New Jersey Federal Court: Policyholders Must Plead Specific Policy Provisions to Maintain Suits

In Law Office of Drew J. Bauman v. Hanover Insurance Co., the U.S. District Court for the District of New Jersey affirmed that policyholders must allege, under New Jersey law, the specific provisions of the insurance policy in order to state a claim for relief under the insurance contract. In doing so, the court bolstered the growing national judicial trend of restricting policyholder coverage litigation to those involving specific allegations of a carrier’s purported breach of contract, not lawsuits based on general policyholder grievances regarding a particular claim.

This case arose in 2019 following Bauman’s legal representation of James Woerner in a real estate transaction, which led to Woerner’s suit for legal malpractice. Bauman requested coverage for the suit under his professional liability insurance policy with Hanover. After Hanover declined multiple requests, Bauman sued Hanover for breach of contract and declaratory judgment.

Hanover moved to dismiss Bauman’s complaint, arguing, among other things, that Bauman’s complaint “failed to allege any facts concerning the terms of the Policy, or how the Policy was breached” and “failed to allege what, if any, damages” resulted from the breach. The court agreed and dismissed Bauman’s complaint.

In support of its ruling, the court reasoned that, while Bauman’s complaint referred to the insurance policy, the policyholder did not attach the policy to the complaint nor did the policyholder quote from, or even cite, the specific policy provisions. The court’s decision is consistent with the approach of other states, like Florida, that refuse generalized complaints against insurance carriers that do not specifically allege the portions of insurance contracts that have allegedly been breached. In doing so, courts in these states are clarifying that insurance contracts should be treated the same as any other contract once the contract becomes the subject of a court proceeding.