the cost of the successful defense even though the [insurer] would not have had to pay the judgment if the case had gone against the insured on a finding of intentional injury." Id. at 393, 267 A.2d 7. In any event, Preferred does not seek a hearing for a factual determination whether Voorhees' conduct was intentional. Instead, it requests a remand so that the defense costs can be apportioned between covered and non-covered claims. We now consider Preferred's argument that a remand is necessary for proper allocation of the defense costs incurred by the insured.
IV.
Preferred argues that it should not be responsible for reimbursing Voorhees for the expenses she incurred in defending against non-covered claims, i.e., defamation, invasion of privacy and outrage by intentional rather than reckless conduct. Citing Dunne v. Fireman's Fund Am. Ins. Co., 69 N.J. 244, 353 A.2d 508 (1976), Voorhees contends that where the complaint in the underlying action alleges both covered and non-covered claims, the insurer's duty to provide a defense extends to all of the complainant's causes of action.
Initially, we note that Dunne is inapposite. As our Supreme Court later observed in Hartford Acc. & Indem. Co. v. Aetna Life & Cas. Ins. Co., supra, "the policy invoked in Dunne
apparently imposed a duty upon the insurer to defend [all claims] if any theory of liability would fall within the policy coverage . . . ." 98 N.J. at 25, 483 A.2d 402. Moreover, the insurer in Dunne had undertaken at the outset to defend the entire action pursuant to a reservation of rights agreement with its insured. Dunne v. Fireman's Fund Am. Ins. Co., 69 N.J. at 246, 353 A.2d 508. Therefore, the sole issue confronting the court in Dunne was how to enforce the insurer's previously acknowledged duty to provide a defense for its insured, in view of the possible conflict raised by the circumstance that the insured would not enjoy coverage if liability were imposed on some basis other than negligence.
Our research discloses no reported New Jersey opinions directly on point. To be sure, we have found language in several opinions supportive of Preferred's position. In Central Nat'l Ins. Co. v. Utica Nat'l Ins. Group, 232 N.J. Super. 467, 557 A.2d 693 (App.Div.1989), for example, it is said that " he carrier's pro
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