SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3150-14T3

ESMAY PARCHMENT,

Plaintiff-Appellant,

v.

CITY OF EAST ORANGE, 

Defendant-Respondent,

and

INSERVCO INSURANCE SERVICES, 

INC. and PENN NATIONAL 

INSURANCE, 

Defendants.

___________________________________

Argued October 25, 2016 – Decided 

Before Judges Ostrer and Vernoia.

On appeal from the Superior Court of New 

Jersey, Law Division, Essex County, Docket No. 

L-182-12.

Michael J. Fioretti argued the cause for 

appellant.

Littie E. Rau argued the cause for respondent 

(Ruderman, Horn & Esmerado, P.C., attorneys; 

Ms. Rau, of counsel and on the brief).

PER CURIAM

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." 

Although it is posted on the internet, this opinion is binding only on the 

parties in the case and its use in other cases is limited. R.1:36-3.

July 17, 2017
2 A-3150-14T3

The primary issue in this appeal is whether principles of 

estoppel require a municipality to indemnify two of its police 

officers for judgments against them for violating a citizen's 

civil rights. The municipality abided by its obligations under 

its collective negotiations agreement and N.J.S.A. 40A:4-155 to 

provide a means of defense for the officers, but did not expressly 

disclaim liability for indemnification. We conclude no duty to 

indemnify arises. We therefore affirm the trial court's January 

28, 2015 order granting summary judgment to defendant City of East 

Orange, and dismissing the declaratory judgment action of 

plaintiff Esmay Parchment, who obtained a judgment against the 

City's officers and sought indemnification of the officers from 

the City. 

I. 

The facts are largely undisputed. Two East Orange police 

officers used excessive force when they arrested plaintiff in her 

home. She filed a complaint against the two arresting officers, 

William Flood and Kim Johnson, as well as the City, asserting 

violations of her constitutional rights under 42 U.S.C.A. §§ 1983 

and 1985.1 

 

1 Plaintiff also named two other officers, who were later dismissed 

from the lawsuit. 
3 A-3150-14T3

Pursuant to its collective negotiations agreement

(Agreement)

2 with the East Orange Fraternal Order of Police (FOP), 

the City selected separate counsel to represent and defend each 

officer in the civil rights litigation. The relevant language in 

the Agreement that obligated the City to provide representation 

for the officers stated:

Whenever an Employee is a defendant in any 

action or legal proceeding arising out of and 

directly related to the lawful exercise of 

police powers in furtherance of his/her 

official duties, the City, pursuant to 

N.J.S.A. 40A:14-155, shall provide such 

officer with the necessary means for the 

defense of such action or proceeding . . . . 

The City did not participate in a municipal joint insurance 

fund, nor did it have applicable commercial insurance (although 

it had excess coverage that was not implicated). The City paid 

for the officers' representation out of its coffers and hired 

separate counsel for itself. However, it did not expressly advise 

the officers that it would disclaim liability for any judgment 

obtained against them.

Before trial, the City obtained a dismissal with prejudice, 

based on Monell v. Department of Social Services, 436 U.S. 658, 

 

2 The City entered separate agreements with the FOP for the periods

of July 1, 1999 through June 30, 2006 and July 1, 2006 through 

June 30, 2010; however, the provision relating to legal 

representation was substantively unchanged. 
4 A-3150-14T3

98 S. Ct. 2018, 56 L. Ed. 2d 611 (1978). About a year later, a 

jury returned a verdict in plaintiff's favor, finding that Flood 

and Johnson "falsely arrest[ed] and/or imprison[ed]" her and used 

excessive force. The jury awarded plaintiff $300,000 in 

compensatory damages.3 The court also assessed attorneys' fees 

and costs in the amount of $27,190. 

After obtaining the judgment, plaintiff served the City with 

a demand for payment. The City refused, stating it was not legally 

responsible for the officers' actions or the judgment against 

them. The present litigation followed. Plaintiff sought a 

declaratory judgment that the City was obligated to indemnify 

Flood and Johnson (Count Two).4 She also sought relief, as a 

third-party beneficiary, based on the City's alleged breach of the 

Agreement (Count Three). Finally, she alleged the City violated 

its duty of good faith (Count Four). 

 

3 Although plaintiff had alleged in her complaint that the officers 

acted willfully, "outside the scope of [their] jurisdiction and 

without authorization of law," the jury was not asked to render 

an express verdict on this issue.

4 In Count One, plaintiff sought declaratory relief against 

Inservco Insurance Services, Inc. and Penn National Insurance, 

which plaintiff alleged provided excess liability coverage for 

losses over $300,000. However, Inservco was a third-party 

administrator, not an insurer; and the City had no pertinent 

insurance coverage for plaintiff's claim. Count One was dismissed 

and is not the subject of this appeal.
5 A-3150-14T3

Thereafter, Flood assigned to plaintiff any claim he had to

indemnification from the City; in return, plaintiff promised not 

to take any further action to collect her judgment against him. 

Flood certified that the City had declined to indemnify him for 

the adverse judgment, "claiming that the acts were outside the 

scope of [his] employment and/or malicious, criminal or amounted 

to willful misconduct." Flood stated the City assigned him counsel 

in the case, but "never indicated that they were defending [him] 

. . . with a reservation of their rights to deny indemnification 

at a later date." Plaintiff did not obtain a similar assignment 

of rights from Johnson. 

After a period of discovery, the City moved for summary 

judgment on all counts. Plaintiff cross-moved for summary judgment 

on Count Two. The parties did not dispute the facts we have set 

forth above. The City did dispute plaintiff's allegation that it 

offered $25,000 on the eve of trial to settle the case against the

officers. The City also disputed plaintiff's allegation that the 

City made "[l]itigation decisions, such as settlement and terms" 

related to the officers' defense.

In a written opinion, Judge James S. Rothschild, Jr. granted 

the City's motion and denied plaintiff's cross-motion. The court 

rejected plaintiff's argument, based on Griggs v. Bertram, 88 N.J.

347 (1982), that the City was estopped from disclaiming liability 
6 A-3150-14T3

to indemnify the officers after it agreed to defend them. The 

judge held that Griggs did not apply to the City, which was a 

public entity, not an insurer. The City had not agreed to insure 

its employees, nor had it obtained insurance from an outside 

insurer or participated in a joint insurance fund. The court 

noted there was no proof the officers' attorneys disserved the 

officers' interests and favored the City.

Citing N.J.S.A. 40A:10-1, Judge Rothschild explained that the 

City was permitted, but not required to carry insurance for its 

employees; consequently, the City was not obligated to indemnify 

the officers. The court noted that the Agreement required the 

City to provide a defense, but was silent on a duty to indemnify 

or pay the costs of an adverse judgment. Likewise, N.J.S.A. 

40A:14-155 obligated the City to pay defense costs, but imposed 

no duty to indemnify. The court noted this limitation was 

recognized in City Council of Elizabeth v. Fumero, 143 N.J. Super.

275, 284 (Law Div. 1976) and Hurley v. Atlantic City Police 

Department, 944 F. Supp. 371, 375 (D.N.J. 1996). The court thus 

dismissed plaintiff's declaratory judgment and breach of contract 

claims.

The court also found no basis to hold the City to the same 

duty of good faith standard imposed on insurers. The court

highlighted that most of the alleged acts of bad faith consisted 
7 A-3150-14T3

of the refusal to indemnify — which the court found the City was 

not obligated to do — and the alleged breach of the Agreement —

which breach the court found did not exist. Therefore, the court 

concluded the City did not act in bad faith. This appeal followed.

II. 

We review the trial court's grant of summary judgment de 

novo, applying the same standard as the trial court. Henry v. 

N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010). We "consider 

whether the competent evidential materials presented, when viewed 

in the light most favorable to the non-moving party, are sufficient 

to permit a rational factfinder to resolve the alleged disputed 

issue in favor of the non-moving party." Brill v. Guardian Life 

Ins. Co. of Am., 142 N.J. 520, 540 (1995). 

On appeal, plaintiff has jettisoned her breach of contract 

claim. That is not surprising. As Judge Rothschild cogently 

reviewed, the Agreement plainly imposes only a duty to provide a 

defense. The same is true of N.J.S.A. 40A:14-155.5 

 

5 Likewise, we note that the Tort Claims Act imposes no duty to 

indemnify; rather, it grants a municipality the option to indemnify 

its employees. See N.J.S.A. 59:10-4 ("Local public entities are 

hereby empowered to indemnify local public employees consistent 

with the provisions of this act."). The Act also imposes special 

conditions upon indemnification for punitive or exemplary awards. 

See id. (stating that a municipality may do so only if the 

governing body finds "the acts committed by the employee upon 

which the damages are based did not constitute actual fraud, actual 

malice, willful misconduct or an intentional wrong.").
8 A-3150-14T3

Instead, plaintiff argues, as she did before the trial court, 

that the City was equitably estopped from denying responsibility 

for the judgment against the officers. Plaintiff also contends

the City breached a duty to act in good faith, which compelled it 

to indemnify the officers. We reject both arguments.

A.

At the outset, we pause to address the difference between 

self-insurance and no insurance — inasmuch as plaintiff refers to 

the City as a self-insured entity and contends that, as such, it 

was obligated to indemnify the officers. As has been observed, 

the term "self-insurance" is ambiguous. 1A Couch on Insurance 3d 

§ 10:1, at 10-3 (2010). In some respects, "so-called selfinsurance is not insurance at all. It is the antithesis of 

insurance." Am. Nurses Ass'n v. Passaic Gen. Hosp., 192 N.J. 

Super. 486, 491 (App. Div.), aff'd in part and rev'd in part, 98 

N.J. 83 (1984).

The essence of an insurance contract is the 

shifting of the risk of loss from the insured 

to the insurer. The essence of selfinsurance, a term of colloquial currency 

rather than of precise legal meaning, is the 

retention of the risk of loss by the one upon 

whom it is directly imposed by law or 

contract.

[Ibid.] 
9 A-3150-14T3

However, under some circumstances, "self-insurance" is more 

than "no insurance."

In a sense, all risks not otherwise insured 

are "self-insured." However, many formal 

procedures exist whereby an entity can become 

recognized as a self-insurer. This is most 

commonly accomplished by filing a bond or 

furnishing another form of proof of the 

ability to pay amounts for which the selfinsurer may become liable. To meet the 

conceptual definition of self-insurance, an 

entity would have to engage in the same sorts 

of underwriting procedures that insurance 

companies employ. These underwriting 

procedures include: (1) estimating likely 

losses during the period; (2) setting up a 

mechanism to create sufficient reserves to 

meet those losses as they occur; and (3) 

arranging for commercial insurance for losses 

that are beyond a preset amount.

[Couch, supra, § 10:1, at 10-3 to -4.]

Under various legislative schemes, New Jersey has formally 

recognized qualified entities as self-insurers. For example, an 

owner or lessor of a fleet of twenty-five or more vehicles may 

comply with the compulsory automobile insurance law by obtaining 

a certificate of self-insurance, provided that the Commissioner 

of Insurance is satisfied with the owner's or lessor's financial 

standing. See N.J.S.A. 39:6-52. Under that particular scheme, 

"a certificate of self-insurance is the functional equivalent of 

a policy of insurance." Ryder/P.I.E. Nationwide, Inc. v. Harbor 

Bay Corp., 119 N.J. 402, 411 (1990). Notably, public entities are 
10 A-3150-14T3

not required to obtain insurance or self-insure, but may "go bare." 

N.J. Mfrs. Ins. Co. v. Hardy, 178 N.J. 327, 336 (2004); Ross v. 

Transp. of N.J., 114 N.J. 134, 139 (1989). 

Employers may also self-insure mandatory workers'

compensation liability, see N.J.S.A. 34:15-77, by complying with 

its "stringent self-insurance requirements." Romanny v. Stanley 

Baldino Constr. Co., 142 N.J. 576, 580 (1995); see also In re 

Pathmark Stores, Inc., 367 N.J. Super. 50, 54-55 (App. Div. 2004). 

Furthermore, municipalities may join together to establish joint 

insurance funds. N.J.S.A. 40A:10-36. Although the fund is not 

an insurance company or an insurer, N.J.S.A. 40A:10-48, its 

"activities are subject to like regulation by the Commissioner of 

Insurance, and are designed to spread the self-insurance risks of 

municipal governments." Shapiro v. Middlesex Cty. Mun. Joint Ins. 

Fund, 307 N.J. Super. 453, 458 (App. Div.), certif. denied, 154 

N.J. 607 (1998). 

Here, the City is not a formal self-insurer in the foregoing 

sense. It has not assumed the responsibility, or demonstrated to 

regulators the capacity, to pay claims as do self-insurers under 

the compulsory automobile insurance and workers' compensation 

laws. The City has not agreed to indemnify its employees. 

Instead, it has decided to "go bare" — obtaining no commercial 
11 A-3150-14T3

insurance coverage — for its own potential liability, at least for

amounts below which excess coverage is triggered. 

We recognize an entity's exposure to losses below the point 

at which its insurer becomes liable under an excess policy is 

often denominated as a "self-insured retention." However, absent 

some other policy to cover those losses, it may be more accurate 

to say the entity is uninsured. In American Nurses Association 

v. Passaic General Hospital, 98 N.J. 83, 88-90 (1984), a hospital 

had a "self-insured sum" of $100,000, before its liability 

insurance, which covered its nurses, would be implicated. A nurse 

was separately covered by her own policy, which made "other 

insurance" primary. Id. at 86-87. Her insurer contended that the 

hospital's "self-insured sum" qualified as "other insurance." Id.

at 88-89. The Court disagreed. Noting that the "tendency has 

been not to regard self-insurance as 'insurance,'" the Court 

concluded that nothing in the hospital's policy required it to pay 

the first $100,000 of a judgment against the nurse, nor was the 

hospital otherwise obligated to pay the first $100,000. Id. at 

89. Furthermore, the hospital's decision to investigate the claim, 

which arose out of its insurance package, did not compel it to pay 

the first $100,000. Id. at 90.

Against this backdrop, we turn to plaintiff's principal 

argument: that like an insurer, the City as a "self-insured entity" 
12 A-3150-14T3

should be estopped from disclaiming liability for indemnifying the 

officers, since it provided the officers a defense without 

expressly reserving its right to disclaim liability. Plaintiff

relies heavily on Griggs, supra. Her reliance is misplaced.

In Griggs, supra, an insured teenager injured another teen

in a fight. 88 N.J. at 353. After the insured promptly notified 

the insurer, it immediately investigated by interviewing the 

insured, who admitted he intentionally hit the other teenager. 

Ibid. Although the policy excluded intentional torts, the insurer 

did not disclaim liability nor investigate further. Id. at 353-

54. Seventeen months later, the injured teen sued the insured. 

Id. at 353. Upon receiving the complaint, the insurer disclaimed 

coverage, relying on the intentional tort exclusion. Id. at 354. 

The insured subsequently settled the case and sought 

indemnification from the insurer. Ibid.

The Court held the insurer was estopped from denying coverage, 

noting that it had previously found that an insurer's actual 

control of an investigation or defense triggers an insured's 

justifiable reliance that the insurer will be responsible for any 

judgment. Id. at 356 (citing Merchs. Indem. Corp. v. Eggleston, 

37 N.J. 114, 127 (1962)). "The insured's justifiable reliance 

arises from the insurer's contractual right to control the defense 

under the policy." Ibid.
13 A-3150-14T3

Notably, in Griggs, the insurer had "neither assumed the 

actual control of a case nor undertaken the preparation of any 

defense on behalf of the insured . . . ." Id. at 357. However, 

the policy authorized the insurer to control an investigation and 

defense. Id. at 359-60. It also required the insured to cooperate 

with the insurer in any lawsuit. Id. at 359. The insured was to 

"refrain from 'voluntarily . . . assum[ing] any obligation,'" and 

to "avoid independent action which will contravene any of the 

essential terms of the policy" or otherwise "interfere with the 

insurer's paramount right to control the case . . . ." Id. at 

359-60. 

In view of the insurer's authority and the insured's duty not 

to "act for itself under the policy," the insured justifiably 

relied upon the insurer's actions to expect coverage. Id. at 362. 

Absent a clear disclaimer or other conduct that clearly repudiated

coverage, "the insured [was] justified in believing the insurer 

[was] vigorously exercising these rights in a manner which [would]

fully protect the insured's interest under the policy." Ibid. 

Furthermore, prejudice arising from the reliance is presumed, 

since the "course cannot be rerun." Ibid. (quoting Eggleston, 

supra, 37 N.J. at 129 (internal quotation marks omitted)).

For several reasons, Griggs provides no grounds to estop the 

City from denying indemnification. First, an insured must 
14 A-3150-14T3

reasonably believe there is insurance at all, in order to 

justifiably rely on an insurer's actions and to expect coverage 

in a particular circumstance. However, the City is not an insurer 

or even a formal self-insurer, as described above. Unlike either, 

the City undertook no obligation to indemnify its officers for 

judgments against them. In fact, the officers' labor 

representatives did not secure an agreement to indemnify. 

Therefore, it would be unjustified for the officers to expect a 

duty to indemnify in their particular circumstances, when there 

was no reason to expect such a duty under any circumstance. 

Second, like the hospital in American Nurses Association, 

supra, the fact that the City has some form of excess coverage 

does not make it an insurer of the amount within the "self-insured 

retention." Moreover, just as the hospital was not obligated to 

indemnify the nurse in American Nurses Association, supra, the 

City was not obliged to indemnify the officers here. 

Finally, although the actual or potential control of the 

investigation or defense may arguably justify an insured's 

reliance and expectation of coverage, none was present here. The 

City provided the officers a means of a defense in accord with its 

contractual and statutory obligations. We reject plaintiff's 

unsupported allegation that the City controlled litigation 

decisions. See Ridge at Back Brook, LLC v. Klenert, 437 N.J. 
15 A-3150-14T3

Super. 90, 97-98 (App. Div. 2014) ("Bald assertions are not capable 

of either supporting or defeating summary judgment."). There is 

no evidence suggesting that the City controlled the defense or 

precluded the officers from presenting any defense that they, with 

the advice of their independent attorneys, wished to pursue. Nor 

were the officers obligated to defer to any "paramount" authority 

of the City to control the investigation and defense of the case 

against them. In short, the City took no actions that "preempt[ed]

its [officers] from defending" themselves, nor did the City leave 

them "defenseless or seriously hampered in [their] ability to 

protect [themselves]," so as to give rise to estoppel. Griggs, 

supra, 88 N.J. at 356.

B.

We next turn to plaintiff's contention that the City violated 

its duty of good faith, which required it to indemnify its 

officers. We are unpersuaded. "[E]very insurance contract 

contains an implied covenant of good faith and fair dealing." 

Price v. N.J. Mfrs. Ins. Co., 182 N.J. 519, 526 (2005). An insurer 

owes a duty of good faith in processing an insured's claim, and 

an insured has a right of action for a bad faith failure to pay a 

claim where no debatable reason for denying payment exists. 

Pickett v. Lloyd's, 131 N.J. 457, 481 (1993). The standard also 

applies to "inattention to payment of a valid, uncontested claim." 
16 A-3150-14T3

Id. at 473. However, "[i]f the insured is unable to establish a 

right to the coverage claimed, the bad faith claim must be 

dismissed." Wacker-Ciocco v. Gov't Emps. Ins. Co., 439 N.J. Super.

603, 612 (App. Div. 2015). As discussed above, the City did not 

insure the officers against the judgment plaintiff obtained 

against them. Thus, it did not breach an insurer's duty of good 

faith.

6

Nor did plaintiff establish that the City breached its implied

duty of good faith and fair dealing found in its Agreement with 

the officers and FOP. "Every party to a contract . . . is bound 

by a duty of good faith and fair dealing in both the performance 

and enforcement of the contract." Brunswick Hills Racquet Club, 

Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 224 (2005). 

Pursuant to that duty, a party must "refrain from doing anything 

which will have the effect of destroying or injuring the right of 

the other party to receive the benefits of the contract." Id. at 

225 (internal quotation marks and citation omitted). 

 

6 As we conclude the City was not a formal self-insurer, we need 

not address the extent to which one is bound by the same duty of 

good faith imposed on an insurer. See 14 Couch on Insurance 3d § 

198.19, at 198-42 to -43 (2007) (noting a split among jurisdictions 

regarding whether self-insurers are held to the same standards of 

good faith and fair dealing toward insureds and third parties as 

traditional insurers).
17 A-3150-14T3

A breach may occur if a defendant "acts with ill motives and 

without any legitimate purpose" to destroy a plaintiff's 

"reasonable expectations," or if a plaintiff "relies to its 

detriment on a defendant's intentional misleading assertions." 

Id. at 226. While the covenant "cannot override an express term 

in a contract, a party's performance under a contract may breach 

that implied covenant even though that performance does not violate 

a pertinent express term." Wilson v. Amerada Hess Corp., 168 N.J.

236, 244 (2001). 

Applying these principles, plaintiff has failed to establish 

a breach of the covenant implied in the Agreement. Plaintiff has 

not established that indemnification was necessary to fulfill the 

parties' expectations. Nor is there any showing that the City 

acted with ill motive or intentionally misled the officers. The 

City did not deprive the officers of the fruits of the Agreement, 

because no right to indemnification was provided, expressly or 

impliedly. 

To the extent not addressed, plaintiff's remaining arguments 

lack sufficient merit to warrant extended discussion in a written 

opinion. R. 2:11-3(e)(1)(E).

Affirmed.