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Exclusionary language precluding transfer of rights must be specific and explicit.

January 6, 2015
Lime Tree Assocs., LLC v. Burlington Ins. Co., 2014 U.S. Dist. LEXIS 165794 (D.N.J. Nov. 25, 2014)

This action arises out of a lawsuit brought by the victim of a physical attack against Lime Tree Associates, which merged with and into Lime Tree Associates LLC and Lime Tree Associates LLC. At the time of the attack, Lime Tree Associates was insured by the defendant, Burlington Insurance Company. Thus, upon receipt of a lawsuit concerning a physical attack that occurred on property owned by Lime Tree Associates, Lime Tree Associates LLC tendered the claim to Burlington seeking defense and indemnity pursuant to their assumption of Lime Tree Associates’ assets and liabilities as a result of the merger. Burlington tendered a defense under a reservation of rights to Lime Tree Associates, but denied coverage to Lime Tree Associates LLC, claiming that it was not an insured under the policy as the policy contained “an explicit provision… prohibiting the transfer of policy rights through merger or by operation of law.” The court determined that the policy language was “neither ‘specific’ nor ‘explicit’ with regard to the transfer by merger or operation of law, and [was thus] insufficient to bar coverage here.” Therefore, the court found that Lime Tree Associates LLC was owed a defense and indemnification in the underlying claim. The court also awarded counsel fees to Lime Tree Associates LLC to avoid “[depriving] Lime Tree [Associates] LLC of the full benefit of its insurance contract.”

Case Law Alerts, 1st Quarter, January 2015

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