Bldg. Materials Corp. of America v. Allstate Ins. Co.
| Decision Date | 13 March 2012 |
| Citation | 424 N.J.Super. 448,38 A.3d 644 |
| Court | New Jersey Superior Court |
| Parties | BUILDING MATERIALS CORPORATION OF AMERICA d/b/a GAF Materials Corporation, Plaintiff–Appellant/Cross–Respondent, v. ALLSTATE INSURANCE COMPANY (as successor to Northbrook Excess & Surplus Insurance Company); American International Surplus Lines Insurance Company; Atlanta International Insurance Company; Birmingham Fire Insurance Company; Employers Casualty Company a/k/a Acceptance Casualty Company; Employers National Insurance Company; Gulf Insurance Company; Hartford Accident & Indemnity Company and Hartford Fire Insurance Company; Industrial Insurance Company of Hawaii, Limited a/k/a Westchester Surplus Lines Insurance Company; Certain Underwriters at Lloyd's London and Certain London Market Companies; Michigan Mutual Insurance Company a/k/a Amerisure Mutual Insurance Company; Mission National Insurance Company a/k/a Danielson National Insurance Company; New England Insurance Company; New England Reinsurance Corporation; Old Republic Insurance Company; Republic Insurance Company; Royal Indemnity Company; Safety National Casualty Corporation; Stonewall Insurance Company; Twin City Fire Insurance Company; Westchester Fire Insurance Company, Defendants,andNational Union Fire Insurance Company of Pittsburgh, P.A., Defendant–Respondent/Cross–Appellant. |
OPINION TEXT STARTS HERE
Robin L. Cohen argued the cause for appellant/cross-respondent (Kasowitz, Benson, Torres & Friedman, LLP, attorneys; Ms. Cohen and Elizabeth A. Sherwin, of counsel and on the brief).
Barbara I. Michaelides (Bates Carey Nicolaides LLP) of the Illinois bar, admitted pro hac vice, argued the cause for respondent/cross-appellant (Harwood Lloyd, LLC, and Ms. Michaelides, attorneys; Ms. Michaelides, Paula M. Carstensen (Bates Carey Nicolaides LLP) of the Illinois bar, admitted pro hac vice, Kevin D. Szczepanski (Hodgson Russ LLP) of the New York bar, admitted pro hac vice, Lisa A. Bauer (Hodgson Russ LLP) of the New York bar, admitted pro hac vice, Benjamin M. Zuffranieri, Jr. (Hodgson Russ LLP) of the New York bar, admitted pro hac vice, Michael B. Oropollo, and Peter E. Mueller, Hackensack, on the brief).
Before Judges SABATINO, ASHRAFI and FASCIALE.
The opinion of the court was delivered by
In this insurance coverage dispute, plaintiff Building Materials Corporation of America d/b/a GAF Materials Corporation (GAF) appeals from a judgment of no cause of action entered after a lengthy jury trial; and defendant National Union Fire Insurance Company of Pittsburgh, PA (National Union) cross-appeals from an order denying its motion for a new trial on its counterclaim. We affirm on the appeal and cross-appeal.
After settling a class action lawsuit in which claimants alleged potential third-party property damage, GAF sought indemnification under a National Union insurance policy that excluded coverage for property damage to GAF's own products. Consistent with recognized principles of insurance law, the parties do not dispute that if GAF offered sufficient evidence to establish a prima facie loss within the coverage of the policy, then the burden of proving that the loss fell within the exclusionary provisions of the policy would shift to National Union.
The primary issue on appeal is whether GAF may establish a covered loss under the policy by showing either that the class action claimants alleged potential damage to third-party property, or that the class action settlement included payment for third-party property damage. We hold that on its claim for indemnification under National Union's insurance policy, GAF cannot establish a prima facie case of covered loss simply by demonstrating that the class action claimants alleged potential third-party property damage; rather, it must show that the underlying settlement actually included payment for such claimed damages. The burden then shifts to National Union to show that the policy excludes the loss. Because GAF's proofs at trial failed to satisfy these requirements, the jury verdict rejecting GAF's claims was legally sound. Additionally, we affirm the judgment dismissing the counterclaim.
GAF is a manufacturer of organic and fiberglass roofing shingles. Its shingles are sold with limited warranties that require GAF to replace its defective products at a reduced cost. A customer may invoke the warranty provisions by reporting a premature deterioration or other irregularity of the shingles. GAF received thousands of complaints that its shingles aged and cracked prematurely.
On March 20, 1996, a class action lawsuit was filed in the Alabama state courts on behalf of various homeowners against GAF (underlying lawsuit or Coleman claimants).1 The Coleman claimants alleged that their GAF roofing shingles were defective because they began to deteriorate “only a few years after installation.” They also alleged that GAF committed fraud by concealing the defects from the public, violated the consumer protection statutes of various states, breached express and implied warranties, and acted negligently.2
In addition to obtaining coverage at various times from other insurers, GAF purchased a claims-made, excess general liability insurance policy (the policy) from National Union with a policy period of March 28, 1996 to March 28, 1997. The policy provided a liability limit of $25 million, excess of a $2 million self-insured retention. The policy excluded coverage for property damage to GAF's own products.
In 1996, GAF notified National Union that it had been served with the complaint in the underlying lawsuit. GAF advised National Union that it believed that the allegations were without merit, selected defense counsel, and promised to keep National Union informed. GAF then retained defense counsel “to protect [GAF's] interests.”
In 1997, National Union advised GAF that it reserved its rights to disclaim coverage for the Coleman claimants and requested more information to evaluate the lawsuit. National Union explained that Coleman involved allegations that the roof shingles
were rigid and inflexible and inherently weak to the extent that they could not adequately contract or expand with changes in temperature. This alleged rigidity and weakness in the product caused the shingles to become prone to cracking and/or splitting after only a few seasons or years of use.
National Union warned GAF that “[s]hould these claims not involve ‘property damage,’ as defined by the policy, there is no coverage.”
On September 24, 1998, GAF settled the underlying lawsuit for approximately $63 million dollars.3 In its settlement notice, GAF explained that “[t]he Settlement allows Eligible Claimants ... to recover certain costs of repair or replacement of Damaged GAF Shingles.” The settlement also established a compensation formula. Coleman claimants generally had the option of receiving compensation in the form of (1) cash for labor plus a coupon for replacement roofing shingles; (2) all cash for both labor and materials; or (3) a coupon for upgraded replacement materials at a reduced cost.
The settlement agreement defined “damage” to GAF shingles as any defects adversely affecting the performance of the shingle during its warranty term. The agreement defined “consequential damages” as
damage to the structure or contents of a Property resulting from Damage to GAF Shingles. Consequential Damages do not include any labor or material costs associated with the repair or replacement of the GAF Shingles or any other roofing materials ( e.g., flashing, underlayment, gutters, drip edge, and ice and water barrier).
The agreement further stated that
[c]laims for Consequential Damages are not released by the terms of this Agreement, and by filing a Claim in the Claims Program, a Settlement Class Member does not release or prejudice his/her right to seek recovery for any Consequential Damages outside the context of this Settlement and the Claims Program. Where Consequential Damages are sought, the Parties agree that Settlement Class Members shall be limited to compensatory damages only.... [GAF] retains all legal and factual defenses to any claim for Consequential Damages.
GAF created a call center to answer general questions from claimants about compensation under the settlement agreement. A worksheet used at the call center provided the following anticipated question and answer:
Question: Will compensation for damages include the removal and replacement of roofing felt, flashing, caulking, etc. and disposal of old shingles?
Answer: As spelled out in the Settlement Agreement, compensation is based on (among other things) the type of shingle, the number of Damaged squares, and the age of the shingles. Labor costs, for those Claimants entitled to them, are related to the cost to install new shingles only and do not include removal costs or costs associated with the repair or replacement of other roofing components (e.g., flashing, roofing felt, etc.). This is explained in more detail in the notice package.
In a letter to a Coleman claimant, GAF stated:
On October 23, 1998, after National Union denied GAF's claims under the policy, GAF filed its complaint against National Union and other insurance companies.4 Pursuant to the Uniform Declaratory Judgment Act, N.J.S.A. 2A:16–50 to –62, GAF sought a declaration that National Union wrongfully refused or disputed its obligation to pay GAF's defense costs and indemnify GAF in the underlying lawsuit. GAF also alleged that National Union breached its contract by refusing to defend and indemnify GAF, and acted in bad faith by failing to conduct an adequate investigation of the underlying lawsuit.5
National Union filed a counterclaim against...
To continue reading
Request your trial
-
Lanzo v. Cyprus Amax Minerals Co.
...Imerys had a duty to preserve evidence that was relevant to such claims. See also Bldg. Materials Corp. of Am. v. Allstate Ins. Co., 424 N.J. Super. 448, 471-72, 38 A.3d 644 (App. Div. 2012) (noting that "duty to preserve evidence ‘arises when there is pending or likely litigation between t......
-
27-35 Jackson Ave., LLC v. Samsung Fire & Marine Ins. Co.
...evidence the spoliator destroyed or concealed would have been unfavorable to him or her." Bldg. Materials Corp. of Am. v. Allstate Ins. Co., 424 N.J. Super. 448, 472, 38 A.3d 644 (App. Div. 2012) (emphases added) (citing Robertet Flavors, 203 N.J. at 273, 1 A.3d 658 ; Rosenblit, 166 N.J. at......
-
Villamil v. Sentinel Ins. Co.
...503, 818 A.2d 431 (App. Div.)certif. denied , 177 N.J. 222, 827 A.2d 289 (2003) ; see Building Materials Corp. of Am. v. Allstate Ins. Co. , 424 N.J. Super. 448, 464, 38 A.3d 644 (App. Div. 2012) (finding that plaintiff "must first establish that its claim is covered under the policy's ensu......
-
Hollywood Café Diner, Inc. v. Geri Jaffee, Esquire & Marks, O'Neill, O'Brien, Doherty & Kelly, P.C.
...cause standard is "more lenient" and " ‘flexible ...’ without a fixed or definite meaning." Bldg. Materials Corp. of Am. v. Allstate Ins. Co., 424 N.J. Super. 448, 480, 38 A.3d 644 (App. Div. 2012) (quoting Tynes ex rel. Harris v. St. Peter's Univ. Med. Ctr., 408 N.J. Super. 159, 169, 973 A......