New Jersey Appellate Court clarifies duty to defend in cases involving mixed claims.

In this declaratory judgment action, the insurer appealed an order requiring it to provide a defense for its insured, an insurance agency, relating to claims in an underlying Texas case that arose out of an alleged breach of a non-compete agreement and defamation. The insurer declined to defend the insurance agency for the defamation claim on the basis that it resulted from knowing an intentional conduct. Applying a choice of law analysis, the court found that there was no conflict between Texas and New Jersey law on the issue of whether a defense was owed. The court held that, “[i]n New Jersey, we permit reimbursement of costs incurred in defending claims that are later determined not to be covered, if they can be apportioned.” Additionally, “[i]n New Jersey, the determination of an insurer’s duty to defend requires review of the complaint with liberality to ascertain whether the insurer will be obligated to indemnify the insured if the allegations are sustained.” The court determined that the defamation, tortious interference and negligent misrepresentation allegations potentially arose out of negligent, misleading, and false statements made during the course of rendering services to various clients by the agency and affirmed the lower court’s ruling that a defense was owed.

_{Case Law Alerts, 3rd Quarter, July 2016}

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