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.