Newsletter

Settlement for Transfer of Rights and Provision of Services Is Not "Money Damages"

July 2011

The New Jersey Supreme Court has held that an insured's settlement agreement to waive fines, provide services for the claimant and to assign to the claimant certain rights did not constitute covered “loss,” defined by the policy as “money damages.” Passaic Valley Sewerage Commissioners v. St. Paul Fire & Marine Ins. Co., 2011 WL 2447987 (N .J. June 21, 2011).

The insured, a state regulatory body responsible for the collection and disposal of wastewater, was sued by a private wastewater hauling and treatment contractor, which challenged the violation notices the regulator had issued to it. The regulator and the contractor reached a settlement under which the regulator agreed to: (1) dismiss fines it had sought from the contractor; (2) accept, treat and dispose of sludge generated by one of the contractor's customers; and (3) assign to the contractor the right to deliver and dispose of sludge at a certain facility. The regulator's expert valued the settlement between $5.9 million and $17.2 million.

The regulator was insured under a Public Entity Management Liability policy, which afforded coverage for “Loss as a result of civil Claims.” The policy defined “Claim” to mean a “demand for Money Damages as of right” and “Loss” to mean “Money Damages which the Insured becomes legally obligated to pay by reason of a Wrongful Act.” “Money Damages” was defined as “monetary compensation for past harms or injuries.”

The insurer denied coverage for the settlement, asserting that it had no obligation to indemnify the regulator absent the payment of money damages. The court agreed, holding that the settlement between the regulator and claimant was not for “money damages” but was instead a business arrangement involving the performance of services, designed to benefit the parties.

The court rejected the insured's argument that, because the settlement could be valued, it constituted covered money damages. According to the court, the insurer defined “loss” narrowly to avoid the necessity of litigating the value of non-monetary losses and did not bargain for the valuation process and proofs that would be required to value the settlement here. Accordingly, the court held that the policy afforded no coverage for the non-monetary settlement.

Read Time: 2 min
Jump to top of page

Wiley Rein LLP Cookie Preference Center

Your Privacy

When you visit our website, we use cookies on your browser to collect information. The information collected might relate to you, your preferences, or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. For more information about how we use Cookies, please see our Privacy Policy.

Strictly Necessary Cookies

Always Active

Necessary cookies enable core functionality such as security, network management, and accessibility. These cookies may only be disabled by changing your browser settings, but this may affect how the website functions.

Functional Cookies

Always Active

Some functions of the site require remembering user choices, for example your cookie preference, or keyword search highlighting. These do not store any personal information.

Form Submissions

Always Active

When submitting your data, for example on a contact form or event registration, a cookie might be used to monitor the state of your submission across pages.

Performance Cookies

Performance cookies help us improve our website by collecting and reporting information on its usage. We access and process information from these cookies at an aggregate level.

Powered by Firmseek