Insurer unsuccessfully argues policyholder-judge lacks objectivity
Liberty Mutual hoped to remove a federal judge from a coverage dispute case because of his significant claims history.
A New Jersey federal judge hearing an insurance coverage dispute has denied Liberty Mutual’s bid to disqualify him over his multiple policies with the company and his “significant” claims history.
Liberty Mutual Fire Insurance Co. sought to disqualify Senior U.S. District Judge Stanley Chesler from a case involving insurance coverage for a crane accident.
The carrier argued that the judge failed to disclose he has four Liberty Mutual policies, and that his personal dealings with the company would cause a reasonable person to question his impartiality.
But Chesler said Liberty Mutual’s motion, suggesting that any judge who is a policyholder of an insurer must disclose that status and recuse from any case where the insurer is a party, is an “untenable proposition.”
That argument “would render hundreds, if not thousands, of judges incapable of presiding over large swaths of their dockets,” Chesler said.
Underlying litigation
The dispute stems from a 2010 incident in Bronx, New York in which two workers were injured using a boom lift on a bridge construction project.
The two injured workers were employees of Conti Enterprises, which rented the boom lift from United Rentals.
The rental agreement required Conti to obtain insurance coverage and to name United Rentals as an additional insured. Conti obtained a policy from Liberty Mutual, according to the complaint.
The injured workers brought suits in New York against the Metropolitan Transportation Authority and the Triborough Bridge and Tunnel Authority, which brought third-party claims against United.
When Liberty Mutual denied coverage, United brought a declaratory judgment suit against it in New Jersey in 2019, according to the complaint.
On April 28, 2022, Chesler granted United’s motion for partial summary judgment, finding Liberty Mutual is obliged to defend United Rentals in the New York suits, and that Liberty must reimburse United for all costs of defense in those cases.
Judge’s insurance history
Chesler said he has been a Liberty Mutual policyholder since 1980, and has policies for his primary home, a vacation home, his vehicles and for personal liability.
Liberty Mutual argued that Chesler’s claim history dictates recusal, and it cited several claims — more than 10 years old — for missing jewelry. Liberty Mutual said one such case, in 2008, was investigated by the company after being “red flagged.”
Chesler said the item of jewelry was later found and the claim withdrawn. He added that there was no assertion that he or his wife knew that the claim was “red flagged.”
Liberty Mutual also said Chesler made additional claims for lost or stolen pieces of jewelry in 2012 and 2014 that were referred to the company’s investigative unit, according to the judge’s ruling.
But Chesler was unaware of any investigation in those cases, and Liberty Mutual’s attorney, Gary Kull, admitted under oath that such investigations never occurred, the judge wrote.
Other than the 2008 case where the piece of jewelry was later found, Liberty Mutual paid all his lost and missing jewelry claims, Chesler wrote.
Whatever suspicions Liberty Mutual had with respect to the jewelry claims were either not substantiated or not investigated, Chesler said.
This suggests that whatever issues, suspicions, or “red flags” Liberty Mutual might have had with respect to these earlier jewelry claims were either not substantiated, or not even investigated by them.
Nevertheless, Chesler wrote, Liberty Mutual argued that “[a]n investigation related to multiple insurance claims could result in negative impressions by the insured towards its insurer.” But he rejected that assertion.
“[I]t is hard to understand how Liberty Mutual can seriously argue that ‘an investigation relating to multiple insurance claims could result in a negative impression by an insured towards its insurer’ and that ‘it would not be unreasonable to believe that the person subjected to such an investigation might harbor some displeasure towards his insurer,’ when here, except for one claim, which was withdrawn, all claims were paid by Liberty Mutual and Liberty Mutual has never demonstrated that the undersigned or his spouse were ever even aware of such an investigation,” Chesler wrote.
Liberty Mutual also asserted in its disqualification bid that a claim by Chesler in August 2019, when his 2017 Subaru Forester was totaled in a crash, was filed just two days after the United Rentals suit was filed.
The judge received $6,523 on that claim.
But U.S. Magistrate Cathy Waldor was in charge of motion practice and discovery in the case, and Chesler did not get involved for the first two years of its pendency, “so a claim filed shortly after the initiation of the suit would not lead a reasonable person to question the undersigned’s impartiality,” the judge wrote.
And another claim, in October 2022, occurred after a tree branch fell through Chesler’s roof during a storm.
Liberty Mutual asserted that this claim came 10 days before Chesler awarded United Rentals roughly $300,000 in legal fees.
However, this assertion ignores the fact that in April 2022, Chesler granted United Rentals’ motion for partial summary judgment, disposing of the major substantive claim in the case, he said.
New Jersey court rules make fees available to a successful claimant in a liability or indemnity policy dispute, he added.
Chesler also rejected Liberty Mutual’s assertion that he decided motions in the case more promptly than usual.
Noting that lawyers often say federal judges are unduly delayed in deciding motions, Chesler said, “Liberty Mutual’s complaint that the court was too quick in disposing of its motions is probably unique in the annals of legal history. It hardly supports a claim of apparent bias. To the extent the speed at which the undersigned issued the decision concerns the parties, the undersigned hereby apologizes for that speed.”
Kull, of Kennedys in Basking Ridge, N.J., the lawyer for Liberty Mutual, did not respond to a request for comment about the ruling.
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