Judge Blasts Liberty Mutual in Declaring He Will Not Disqualify Because He’s an Insured

June 14, 2024 by

­­A federal judge in New Jersey, in a blistering opinion, has refused to disqualify himself from a case involving his insurer, Liberty Mutual, and accused the insurer of seeking his recusal and attacking his integrity because it did not like the substance or tenor of one of his rulings.

­Senior Judge Stanley R. Chesler of the U.S. District Court for New Jersey said Liberty Mutual offered no evidence to support its claim that the judge’s history with the company or a ruling he issued raised the perception of bias.

In a recent motion for disqualification, Liberty Mutual asserted that given the totality of the circumstances involving Chesler and the insurer, it was reasonable to conclude that the judge’s involvement in the case raised questions about bias and impartiality that the law is meant to prevent. The insurer further maintained that the judge’s failure to disclose his ties with Liberty at the outset heightens the perception of bias.

Chesley found that Liberty Mutual had information about his relationship with the insurer in its possession and could have acted on it at any time but only did so after he denied a summary judgment motion sought by the insurer. Chesley maintains that this matter raises “serious questions” about the conduct of a major national insurer and repeat litigant before the federal courts.

“Even a cursory reading of Liberty Mutual’s moving papers reveal that the motion and the assertions contained therein in fact constitute a carefully choreographed effort to attack the integrity and ethics of this Court both directly and by innuendo,” Chesler wrote.

Liberty Mutual declined comment when contacted by Insurance Journal.

Should Judge Recuse Himself From Case Involving His Own Insurer?

The judge criticized what he termed the “untenable proposition” that any judge who is a policyholder of an insurer must disclose that status and recuse from cases where the insurer is a party. Chesler wrote that that argument “would render hundreds, if not thousands, of judges incapable of presiding over large swaths of their dockets” and thus it cannot be the standard envisioned by the framers of the law.

In its motion for disqualification, Liberty Mutual took the position that the burden of disclosure of potential conflict rested with the judge and he should have disclosed his status as an insured and claimant at the outset of the case. But the judge cited a case noting that if a party’s attorney is aware of the grounds supporting recusal but fails to act until the judge issues an adverse ruling, the recusal motion is not timely.

The judge also said he agreed with Liberty Mutual that a court should disclose when it has knowledge in its possession which could arguably form the grounds for a recusal motion. But, he concluded, none of the reasons offered by Liberty Mutual in fact constitutes grounds for disqualification and, therefore, none of these facts required disclosure.

“Liberty Mutual’s actions suggest that it believes it is entirely appropriate for an insurance company to search its files for negative and prejudicial information about the presiding judge in response to any decision by that judge which it regards as having a ‘tenor’ that ‘seemed negative,'” Chesler claimed in rejecting Liberty Mutual’s motion.

Claims History

The insurer cited Chesler’s long tenure as a customer and, in particular, four claims filed while the case was before the court. Liberty Mutual also alleged it had pursued an investigation into jewelry claims filed by the judge and his wife.

The judge dismissed suggestions that his claims history is an issue. He criticized Liberty Mutual for not supplying factual evidence or documents about his claims. He reported he has had 14 claims in his 44 years as an insured of Liberty Mutual and there has never been a dispute. Regarding the four recent claims cited by Liberty Mutual, he said none coincided with his actual involvement in the case, all were settled without dispute, and several were brought by third parties.

He also took issue with Liberty Mutual’s claim that he was investigated. He said he and his wife were never informed about the insurer’s concerns over jewelry claims and thus he could not have been affected by that if it were true. During oral arguments, Liberty Mutual’s counsel acknowledged that the alleged investigations of Chesler’s jewelry claims never took place. The judge charged that Liberty Mutual’s brief “relied upon slyly suggesting” that he would be biased because of a further “investigation” of his claims activity, but “conveniently omitted—and did not acknowledge until the court pressed at oral argument—”that no such investigation ever occurred.”

When the claims facts are taken together, a “reasonable person” could not conclude that his “impartiality might reasonably be questioned,” the judge concluded.

(In a footnote, the judge suggested that the facts would indicate a positive history over 44 years with Liberty Mutual and made it more likely that the opposite party might raise an objection, not Liberty Mutual. “That they have not speaks volumes about what a reasonable person might conclude when presented with the facts asserted herein,” he added, without noting that his rulings have gone in that other party’s favor.)

Summary Judgment

The insurer further claimed that the judge committed errors and was highly critical and negative in tone towards the insurer in a summary judgment order, which the insurer said raised questions about whether he was being impartial.

The judge said that this was not the proper time for the insurer to attack the summary judgment opinion. if an appeal is made after the entry of final judgment, Liberty Mutual will be free to demonstrate the error to the Third Circuit appeals court, he noted.

Liberty Mutual had cited other cases involving Chesler and insurers where recusal was an issue but the judge noted that those were class actions, which would have meant he would have been part of the class seeking certification.

In closing his 25-page opinion, Chesler took aim at what he characterized as the insurer’s position that “every judge who has an insurance policy with an insurer defendant and presides over a case involving that insurer defendant is required to disclose that policy’s existence, the claims history, and other personal information relating to the judge’s insurance and potentially recuse himself or herself.”

He continued, “Moreover, given the genesis of this motion, Liberty Mutual’s actions suggest that it believes it is entirely appropriate for an insurance company to search its files for negative and prejudicial information about the presiding judge in response to any decision by that judge which it regards as having a ‘tenor’ that ‘seemed negative.'”

Underlying Case

The underlying coverage action stemmed from lawsuits filed by two employees of a construction firm against equipment rental firm United Rentals alleging that they sustained injuries when a rented boom lift malfunctioned. Liberty Mutual Fire Insurance Co. insured the construction firm. United sought a declaratory judgment that it was entitled to coverage as an additional insured on the Liberty Mutual policy.

In early 2022, United sought partial summary judgment on the duty to defend. Liberty Mutual sought partial summary judgment that it had no duty to defend. The U.S. District Court granted United’s motion for partial summary judgment finding that United qualified as an additional insured. The district court denied Liberty Mutual’s motion for partial summary judgment. In May 2022, Liberty Mutual filed a motion for reconsideration, which the district dourt denied in its entirety. Liberty Mutual appealed and in January 2024, the Third Circuit Court of Appeals dismissed Liberty Mutual’s appeal on jurisdictional grounds. It was only after that dismissal that Liberty Mutual said it discovered Chesler’s history with the company.