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New Jersey Practice Point for Insurers: Deciding Whether to Oppose a Motion for Substituted Service

July 8, 2015

Often insurers find themselves being notified of a lawsuit by the plaintiff’s counsel when counsel is struggling to locate the insured defendant for service. Typically, after placing the insurer on notice, the plaintiff’s counsel will request the court permit the plaintiff to serve the insured defendant’s insurer in lieu of the insured defendant. These motions are liberally granted when the plaintiff’s counsel can show proof of reasonable attempts to serve the insured defendant because the assumption is the insurer is interested in locating the insured and defending the matter. In theory, by permitting service of the lawsuit on the insurer, the insured defendant will not only be put on notice of the suit but will also have its interests protected by the insurer who will provide a defense. When the insurer is fortunate enough to receive a courtesy copy of the plaintiff’s motion for substituted service, it typically goes unopposed because the insurer, who ultimately can be liable for a verdict, has an interest in locating and defending the insured defendant.

Be cautious because sometimes these attempts for substituted service are essentially attempts to make the insurer a party to the plaintiff’s suit despite the fact that the plaintiff has no direct cause of action against the insurer.  See White v. Austin, 172 N.J. Super 451,455-456 (Cty. Ct. 1980). When the insurer has already determined that there is no coverage, the insurer should oppose the motion for substituted service to at least put all parties on notice, essentially making it part of the record, that there is no coverage for the insured defendant. Should the court grant the motion for substituted service, at least all parties have been advised that the insurer is not providing a defense and will ultimately not be providing indemnity should there be a plaintiff’s verdict at the end of the litigation. 

We recently encountered a situation like the one described above where we were asked by our client to oppose a motion for substituted service in the Superior Court of Hudson County, New Jersey, because the insurer denied coverage for the insured. The plaintiff’s counsel filed a motion for substituted service, relying on New Jersey Court Rule 4:4-4(b)(3), which permits the court to direct service to be made in a particular manner when service cannot be effectuated pursuant to the court rules, so long as the court’s order is consistent with due process of law. The rule is necessary “where usual modes of service are either impossible or unduly oppressive upon plaintiff or where the defendant successfully evades service of process.”  Ledbetter v. Schnur, 107 N.J. Super. 479, 482 (Law Div. 1969).  Since substituted service invokes a constitutional question of due process, the court must invoke a balancing test, weighing the following factors: (1) the plaintiff’s need, (2) the public interest, (3) the reasonableness of the plaintiff’s efforts to inform the defendant, and (4) the availability of other safeguards for the defendant’s interests. See Feuchtbaum v. Constantini, 59 N.J. 167, 177 (N.J. 1971). If the balance of the four (4) due process factors weighs in favor of the plaintiff, then the request for substituted service must be granted. See Ledbetter, 107 N.J. Super. at 483.

Although these motions are liberally granted by the court when the plaintiff’s counsel can show reasonable attempts at service, we filed an opposition asserting that more attempts at service were necessary in light of the fact that coverage had already been denied. We relied on Houie v. Allen, 192 N.J. Super. 517, 522 (App. Div. 1984), where the court held, “analysis under the due process balancing test also requires the court to consider fairness to the defendant.”   Id.  In examining the fairness element, the Houie court held that a plaintiff is required to make a prima facie showing that the claims asserted by the plaintiff against the defendant are covered by the latter’s insurance policy.   Id. In our matter, the court agreed with our position and denied the plaintiff’s motion for substituted service.  In so finding, the court agreed that in light of the denial of coverage by the insurer, the plaintiff’s counsel’s attempts at locating the insured were not sufficient. The court cited the Houie decision, which provided, “An insurance carrier which is not under a duty to defend or indemnify defendant obviously has little incentive to seek out and notify him of a claim pending against him.” Id.  Relying on this language, the court found that without additional attempts at service, the insured defendant’s due process rights would be violated. The plaintiff was sent away to conduct additional investigation to obtain service.

In summary, if the insurer denies coverage then the insurer should oppose a motion for substituted service relying on the Houie decision.  Regardless of whether the insurer wins, at least all parties are put on formal notice that there is no coverage and the insurer should not be responsible for paying the verdict in the end.

Authored by: Charity Heidenthal, Esq. 

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