NJ Supreme Court Decision Defines the Parameters of Acceptable Precedent in Bad-Faith Claims

For insurance attorneys and carriers alike, the decision to disclaim coverage is an invitation to enter delicate and uncertain legal territory, situated firmly between a rock and a hard place. On one side of the scale lies the potential contractual obligation to defend or indemnify the insured. On the other is the prudency of avoiding coverage obligations that were never bargained for. The crux of this dilemma arises from the insurer's heightened duty of good faith.

Implicitly written into every insurance contact by operation of law is the obligation to investigate claims with the utmost honestly and sincerity. This obligation runs deep, as reflected by the fact that unlike a typical contract, a showing that an insurer breached its contractual duty of good faith does not always necessarily require a showing of any malice or ill will. Rather, simple proof that the insurer violated its fiduciary obligations to its insured may often be sufficient to make a bad-faith claim. In that regard, nearly every jurisdiction has affixed a “fairly debatable” standard of proof to insurance bad-faith claims.

Under this standard, there must exist some reasonably ascertainable cause for belief that the disputed claim is not covered. If the decision to disclaim coverage is not determined to be a “fairly debatable” one, then the insurer may find itself liable in a tort action for bad faith. Accompanying bad-faith liability is a litany of potential costs, from counsel fees to consequential damages.

With the consequences of a bad-faith claim taken to account, it seems a truism that the decision to disclaim coverage must be made with thorough care and certainty. When the facts underlying a claim are unique or unprecedented, however, that decision is thrust into a realm of legal ambiguity. As a result, insurance coverage attorneys find themselves in the unenviable position of having to research the applicability of the policy language to a novel claim that may or may not fall in the bounds of coverage, then having to ensure that the ensuing disclaimer stands on reasonably firm legal grounds. In short, it can be an exercise in spinning certainty from vagueness. The only tool attorneys have to guide them is the legal precedent upon which their research is based.

The decision to disclaim coverage is made all the more difficult when the parameters of precedent counsel are allowed to consider in making that decision are never defined. Not all law is created equal. For example, perhaps the language of an insurance policy is entirely ambiguous as to an unforeseen claim, and the only precedent that bears on the issue is an unpublished decision. Can counsel reasonably rely on that ruling as a basis for denying coverage? If so, to what extent?

In February, the New Jersey Supreme Court shone light into this darkness, considering as a matter of first impression whether an insurer may consider an unpublished opinion as the basis for denying coverage. In Badiali v. New Jersey Manufacturer's Insurance Group, 220 N.J. 544 (2015), the court determined that an insurer who denied coverage based on an unpublished opinion had a “fairly debatable” cause for doing so, precluding liability for a bad faith claim. The ruling represented a small but significant step in designating the bounds of permissible precedent under the “fairly debatable” standard, offering a measure of clarity to an area of the law still largely undefined in many jurisdictions.

The 'Fairly Debatable Standard' Across America

The wide majority of American courts have weighed the remedial purposes of bad-faith torts against a carrier's right to make educated decisions about whether a claim is covered. Most of these courts have adopted some form of the “fairly debatable” standard, declining to impose liability on a disclaiming insurer, so long as the basis of the disclaimer was deemed fairly debatable. Unfortunately, the standard itself, along with the jurisprudence upon which insurers can rely, remains a hazy landscape from state to state.

In Iowa, for example, it is well established that an insurer has a reasonable basis for denying insurance benefits if a claim is fairly debatable as to either a matter of fact or a matter of law. Adam v. Stonebridge Life Ins. Co., 612 F.3d 967, 974 (8th Cir. 2010). What constitutes a permissible “matter of law,” however, is never clearly established. In Stonebridge , the plaintiff, an administrator of the insured's estate, brought suit against the insurer, alleging breach of contract and bad faith arising out of the denial of benefits under a life insurance policy. Id. at 969. The insurer rescinded the policy after discovering that the insured failed to disclose a mental disorder. Id. The administrator's bad-faith claim alleged that the rescission was unreasonable, willful, and wanton, and sought punitive damages. Id. In deciding that the insurer did not act in bad faith, the U.S. Court of Appeals for the Eighth Circuit determined that “a claim is fairly debatable when it is open to dispute on any logical basis,” and that the insurer acted with sufficient evidence to justify the denial of the claim. Id . at 974-975. The court went on to specify that such denial could be reasonably made on the basis of law. Id . at 974. Despite holding that matters of law could constitute reasonably debatable causes for disclaimer, the Stonebridge court never identified which sources of law were sufficiently “reasonable.”

Likewise, Michigan courts have held that a disclaiming insurer can make a showing of “reasonableness” by establishing that its refusal or delay in providing coverage was the product of a legitimate question of statutory construction. Durmishi v. National Cas. Co., 720 F.Supp. 2d 862, 873 (E.D. Mich. 2010). In Durmishi, the plaintiff insured sought payment under his auto-insurance policy, as well as penalty interest and attorney's fees after his insurer disclaimed coverage because he did not submit to a medical examination. Id. at 863. The insurer claimed that the denial of coverage was based on its interpretation of Michigan law granting insurers a statutory right to require insureds to submit to medical examinations. Id. at 873. In deciding that an issue of fact remained over whether the insurer behaved reasonably, the court discussed the precedent relied upon by the insurer, constituting only a Michigan State Court Appellate decision, and a Michigan statute. Id. Neither was held to be an unreasonable source as a matter of law. As in Stonebridge , the Durmishi ruling declined to explore the outer limits of permissible precedent, leavingthe issue unresolved.

Under Kentucky law, when an insurer's denial of a claim is based on a legal issue of first impression, that insurer cannot be said to have acted “unreasonably.” Philadelphia Indem. Ins. Co. v. Youth Alive, Inc., 732 F.3d 645 (6th Cir. 2013). In Youth Alive, the U.S. Court of Appeals for the Sixth Circuit considered a bad-faith claim brought against an insurer involving coverage arising out of a motor vehicle accident. Id. at 645. The insured youth program provided services to at-risk teens in the Louisville area. Id . After an outing, one participant was given permission by service volunteers to drive sevral other members home. When police spotted the vehicle and determined that it had been stolen in an earlier carjacking, a police chase ensued and the resulting accident killed each of the car's passengers. Id . at 648. The insurer considered the matter as an issue of first impression, ultimately discaiming coverage. Id. at 647. The court determined that the insurer had a “reasonable” basis for denying coverage, as it made a good-faith consideration of the applicability of the underlying policy language to the claim at hand. Id. at 652. The court went on to say that “no Kentucky cases on point require a contrary construction of similar language, nor does the sparse out-of-state authority compel a different result.” Id. at 650. The Youth Alive ruling suggested that the insurer could have looked to Kentucky decisions (or lack thereof) as well as out-of-state precedent in making a good faith determination that coverage did not apply. Id. Despite obliquely referencing an insurer's right to refer to precedent, the court declined to provide any detail as to the quality of precedent required to muster a showing of good faith. While a legal right was defined, its outer reaches were never explored.

California courts have encountered similar ambiguities. In T.G.S. Transportation v. Canal Ins. Co. , 216 Fed. Appx. 708 (9th Cir. 2006), the U.S. Circuit Court of Appeals for the Ninth Cicuit held that reliance on legal counsel may be sufficient to establish that the basis of an insurer's disclaimer was “reasonably debatable.” Id. at 708. T.G.S. Transportation involved bad faith and punitive damages claims brought against an insurer stemming from the refusal to pay a claim for stolen cargo. Id. at 708. The policy at issue covered the use of the insured's tractors, and any trailers attached to them by the insured. Id. When the cargo in question was stolen through the use of trailers attached by the thieves, the insurer was left to make a good-faith determination on whether coverage applied. The insurer sought the advice of counsel, who advised that trailers attached by thieves did not legally constitute “scheduled vehicles” within the terms of the policy. Id. at 709. Based on this advice, the insurer disclaimed coverage. Id. The court ultimately determined that the insurer did not breach its duty of good faith, but carefully scrutinized counsel's legal reasoning. Id . The court held that the insurer had “reasonably relied on the advice of counsel in making its coverage decision” and that counsel's advice was reasonable because, despite the lack of controlling California case law, similar interpretations of counsel's position were supported by case law in other jurisdictions. Id.

The court concluded that “the fact that other courts have interpreted the law in the same manner as did the insurer … is certainly probative of reasonableness, if not necessarily the ultimate correctness, of an insurer's position.” Id. Although the T.G.S. court shed some helpful light on the issue, its applicability is still quite limited. While the ruling seems to stand for the proposition that out of state precedent may be considered a “reasonable” source of law, it does not specify whether that reasonableness is freestanding, or dependent on a lack of relevant in-state case law. Although certainly helpful in establishing that the advice of legal counsel is relevant in good-faith determinations, the T.G.S. court was not interested in definitively establishing the boundaries of such advice. The parameters were addressed, but remain cloudy.

Badiali v. New Jersey Mfrs. Ins. Group : A Light in the Dark

In New Jersey, the outer limits of permissible precedent went unexplored until February 2015, when the New Jersey Supreme Court took a hesitant step into uncharted territory. In Badiali v. New Jersey Manufacturer's Insurance Group, 220 N.J. 544 (2015), the court considered as a matter of first impression whether the existence of an unpublished opinion allowed an insurer to avoid a finding of bad faith for actions taken in accordance with the opinion. Id. at 544.

The facts of Badiali are simple. The insured plaintiff was injured after his motor vehicle was rear-ended by an uninsured motorist. Id. The insured filed an uninsured motorist claim, which proceeded to arbitration, resulting in an award in his favor. Id. The plaintiff's insurer, New Jersey Manufacturer's Insurance Group (“NJMIG”), rejected the arbitration award and refused to pay its share, asserting that the language of its auto policy allowed either party to dispute an arbitration award exceeding $15,000. Id. After a trial court confirmed the arbitration award in a summary action, the plaintiff insured brought suit against NJMIG, alleging that it litigated in bad faith by claiming that its policy language allowed for a rejection of the award. Id. The trial court rejected the insured's bad-faith claim, finding that NJMIG's position was “fairly debatable” based on the language of its policy, and on the existence of an unpublished Appellate Division decision involving nearly identical facts, in which NJMIG was also a party. Id. In the unpublished decision, Geiger v. N.J. Manufacturer's Insurance Co., No. A-5135-02 (App. Div. March. 22, 2004), the Appellate Division held that, under the exact same circumstances, NJMIG was entitled to reject the insured's arbitration award and demand a trial. Id . Additionally, the arbitration provision that appeared in the Geiger policy was identical to the one in the Badiali policy.

The Appellate Division affirmed the trial court's decision, holding that ” Geiger's mere existence precludes a finding that that [NJMIG's] position was either instituted or pursued in bad faith. That is, plaintiff cannot persuasively argue that [NJMIG's] position was posited or prosecuted in bad faith when that very position was endorsed by another panel of this court.” Badiali v. New Jersey Manufacturer's Insurance Group, 429 N.J. Super. 121, 126 (App. Div. 2012).

On appeal, the New Jersey Supreme Court was left to determine whether “fair debatability” could be supported by an insurer's reliance on an unpublished decision. Badiali v. New Jersey Manufacturer's Insurance Group, 220 N.J. 544 (2015). The court affirmed the judgement of the Appellate Division, holding that:

[I]t is illogical to suggest that [NJMIG], or any other corporation, cannot rely on previously unpublished opinions ' especially those in which they were specifically involved ' in forming their business decisions ' as such, we find that [NJMIG's] citation to the Appellate Division's unpublished decision in Geiger before the Court was acceptable because it was referenced not for its legal precedential value, but rather to prove that [NJMIG] acted in good faith in conducting its business as an insurance claims handler ' [we] expressly hold that the existence of the unpublished Geiger decision precludes a finding of bad faith against [NJMIG].

Id. at 1292.

Though limited in scope, the Badiali ruling established an unprecedented litmus test against which to measure the legitimacy of legal research. For attorneys and insurers alike, the implications are palpable. Coverage counsel is allowed a broader spectrum from which to glean precedent, on which insurers may rely without fear of incurring bad-faith liability. Counsel for insureds would also be prudent to consider unpublished opinions before bringing bad faith claims.

Conclusion

For as long as insurance claims have been litigated, allegations of bad faith have landed insurers in especially hostile territory. The only road out of the quagmire is the good faith reliance on permissible precedent. In most jurisdictions, guidelines have never been delineated. Under Badiali, New Jersey is the first to mark the trail.

Daren S. McNally , a member of this newsletter's Board of Editors, is the Managing Partner, Matthew I. Gennaro is Senior Counsel and John Vieira and James Layman are Associates in the New Jersey office of Clyde & Co US LLP. Mr. McNally maintains a practice that is focused on insurance coverage litigation and counseling, with an emphasis in complex insurance and reinsurance litigation, trials and arbitrations in both domestic and foreign arenas. Messrs. Gennaro, Vieira and Layman focus their practices in the areas of insurance coverage law and litigation.

For insurance attorneys and carriers alike, the decision to disclaim coverage is an invitation to enter delicate and uncertain legal territory, situated firmly between a rock and a hard place. On one side of the scale lies the potential contractual obligation to defend or indemnify the insured. On the other is the prudency of avoiding coverage obligations that were never bargained for. The crux of this dilemma arises from the insurer's heightened duty of good faith.

Implicitly written into every insurance contact by operation of law is the obligation to investigate claims with the utmost honestly and sincerity. This obligation runs deep, as reflected by the fact that unlike a typical contract, a showing that an insurer breached its contractual duty of good faith does not always necessarily require a showing of any malice or ill will. Rather, simple proof that the insurer violated its fiduciary obligations to its insured may often be sufficient to make a bad-faith claim. In that regard, nearly every jurisdiction has affixed a “fairly debatable” standard of proof to insurance bad-faith claims.

Under this standard, there must exist some reasonably ascertainable cause for belief that the disputed claim is not covered. If the decision to disclaim coverage is not determined to be a “fairly debatable” one, then the insurer may find itself liable in a tort action for bad faith. Accompanying bad-faith liability is a litany of potential costs, from counsel fees to consequential damages.

With the consequences of a bad-faith claim taken to account, it seems a truism that the decision to disclaim coverage must be made with thorough care and certainty. When the facts underlying a claim are unique or unprecedented, however, that decision is thrust into a realm of legal ambiguity. As a result, insurance coverage attorneys find themselves in the unenviable position of having to research the applicability of the policy language to a novel claim that may or may not fall in the bounds of coverage, then having to ensure that the ensuing disclaimer stands on reasonably firm legal grounds. In short, it can be an exercise in spinning certainty from vagueness. The only tool attorneys have to guide them is the legal precedent upon which their research is based.

The decision to disclaim coverage is made all the more difficult when the parameters of precedent counsel are allowed to consider in making that decision are never defined. Not all law is created equal. For example, perhaps the language of an insurance policy is entirely ambiguous as to an unforeseen claim, and the only precedent that bears on the issue is an unpublished decision. Can counsel reasonably rely on that ruling as a basis for denying coverage? If so, to what extent?

In February, the New Jersey Supreme Court shone light into this darkness, considering as a matter of first impression whether an insurer may consider an unpublished opinion as the basis for denying coverage. In Badiali v. New Jersey Manufacturer's Insurance Group , 220 N.J. 544 (2015), the court determined that an insurer who denied coverage based on an unpublished opinion had a “fairly debatable” cause for doing so, precluding liability for a bad faith claim. The ruling represented a small but significant step in designating the bounds of permissible precedent under the “fairly debatable” standard, offering a measure of clarity to an area of the law still largely undefined in many jurisdictions.

The 'Fairly Debatable Standard' Across America

The wide majority of American courts have weighed the remedial purposes of bad-faith torts against a carrier's right to make educated decisions about whether a claim is covered. Most of these courts have adopted some form of the “fairly debatable” standard, declining to impose liability on a disclaiming insurer, so long as the basis of the disclaimer was deemed fairly debatable. Unfortunately, the standard itself, along with the jurisprudence upon which insurers can rely, remains a hazy landscape from state to state.

In Iowa, for example, it is well established that an insurer has a reasonable basis for denying insurance benefits if a claim is fairly debatable as to either a matter of fact or a matter of law. Adam v. Stonebridge Life Ins. Co. , 612 F.3d 967, 974 (8th Cir. 2010). What constitutes a permissible “matter of law,” however, is never clearly established. In Stonebridge , the plaintiff, an administrator of the insured's estate, brought suit against the insurer, alleging breach of contract and bad faith arising out of the denial of benefits under a life insurance policy. Id. at 969. The insurer rescinded the policy after discovering that the insured failed to disclose a mental disorder. Id. The administrator's bad-faith claim alleged that the rescission was unreasonable, willful, and wanton, and sought punitive damages. Id. In deciding that the insurer did not act in bad faith, the U.S. Court of Appeals for the Eighth Circuit determined that “a claim is fairly debatable when it is open to dispute on any logical basis,” and that the insurer acted with sufficient evidence to justify the denial of the claim. Id . at 974-975. The court went on to specify that such denial could be reasonably made on the basis of law. Id . at 974. Despite holding that matters of law could constitute reasonably debatable causes for disclaimer, the Stonebridge court never identified which sources of law were sufficiently “reasonable.”

Likewise, Michigan courts have held that a disclaiming insurer can make a showing of “reasonableness” by establishing that its refusal or delay in providing coverage was the product of a legitimate question of statutory construction. Durmishi v. National Cas. Co. , 720 F.Supp. 2d 862, 873 (E.D. Mich. 2010). In Durmishi, the plaintiff insured sought payment under his auto-insurance policy, as well as penalty interest and attorney's fees after his insurer disclaimed coverage because he did not submit to a medical examination. Id. at 863. The insurer claimed that the denial of coverage was based on its interpretation of Michigan law granting insurers a statutory right to require insureds to submit to medical examinations. Id. at 873. In deciding that an issue of fact remained over whether the insurer behaved reasonably, the court discussed the precedent relied upon by the insurer, constituting only a Michigan State Court Appellate decision, and a Michigan statute. Id. Neither was held to be an unreasonable source as a matter of law. As in Stonebridge , the Durmishi ruling declined to explore the outer limits of permissible precedent, leavingthe issue unresolved.

Under Kentucky law, when an insurer's denial of a claim is based on a legal issue of first impression, that insurer cannot be said to have acted “unreasonably.” Philadelphia Indem. Ins. Co. v. Youth Alive, Inc. , 732 F.3d 645 (6th Cir. 2013). In Youth Alive, the U.S. Court of Appeals for the Sixth Circuit considered a bad-faith claim brought against an insurer involving coverage arising out of a motor vehicle accident. Id. at 645. The insured youth program provided services to at-risk teens in the Louisville area. Id . After an outing, one participant was given permission by service volunteers to drive sevral other members home. When police spotted the vehicle and determined that it had been stolen in an earlier carjacking, a police chase ensued and the resulting accident killed each of the car's passengers. Id . at 648. The insurer considered the matter as an issue of first impression, ultimately discaiming coverage. Id. at 647. The court determined that the insurer had a “reasonable” basis for denying coverage, as it made a good-faith consideration of the applicability of the underlying policy language to the claim at hand. Id. at 652. The court went on to say that “no Kentucky cases on point require a contrary construction of similar language, nor does the sparse out-of-state authority compel a different result.” Id. at 650. The Youth Alive ruling suggested that the insurer could have looked to Kentucky decisions (or lack thereof) as well as out-of-state precedent in making a good faith determination that coverage did not apply. Id. Despite obliquely referencing an insurer's right to refer to precedent, the court declined to provide any detail as to the quality of precedent required to muster a showing of good faith. While a legal right was defined, its outer reaches were never explored.

California courts have encountered similar ambiguities. In T.G.S. Transportation v. Canal Ins. Co. , 216 Fed. Appx. 708 (9th Cir. 2006), the U.S. Circuit Court of Appeals for the Ninth Cicuit held that reliance on legal counsel may be sufficient to establish that the basis of an insurer's disclaimer was “reasonably debatable.” Id. at 708. T.G.S. Transportation involved bad faith and punitive damages claims brought against an insurer stemming from the refusal to pay a claim for stolen cargo. Id. at 708. The policy at issue covered the use of the insured's tractors, and any trailers attached to them by the insured. Id. When the cargo in question was stolen through the use of trailers attached by the thieves, the insurer was left to make a good-faith determination on whether coverage applied. The insurer sought the advice of counsel, who advised that trailers attached by thieves did not legally constitute “scheduled vehicles” within the terms of the policy. Id. at 709. Based on this advice, the insurer disclaimed coverage. Id. The court ultimately determined that the insurer did not breach its duty of good faith, but carefully scrutinized counsel's legal reasoning. Id . The court held that the insurer had “reasonably relied on the advice of counsel in making its coverage decision” and that counsel's advice was reasonable because, despite the lack of controlling California case law, similar interpretations of counsel's position were supported by case law in other jurisdictions. Id.

The court concluded that “the fact that other courts have interpreted the law in the same manner as did the insurer … is certainly probative of reasonableness, if not necessarily the ultimate correctness, of an insurer's position.” Id. Although the T.G.S. court shed some helpful light on the issue, its applicability is still quite limited. While the ruling seems to stand for the proposition that out of state precedent may be considered a “reasonable” source of law, it does not specify whether that reasonableness is freestanding, or dependent on a lack of relevant in-state case law. Although certainly helpful in establishing that the advice of legal counsel is relevant in good-faith determinations, the T.G.S. court was not interested in definitively establishing the boundaries of such advice. The parameters were addressed, but remain cloudy.

Badiali v. New Jersey Mfrs. Ins. Group : A Light in the Dark

In New Jersey, the outer limits of permissible precedent went unexplored until February 2015, when the New Jersey Supreme Court took a hesitant step into uncharted territory. In Badiali v. New Jersey Manufacturer's Insurance Group , 220 N.J. 544 (2015), the court considered as a matter of first impression whether the existence of an unpublished opinion allowed an insurer to avoid a finding of bad faith for actions taken in accordance with the opinion. Id. at 544.

The facts of Badiali are simple. The insured plaintiff was injured after his motor vehicle was rear-ended by an uninsured motorist. Id. The insured filed an uninsured motorist claim, which proceeded to arbitration, resulting in an award in his favor. Id. The plaintiff's insurer, New Jersey Manufacturer's Insurance Group (“NJMIG”), rejected the arbitration award and refused to pay its share, asserting that the language of its auto policy allowed either party to dispute an arbitration award exceeding $15,000. Id. After a trial court confirmed the arbitration award in a summary action, the plaintiff insured brought suit against NJMIG, alleging that it litigated in bad faith by claiming that its policy language allowed for a rejection of the award. Id. The trial court rejected the insured's bad-faith claim, finding that NJMIG's position was “fairly debatable” based on the language of its policy, and on the existence of an unpublished Appellate Division decision involving nearly identical facts, in which NJMIG was also a party. Id. In the unpublished decision, Geiger v. N.J. Manufacturer's Insurance Co., No. A-5135-02 (App. Div. March. 22, 2004), the Appellate Division held that, under the exact same circumstances, NJMIG was entitled to reject the insured's arbitration award and demand a trial. Id . Additionally, the arbitration provision that appeared in the Geiger policy was identical to the one in the Badiali policy.

The Appellate Division affirmed the trial court's decision, holding that ” Geiger's mere existence precludes a finding that that [NJMIG's] position was either instituted or pursued in bad faith. That is, plaintiff cannot persuasively argue that [NJMIG's] position was posited or prosecuted in bad faith when that very position was endorsed by another panel of this court.” Badiali v. New Jersey Manufacturer's Insurance Group , 429 N.J. Super. 121, 126 (App. Div. 2012).

On appeal, the New Jersey Supreme Court was left to determine whether “fair debatability” could be supported by an insurer's reliance on an unpublished decision. Badiali v. New Jersey Manufacturer ' s Insurance Group , 220 N.J. 544 (2015). The court affirmed the judgement of the Appellate Division, holding that:

[I]t is illogical to suggest that [NJMIG], or any other corporation, cannot rely on previously unpublished opinions ' especially those in which they were specifically involved ' in forming their business decisions ' as such, we find that [NJMIG's] citation to the Appellate Division's unpublished decision in Geiger before the Court was acceptable because it was referenced not for its legal precedential value, but rather to prove that [NJMIG] acted in good faith in conducting its business as an insurance claims handler ' [we] expressly hold that the existence of the unpublished Geiger decision precludes a finding of bad faith against [NJMIG].

Id. at 1292.

Though limited in scope, the Badiali ruling established an unprecedented litmus test against which to measure the legitimacy of legal research. For attorneys and insurers alike, the implications are palpable. Coverage counsel is allowed a broader spectrum from which to glean precedent, on which insurers may rely without fear of incurring bad-faith liability. Counsel for insureds would also be prudent to consider unpublished opinions before bringing bad faith claims.

Conclusion

For as long as insurance claims have been litigated, allegations of bad faith have landed insurers in especially hostile territory. The only road out of the quagmire is the good faith reliance on permissible precedent. In most jurisdictions, guidelines have never been delineated. Under Badiali, New Jersey is the first to mark the trail.

Daren S. McNally , a member of this newsletter's Board of Editors, is the Managing Partner, Matthew I. Gennaro is Senior Counsel and John Vieira and James Layman are Associates in the New Jersey office of Clyde & Co US LLP. Mr. McNally maintains a practice that is focused on insurance coverage litigation and counseling, with an emphasis in complex insurance and reinsurance litigation, trials and arbitrations in both domestic and foreign arenas. Messrs. Gennaro, Vieira and Layman focus their practices in the areas of insurance coverage law and litigation.