Shore Orthopaedic v. The Equitable is an important case in a policyholder’s arsenal – supporting the right to obtain a disability carrier’s underwriting manuals to challenge a claim denial.

The Appellate Court decided on January 24, 2008 that a $50,000 counsel fee award by the trial judge in favor of plaintiff was the proper sanction, after the disability carrier, Equitable, delayed producing its underwriting manual.  One of Shore Orthopaedic’s practitioners became disabled and unable to pay his share of the overhead expenses of the medical group.  The practice owned a disability policy through Equitable intended to pay the practice benefits to reimburse for overhead expenses the doctor, insured under the policy, was unable to pay.  The policy provided that the benefits would be paid directly to the medical practice as the owner of the policy.

During discovery, Shore demanded a copy of Equitable’s underwriting manuals.  The trial judge determined that Equitable intentionally obfuscated plaintiff’s request for the manuals which were eventually produced after they “surfaced.”  Plaintiff was awarded attorney’s fees from the time of the first discovery request through its motion for summary judgment.

The decision to award counsel fees was within the trial court’s discretion under R. 4:42-9, even though the court rejected plaintiff’s request for counsel fees under the Frivolous Lawsuit statute or under the statute providing for reimbursement of attorney’s fees in an action upon a liability or indemnity insurance policy, traditionally limited to “third party” claims in New Jersey as a matter of policy.

Thus, the importance of the opinion is that while the court did not award counsel fees under what would have been a significant modification to the rule, by allowing attorney’s fees in what the court determined was a “first party” insurance claim, the case affirms a plaintiff’s right to obtain underwriting manuals from a defendant disability insurance carrier.  An issue in the case was whether the insurance carrier acted properly in denying the claim.  The court agreed that the carrier’s handling of the claim, i.e. disputing the insured’s medical condition, warranted an examination of the carrier’s claims handling procedure, as revealed in its underwriting manuals.