SteveK February 13th, 2013

This declaratory judgment action was brought against Travelers Property and Casualty Company of America (“Travelers”) seeking a declaration that Travelers provided coverage to a subcontractor that allegedly performed negligent work as part of an extensive home improvement project involving construction of an addition, including the excavation of a full basement, construction of footings, foundation, framing, exterior finish, roofing, windows, plumbing and electrical work.  When the contractor sued the homeowners for failure to make payment, the homeowners counter-sued, claiming that they had suffered damages due to defective workmanship.  The contractor in turn sued several of its subcontractors, including Builders of America, Inc. (“BOA”), seeking indemnification and contribution.
Travelers issued a commercial general liability insurance policy to BOA which covered the period during which the construction took place, but which was cancelled effective April 1, 2002, for non-payment.  In response to Travelers’ motion for summary judgment, the plaintiff homeowner submitted a certification in which he stated that, “after the house was completed[,] severe cracking, shifting, and other major deficiencies began to develop.”  The trial judge concluded that there was no evidence the alleged property damage occurred during the Travelers policy period and, therefore, that the policy did not provide coverage to BOA for plaintiffs’ claims.
On appeal, the court noted that there was no question that the policy at issue was an “occurrence” policy, providing coverage for “property damage” claims the insured becomes legally obligated to pay if the damage “is caused by an ‘occurrence’ that takes place . . . during the policy period.”  Citing to clear authority that “[w]hen parties dispute the identity of the operative ‘occurrence’ for purposes of coverage, the actual damage to the party asserting the claim, not the wrongful act that precipitated that damage, triggers the ‘occurrence.’”
Accordingly, the court concluded that “the actual, cognizable damage to plaintiffs’ property occurred after the renovations were completed and the ‘severe cracking, shifting and other major deficiencies began to develop,” which was well after the coverage at issue was cancelled, there was no covered property loss during the policy period and summary judgment was appropriate.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum, PC (www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in insurance coverage matters. For additional information about the matters in this bulletin or in the firm’s insurance practice, please contactSteven A. Kunzman, Esq. who heads our Insurance Coverage Group.

The information contained in this blog is intended solely for informational purposes; it is a advertising publication of DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum P.C.This publication is intended to alert recipients of developments in the law and is not intended to provide legal counsel, advice or opinion on any specific facts or circumstances. The contents are intended as general information only. You are urged to consult a member of this firm or your own attorney concerning your particular situation and any specific legal questions you might have.

Tags: Construction Defect, Insurance, New Jersey insurance law, Occurrence Policy, Real Estate

• Construction Defect , Insurance Law
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SteveK August 15th, 2011

Steve Kunzman, partner in the firm, will be a co-chair of a comprehensive conference:

Groundwater Contamination and Vapor Intrusion Cases

The seminar, which will be put on by Law Seminars International, will take place at the Sheraton Newark Airport Hotel on September 15 and 16.

For more information and to register go to: http://www.lawseminars.com/seminars/11GWATNJ.php

The speakers include noted attorneys, remediation consultants and and other noted experts in the field. The seminar is co-chaired by Ira Gottlieb of McCarter & English. Steven and Ira will also be speaking on insurance coverage issues relating to groundwater claims.

Tags: CERCLA, Contamination, Environmental Law, Ground water, Groundwater, insurance law new jersey, Natural Resource Damages, NJ insurance law, NJ Spill Act, NRD, Pollution, Toxic Torts, Water Resources

• CERCLA , Clean Water Act , Environmental Law , Insurance Law , Natural Resource Damages , NJ Spill Act , Real Estate , Superfund , Toxic Torts
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SteveK June 15th, 2011

On June 14, 2011 the New Jersey Supreme Court ruled that a claim for bad faith against an insurer for failure to settle a case within the limits of an insurance policy is to be decided by a jury.  Wood v. New Jersey Manufacturers Insurance Co. involved a claim by Karen Wood who was bitten by a dog when delivering mail in a condominium complex. New Jersey Manufacturers (NJM) insured the owner of the dog and defended the case under the policy. Prior to trial an arbitrator assessed the damages as $600,000, and apportioned the award 90% to the owner of the dog and 10% to the condominium association.  The arbitration award was rejected by the defendant’s insurer and the matter proceeded to trial. Prior to trial NJM offered to settle the case for $300,000; however, the offer was rejected. The plaintiff did agree to settle the case at or near the policy limits of $500,000. Prior to trial both defense counsel and NJM’s claims handler recommended payment of the policy limits, but NJM’s claims committee refused to increase the offer. In accordance with the Rova Farms decision, the plaintiff placed NJM on notice that the offer was in bad faith.  The matter went to trial and  the jury awared the plaintiff damages  in the amount of $2,422,000. The jury also assessed 51% of the liability to the dog owner. The trial court molded the verdict so that the dog owner was responsible for $1,408,320.33 of the judgment. NJM paid the $500,000 policy limits. The defendant assigned her claim for bad faith against NJM to the plaintiff so that plaintiff could pursue NJM for the judgment in excess of the policy limits. Plaintiff filed a motion for summary judgment which was granted. On appeal, the defendant, NJM, argued that summary judgment was improper for a variety of reasons, including that the matter should have been decided by a jury.  The Appellate Division remanded to the trial court for more specific findings of fact and for the trial court to determine if the matter should be decided by a jury. The N.J. Supreme Court granted certification on the sole issue of whether such claims should be decided by a jury. The Supreme Court decided that this was not an issue of whether or not there is coverage under the policy as is typically contained in a declaratory judgment action, but is a “garden variety” contract action based upon the covenant of good faith and fair dealing which is contained in all contracts.  The Court determined that the claim was legal in nature, not equitable, and was, therefore, to be decided by a jury. The Court was careful to note that not every Rova Farms-bad faith case must be tried to a jury, as the parties may elect to waive the jury either by not demanding it in the first instance, or where the parties agree that a bench trial would be more fitting.

Once a jury trial is demanded in a pleading in New Jersey, both parties must consent to waive the jury demand unless there is no right to a jury for the claims. It is interesting to note that only the plaintiff demanded a jury trial in the pleadings of this case, but that it was NJM that insisted on the jury trial. NJM’s position was joined by the amici curiae Insurance Council of New Jersey, and the Property Casualty Insurers Association of America.  Whether the decision to assert the jury right was a strategic maneuver to avoid an adverse decision and keep the matter open for further negotiation, or was truly an assertion of a substantive right, the decision reveals the importance of assessing whether a jury demand should be included in the initial complaint or answer as the demand may be a significant factor in the overall handling and final trial of a case.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in insurance coverage. For additional information about the matters in this bulletin or in the firm’s insurance practice, please contact Steven A. Kunzman, Esq. who heads our Insurance Coverage Department.

Tags: Insurance, insurance law new jersey, insurance law NJ, New Jersey insurance law, NJ insurance law

• Defense Litigation , Insurance Law
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SteveK April 29th, 2010

In the recent unreported decision, Proformance Insurance Co. v. Riggins, the New Jersey Appellate Division addressed a dispute between two insurers as to the responsibility to pay for the demolition of a home necessary for implementation of cost effective environmental remediation, holding that the cost of demolition was not excluded by the owned property exclusion.  In the case, Proformance insured the property owned by Don Kolbe from 2002 until 2004, and MetLife insured it from 2004 until 2006.  A leak was discovered from the underground eating oil tank in 2006.  It was undisputed that the tank had been leaking for four to eight years prior to the discovery.

Proformance acknowledge its obligation to provide coverage, and engaged two consultants to evaluate the options to remediate the property. Each consultant provided two options, one that required demolition of the house, the other allowed the house to remain with structural supports during the process of remediation.  The cost of the demolition option cost approximately $145,000 less than the support option. Proformance elected the more cost effective option.  MetLife agreed to contribute to the remediation, but not for the costs related to demolition, arguing that it constituted damage to owned property. The Court disagreed finding that the house was not damaged by the contamination and that the destruction to the house was not due to “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The Court held that the decision to destroy the house was “simply a function of the decision to employ the most cost-effective means of addressing covered claims, rather than the product of any ‘occurrence’ as defined in the MetLife policy.”  Accordingly, the Court concluded that the exclusion did not apply. The Court further stated that it saw no rational basis to extend coverage for the costs of the structural option but excluding coverage for the less expensive option of reimbursing the homeowner for the demolition of the residence.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental and insurance matters. For additional information about the matters in this bulletin or in the firm’s environmental  or insurance practice, please contact Steven A. Kunzman, Esq. who heads the Environmental and Insurance Coverage Practice Groups.

Tags: Environmental Law, NJ insurance law

• Environmental Law , Insurance Law
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SteveK January 19th, 2010

Steven Kunzman and Todd Ruback of the firm recently participated in a podcast with A.M Best regarding developments in privacy law and related insurance issues. To hear the podcast go to: http://www3.ambest.com/bestfeed/insurancelaw/Insurance_Law_Podcast_40.mp3

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in insurance coverage matters as well as technology and privacy matters. For additional information about the matters in this bulletin or in the firm’s insurance practice, please contact Steven A. Kunzman, Esq. who heads our Insurance Coverage Department; for additional information about the firm’s technology and privacy practice, please contact Todd. R. Ruback, Esq. who heads our Technology and Privacy Law Department

Tags: insurance law new jersey, Privacy Law, Technology Law

• Corporate Law , Insurance Law , Privacy Law , Technology Law
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SteveK October 19th, 2009

On October 7, 2009, in the case of American Home Assurance Company v. United States Magistrate Judge Falk ,in the District Court of New Jersey, ruled that a report of an accident prepared by an investigator was not protected by the work product doctrine even though attorneys for the insurer were also present. The issue arose in a subrogation claim asserted by American Home against the U.S. arising from a collision between an aircraft that American Home insured and a paving roller on the runway at the Teterboro Airport. American Home dispatched an investigator immediately after the accident. At the same time counsel for the insurer also went to the site of the accident. While at the scene, counsel requested the investigator to send them the report.  During the course of the subrogation claim, the U.S. sought disclosure of the report. After an in camera review, Magistrate Judge Falk ruled that the document was to be disclosed. Te Judge reasoned that the report was not prepared in anticipation of litigation, but in the course of the usual routine of the business of insurance claims.  Even though a subrogation claim was always a possibility, the Court determined that the investigation was the ordinary course of business and, therefore, did not create a basis to protect the document from disclosure. Further, since the investigator was not hired by counsel, but by the insurer in accordance with the usual process, the presence of the attorney, or the request that the report be sent to the attorney, did not alter the character of the report. Finally, the Court noted that the report could not be considered to be in anticipation of litigation where the report itself states that the subrogation claim was “to be determined.” The Court stated that work-product protection is not ordinarily afforded to a document prepared prior to the decision regarding whether a subrogation claim will exist. This further demonstrated to the Court that the report was done in the ordinary course of business. This decision provides some guidance in what can be done to attempt to protect such reports from disclosure, or the need of the investigator to consider the content of report since it is subject o disclosure in discovery.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( http://www.dbnjlawblog.com) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of insurance companies in coverage matters. For additional information about the matters in this bulletin or in the firm’s Insurance Coverage Practice, please contact Steven A. Kunzman, Esq. 

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SteveK September 14th, 2009

The New Jersey Appellate Division, in Crum & Forster v. Mecca & Sons Trucking, (unreported), affirmed the denial of coverage for a fire loss based, primarily, upon the vacancy exclusion contained in the policy. The Court reviewed the evidence as the use and operations on the premises and considered those facts in light of the policy terms which a building is stated to be “vacant when it does not contain enough business personal property to conduct customary operations.” The building was found to have, at best, some documents of Mecca and purportedly subleased to a landscaper to store some equipment.  In addition, the customary use of the building was precluded due to the current zoning.  The Court held that the storage of trailers by Mecca, a lessee, was an unauthorized or unlawful use of the premises and could not be considered a “customary operation,” therefore the property must be considered to have been vacant.

The Court also addressed the exclusion for loss due to vandalism where the property is vacant for more than 90 days. The court considered vandalism as being undefined as a question of fact. The Court therefore considered the experts for the parties as to the cause of the fire. The insured’s expert considered the cause to be “undetermined” because the state of the building did not permit a determination. The insurer’s expert did, however, conduct building inspections both inside and outside and interviewed witnesses, which supported the opinion that the fire was set, a result of vandalism. Since the report of the insured’s expert did not advance a determination based upon facts, it did not create a genuine issue of material fact precluding summary judgment in favor of the insurer.

The Court addressed whether there was any value to the loss, since the building could not be used for any discernable purpose, thus the building was a liability (the cost of removal) and the value was solely based on vacant land. The insured focused on the policy as an Agreed Value Policy. The Court concluded, however, that the language of the policy made agreed value an upper limit rather than a liquidated damage. Since this was no longer a needed determination, the Court did not address the issue further.

Although the Court was able to dispose of the case based upon the vacancy and vandalism issues, it also reviewed a number of other issues. One issue was whether the failure to have a sprinkler system, contrary to representations in the policy application, constituted an increased of hazard. Since there was no such system in place, there was no change in the use.  The Court considered this to be a different from Dynasty v. Princeton Ins. Co. 165 N.J. 9 (2000) in which the sprinkler system existed, but had been disabled;  justifying a determination of an “increase-in-hazard.” The Court here noted that the issue was not one of increased hazard but a claim for rescission due to a misrepresentation in the policy. On this issue, the Court questioned whether the misrepresentation was made by the insured or the broker. The Court stated that there was a question of fact as to whether the statements could be attributed to the insured. Since, however, there were other grounds to find no coverage there was no need to remand the case for a further determination of facts. Of course this is an important issue to be kept in mind in a case dealing with alleged misrepresentations in the policy; who made the statements and are the statements of the broker attributable to the entity actually applying for the coverage.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of insurance companies in coverage matters. For additional information about the matters in this bulletin or in the firm’s Insurance Coverage Practice, please contact Steven A. Kunzman, Esq. 

Tags: insurance law new jersey

• Insurance Law
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SteveK September 10th, 2009

      In a recent unreported decision, Rodriguez v. New Jersey Underwriting Ass’n, the New Jersey Appellate Division affirmed a decision reforming a homeowner’s insurance policy on equitable grounds. In the case, Diomedes Gonzales deeded his home to his former non-marital partner, Rosa Rodriguez. Prior to the transfer, Gonzalez had purchased insurance from NJUIA.  Although neither the mortgage holder nor the insurer were informed of the transfer, all payments were made on both from February 2000 until the time of an accidental fire which destroyed the house on September 2004.  NJUIA denied coverage on the basis that Gonzalez did not have an insurable interest in the home. Plaintiffs, Gonzalez and Rodriguez, instituted a declaratory judgment action seeking reformation of the policy and payment of the loss. The trial judge held that reformation was appropriate on equitable grounds, finding that NJUIA’s collection of premiums coupled with its failure to refund the premiums after declining the claim made it an appropriate case for policy reformation. The Court also justified the decision by concluding that NJUIA’s actions constituted unjust enrichment, and that there was no “gamesmanship” or fraud by the plaintiffs.

       After the trial and award of coverage, plaintiffs filed a motion to be able to assert a claim against NJUIA for breach of the covenant of good faith and fair dealing. In affirming the denial of the motion, the Court restated the reasoning of  Picket v. Lloyds, 131 N.J. 457, 67 (1993) that a finding of bad faith requires there to be no “fairly debatable” reason for denial  of a claim or where there is an unreasonable delay in processing a claim. Since the decision of NJUIA to deny the claim was “fairly debatable” there was no basis for a claim of bad faith to be sustained; therefore the denial of the motion was affirmed.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of insurance companies in coverage matters. For additional information about the matters in this bulletin or in the firm’s Insurance Coverage Practice, please contact Steven A. Kunzman, Esq. 

Tags: insurance law new jersey, insurance law NJ, New Jersey insurance law, NJ insurance law

• Insurance Law
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admin August 19th, 2009

In DEB Associates v. Greater New York Mutual Insurance Company, (NJ App. Div.- approved for publication) the court held there is insurance coverage for the costs to update and correct construction code deficiencies on floors of a building arising from wind damage to another floor. The seventh floor of the building had been damaged from a windstorm. When the code officials inspected the damaged floor, they discovered that the walls had been secured to the concrete flooring with mortar, but not steel angle irons, as is presently required under the building code.  There was no evidence that the failure to use angle irons violated the code when the building was constructed.

The trial court found that the evidence was undisputed that the “repairs to the other floors would not have been required if the seventh floor wall had not collapsed and also that the angle irons were required [to be installed on all floors] as a consequence of the December 2003 partial collapse.” Although the parties agreed that the repair of the seventh floor required GNY to pay to reconstruct that floor in accordance with the current code, they disagreed as to coverage for repairs to the separate, undamaged portions of the building.

After reviewing case law from other jurisdictions, and restating that coverage sections of an insurance policy are to be liberally construed in favor of coverage; that exclusions are to be narrowly construed, and that ambiguities are to be construed against the insurer, the court concluded that since there was a causal connection between the collapse of the seventh floor wall and the requirement to bring the other floors in compliance with the existing building code, there is coverage for the corrective work. The court specifically stated that the decision was limited to the facts of the case, and that it may be different if the code problems were unrelated to the collapse of the wall. Since, however, the work to install angle irons to the remainder of the building was directly related to the cause of the initial collapse, involving the same structural part of the building and the same building code provisions. The court also stated that while the policy specifically excluded pre-existing code violations, the policy did not specifically exclude situations where a covered structure is grandfathered under the code but lost that status due to the occurrence. The court concluded that if the insurer had intended to exclude coverage in these situations, it could have written the policy to specifically exclude the coverage.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of insurance companies in coverage matters. For additional information about the matters in this bulletin or in the firm’s Insurance Coverage Practice, please contact Steven A. Kunzman, Esq. 

Tags: insurance law new jersey, insurance law NJ, New Jersey insurance law, NJ insurance law

• Insurance Law
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admin August 19th, 2009

On June 5, 2009, the New Jersey Appellate Court ruled that an insurer is obligated to pay counsel fees incurred by the insured for a declaratory judgment action that the insurer had filed in Federal Court in Illinois, but was deferred in favor of a New Jersey action in which the insured was ultimately successful.

The case of Myron v. Atlantic Mutual (approved for publication) involved a New Jersey based company’s claim for insurance coverage for claims under the Telephone Consumer Protection Act (TCPA). Myron, a New Jersey based company, had been sued in numerous jurisdictions for allegedly sending “junk faxes” in violation of the TCPA, including one filed in Illinois as a class action.  Atlantic Mutual initially agreed to defend under a reservation of rights. After more than a year, Atlantic filed a declaratory judgment action in the United States District Court for the Northern District of Illinois seeking a determination that the Atlantic Mutual policy did not cover the claims. The declaratory action was filed shortly after the Seventh Circuit Court of Appeals (which includes Illinois) issued a decision in another action denying coverage for TCPA claims. The Court, however, dismissed Atlantic Mutual’s action due to lack of jurisdiction since the amount in controversy was less than the required $75,000.

Finding additional invoices, Atlantic Mutual re-filed.  Five days later, Myron filed a declaratory judgment action in Bergen County, New Jersey. Although the Bergen County action was dismissed due to the earlier filed Illinois federal court action, the Illinois federal court granted Myron’s motion for abstention, reasoning that New Jersey had the most substantial interest in the insurance coverage dispute. Myron then re-filed in New Jersey and was ultimately successful on the merits of Atlantic Mutual’s duty to defend, leaving the indemnity determination pending the outcome of the underlying TCPA litigation.  The court also granted Myron’s claims for counsel fees in the New Jersey declaratory action in accordance with New Jersey Court Rule 4:42-9(a)(6), which permits an award of counsel fees to a successful claimant “[i]n and action upon a liability or indemnity policy of insurance.” The trial court, however, denied Myron’s application for reimbursement of approximately $160,000 in fess incurred in the Illinois declaratory action reasoning, in part, that the rule should not apply “extraterritorially.”

On appeal, the Appellate Division reversed, holding that granting an award of the fees furthers the intent and purpose of the rule, “to discourage groundless disclaimers and to provide more equitably to an insured the benefits of the insurance contract without the necessity of obtaining a judicial determination that the insured, in fact, is entitled to such protection.” The Court also noted that this would prevent an insurer from using forum shopping to wear down an insured financially. The Court found that the two federal complaints were “battles in the war that Myron ultimately won,” and therefore can be characterized as part of the same action in the context of the applicability of Rule 4:42-9(a)(6).

This is a significant decision in that it imposes what is, in essence, a rule of procedure to a largely substantive issue. As the Court noted, it has applied the rule in suits in New Jersey where the substantive law of other jurisdictions has been applied.  In this case, however, the Court largely disregarded the distinction between the substantive laws as contained in legislation or common law, and elevated the rule based upon it’s espoused purpose, which is to provide an insured “the full benefits of the insurance contract” without the transactional costs necessitated by engaging in declaratory litigation.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, PC ( www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of insurance companies in coverage matters. For additional information about the matters in this bulletin or in the firm’s Insurance Coverage Practice, please contact Steven A. Kunzman, Esq. 

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