N.J. Federal Judge Severs, Stays Bad Faith Claim in Sandy Case Pending Coverage Determination

NEWARK, N.J. — A New Jersey federal judge has severed and stayed bad faith and breach of fiduciary claims in a Superstorm Sandy coverage action, explaining that proof an insured is entitled to coverage as a matter of law is a necessary pre-requisite to pursuing discovery as to bad faith and fiduciary claims.

In an April 25 order, Judge Kevin McNulty of the U.S. District Court for the District of New Jersey reasoned that if there is no coverage, then denial of a claim cannot have been in bad faith so discovery and litigation on the bad faith issue will …