Arrow Indus. Carriers, Inc. v. Continental Ins. Co. of New Jersey

• Decision Date: 26 January 1989
• Citation: 556 A.2d 1310,232 N.J.Super. 324
• Parties: ARROW INDUSTRIAL CARRIERS, INC., Plaintiff, v. The CONTINENTAL INSURANCE COMPANY OF NEW JERSEY, The Dilks Agency, Inc., Gerald Watson, Patricia Wisniewski, John Doe and Jane Doe, Defendants.
• Court: New Jersey Superior Court

Page 324

232 N.J.Super. 324

556 A.2d 1310

ARROW INDUSTRIAL CARRIERS, INC., Plaintiff, v. The CONTINENTAL INSURANCE COMPANY OF NEW JERSEY, The Dilks Agency, Inc., Gerald Watson, Patricia Wisniewski John Doe and Jane Doe, Defendants.

Superior Court of New Jersey, Law Division Burlington County.

Decided Jan. 26, 1989.

William J. Kinnear, III for plaintiff (John A. Almeida, Medford, atty.).

James W. Johnson, for defendant The Continental Ins. Co. of New Jersey (Clark, Ladner, Fortenbaugh & Young, Haddonfield, attys.).

GOTTLIEB, J.S.C.

Plaintiff Arrow Industrial Carriers, Inc. ("Arrow") and defendant The Continental Insurance Company of New Jersey ("Continental") have each moved for partial summary judgment. A resolution of the basic issue presented has not been decided previously by a reported decision of the courts of this State. That issue is whether an inland marine policy which provides insurance coverage for cargo damages and which itemizes coverage resulting from a collision between the conveyance and any other vehicle or object, clearly excludes coverage for a collision between the cargo and a bridge, where the truck conveyance is not involved in a collision. Because of the overall ambiguity in the policy's language, the court concludes that coverage must be afforded.

Arrow filed a complaint against Continental, The Dilks Agency, Inc. ("Dilks"), Gerald Watson, Pat Wisniewski and John Doe and Jane Doe, the latter two being fictitious parties under R. 4:26-4. It is claimed that the four individual defendants are employees of Dilks. The complaint has four counts and seeks: in the first count, a determination that an insurance policy issued to Arrow by Continental provides liability coverage for a specific event; in the second count, a reformation of the policy in the event the insurance policy does not provide that coverage in the third count, a finding that Dilks was professionally negligent in providing insurance coverage and, moreover, that Dilks made certain false representations as to the extent of that coverage; and, in the fourth count, the staying of any potential litigation involving the underlying claim against Arrow.

The present motions relate solely to the first count of the complaint. There are no disputed material facts, R. 4:46-2, as to the issues in the first count, even though facts are in dispute concerning the other causes of action. Therefore, the court is able to rule affirmatively on the motions. The court begins by reciting those unchallenged facts.

The Facts.

Arrow was incorporated in December 1985, having Lee R. Lieber ("Lieber") and Richard O'Donnell as its principals. Its business is to haul vehicles, machinery and forklifts from place to place. Lieber selected Dilks to secure appropriate business insurance coverage. Dilks obtained a motor truck cargo policy with Colonial Penn Insurance Company ("Colonial Penn") for a one-year period beginning January 22, 1986. That policy afforded two alternative types of coverage for the transported items. One was an "all risks" coverage and would have insured Arrow against "[a]ll [r]isks of direct physical loss or damage from any external cause." The second type of coverage--"named perils including theft"--itemized eight events for which protection would be afforded, including, "[d]irect physical loss or damage caused by ... (5) [a]ccidental collision of carrying conveyance with any other vehicle or object...." Excluded from insurance protection was "[l]oss or damage caused directly or indirectly by the load or any portion thereof or tarpaulin covering thereon coming into contact with any other object unless the carrying vehicle also collides with such object." The policy actually issued by Colonial Penn provided "named perils including theft" alternate coverage.

At the expiration of the term of that insurance coverage, an inland marine policy was obtained by Dilks with Continental. The new policy's term commenced on January 22, 1987, and continued for one year. The replacement policy indicated, in relevant part:

SUBJECT TO ALL THE STIPULATIONS, LIMITATIONS, CONDITIONS AND EXCLUSIONS IN THE POLICY OF WHICH THIS FORM CONSTITUTES A PART AND SUBJECT ALSO TO THE PROVISIONS OF THIS FORM THIS POLICY COVERS: The liability of the Insured as hereinafter provided, with respect to all kinds of goods and merchandise, consisting principally of machinery, automobiles & forklifts (hereinafter referred to as "property"), while such property is in the custody and control of the Insured ... while in due course of transit....

THIS POLICY COVERS

Within the foregoing provisions and exceptions hereinafter provided:

The liability of the Insured, as a carrier for direct physical loss of or damage to the property caused by or resulting from:

(a) Fire, including self-ignition and internal explosion of the conveyance, and Lightning;

(b) Windstorm;

(c) Collision, i.e., accidental collision of the conveyance with any other vehicle or object;

(d) Overturn of the conveyance;

(e) Collapse of bridge, wharf, dock, platform or culvert;

(f) Stranding, sinking, burning or collision of any regular ferry, including General Average and Salvage Charges;

(g) Flood (meaning thereby the raising of any natural body of water).

An endorsement added theft coverage. However, unlike the Colonial Penn policy, the itemization of exclusions from coverage in the Continental policy did not specify damage to the load from contact with another object where the carrying vehicle did not collide as well with that object.

Lieber received a copy of each insurance policy from Dilks. However, he did not read the Colonial Penn insurance policy while it was in effect, nor did he read the Continental policy before the accident. Lieber never had any direct communications with Continental's employees before the accident and he did not rely upon any language in Continental's policy in formulating his understanding of the nature and extent of insurance coverage afforded by that policy.

When Continental provided the inland marine policy, it also had available full liability coverage which would have provided insurance for any liability of Arrow as a motor carrier. Additionally, Continental could have provided an endorsement to the policy actually issued which would have insured against damages resulting from a collision between a cargo load and another object, even if the cargo truck was not involved in that collision.

The application to Continental for issuance of the policy specified "named perils and theft" coverage, although Arrow disputes authorizing that particularization. ¹

On August 6, 1987, Lieber was driving a flatbed truck, which had been identified specifically as a covered conveyance in Continental's policy. Loaded onto the truck was a forklift owned by Public Service Electric & Gas Co. As the truck traveled northbound on Route I-295 in Carneys Point (Upper Penns Neck Township), Salem County, the forklift struck an overpass. The forklift was caused to fall off the truck and onto the roadway. As a result the forklift was damaged. However, the truck itself did not collide with any other vehicle or object.

After the accident, a claim was presented to Continental. By letter of November 4, 1987, it declined coverage since the damage to the forklift "did not arise out of a collision or overturn of a conveyance." Arrow then instituted this suit.

The Issues.

Arrow asserts that the provisions in Continental's policy are ambiguous, and that, in accordance with normal rules of construction of insurance policy language, the policy should be interpreted to afford coverage. Arrow also urges that its reasonable expectations of coverage require that the policy provide insurance protection. Finally, Arrow contends that if it prevails on the motion it is entitled to counsel fees under R. 4:42-9(a)(6).

To the contrary, Continental argues that there is no ambiguity in the policy language. Moreover, Continental claims that any expectation of coverage in Arrow's mind developed, not from the policy language or conduct or Continental's employees, but from communications between Lieber and the employees of Dilks, and Continental is not responsible for another's misunderstanding. Lastly, Continental asserts that Arrow is not entitled to counsel fees.

The court will now discuss its reasoning in deciding these issues as it has, to the extent required.

Any Ambiguity in the Policy Language.

As indicated earlier, Continental's policy was designated by it as an inland marine policy. It was created to cover Arrow's liability for damage to cargo, "[s]ubject to all of the stipulations, limitations, conditions and exclusions in the policy...." While the policy itemizes eight exclusions from coverage as well as eight conditions for coverage, it does not expressly indicate that coverage is not afforded for cargo damage resulting from a collision between the cargo and another object even though there is no collision between the conveying vehicle and another object.

Rather, Continental seeks to preclude coverage by specifying those events for which it is afforded and urging that this specification bars coverage for other events. In essence, Continental is attempting to itemize positive events affording coverage and imply from that a negative, that non-itemized events do not result in coverage, even though it particularized a list of coverage exclusions. That is illogical. It is as if Continental were to issue an insurance policy on the life of an insured (comparable, for this analysis, to insuring cargo), indicate that benefits under the policy are available where the death results from disease or natural causes (comparable to stating certain causes of damage to cargo), advise that self-inflicted causes of death are excluded (comparable to precluding other causes of cargo damage), and then deny coverage where the insured's death is attributable to an automobile accident (comparable to an unitemized but...