Ellmex Const. Co., Inc. v. Republic Ins. Co.

Decision Date17 June 1985
Citation494 A.2d 339,202 N.J.Super. 195
PartiesELLMEX CONSTRUCTION COMPANY, INC., a corporation of the State of New Jersey, Plaintiff-Appellant, Cross-Respondent, v. REPUBLIC INSURANCE COMPANY, a corporation of the State of Texas, Defendant-Respondent, Cross-Appellant.
CourtNew Jersey Superior Court — Appellate Division

Glenn A. Bergenfield, Trenton, on behalf of plaintiff-appellant, cross-respondent (Michael F. Chazkel, East Brunswick, attorney; Glenn A. Bergenfield, Trenton, of counsel and on brief).

Leonard Rosenstein, West Orange, on behalf of defendant-respondent, cross-appellant (Feuerstein, Sachs Maitlin, Rosenstein & Flemming, West Orange, attorneys; Leonard Rosenstein, West Orange, on brief.

Before Judges McELROY and SHEBELL.

The opinion of the court was delivered by


Plaintiff-appellant (Ellmex) is a builder of residential homes and in May 1980 owned a model home situated on a residential tract it was developing in Wall Township. Defendant-cross-appellant (Republic) is an insurer which issued a "builder's risk" policy covering plaintiff's model home. On May 12, 1980 plaintiff discovered that the house had sustained extensive water damage. Apparently, vandals had stuffed rags into a sink in the bathroom of the second floor master bedroom suite and had turned on the water which overflowed through the second floor and down into the first floor and basement. This matter arises out of a suit by plaintiff for the costs of repairing that damage after Republic disclaimed coverage for the loss. Plaintiff also sued for punitive damages, interest, costs of suit and attorney's fees.

Plaintiff's proofs were that at the time of this loss the house was "basically completed" but lacked landscaping, some tile in the lower lavatory, screens, grills for the windows and a shower head in a bathroom. A certificate of occupancy had not been issued for this dwelling but it was "95% completed." The house was under contract of sale with a closing scheduled in June 1980. For about 30 days prior to the damage a realtor, who had a contract with plaintiff to show and sell this home and others plaintiff was constructing, maintained a sales office in the dining room furnished with a telephone, a desk and some chairs. The realtors were at this office "at least four days a week, definitely weekends and a few days during the week."

The loss was reported to Republic and it had the house inspected by a builder-appraiser who, on July 14, 1980, estimated that the cost of repair would amount to $9,575.79. Plaintiff's estimate was $21,135 and was prepared by its job supervisor from estimates he obtained from plaintiff's subcontractors.

Michael O'Shea, defendant's senior adjuster, testified at trial that Max Halbrecht, Ellmex's president, signed a statement on June 24, 1980 that the house was "completed sometime in February 1980." Halbrecht testified that he did not then tell O'Shea that the house was only 95% finished because he did not think that a determination of whether the house was "95 or 100 percent" complete would influence the recovery.

O'Shea had direct responsibility for passing upon plaintiff's claim. He recommended a disclaimer because "the building had been vacant for a period in excess of 30 days prior to the loss." In doing so he relied upon the following policy provision as to vandalism, a "specified peril," which in pertinent part provided:

9. Vandalism or Malicious Mischief, meaning only the willful and malicious damage to or destruction of the property covered excluding glass (other than glass building blocks) constituting a part of the building or loss by pilferage, theft, burglary or larceny and excluding loss if the described dwelling had been vacant beyond a period of 30 consecutive days immediately preceding the loss.

O'Shea also relied upon Halbrecht's statement that the building was completed in February 1980 as a basis for disclaimer. He did so because another policy provision provided:

1. Vacancy and Unoccupancy: Permission granted for the premises to be vacant or unoccupied without limit of time, except as otherwise provided in this policy for certain specified perils, however, a building in the course of construction shall not be deemed vacant.

Republic's disclaimer, apparently sent to plaintiff, was dated November 26, 1980.

O'Shea testified that because of his past experience with defendant he regarded the word "vacant", as used in the vandalism coverage provision, to mean the house had to be "void of inanimate objects." Nevertheless, he classified this house as vacant, despite the realtor's telephone, desk and chairs, because "[y]ou could not live with just a desk and two chairs. You do not live in a house like that." He stated that when "construction is completed and nothing has been put in there then it is a vacant house" and if it remains so for 30 days, coverage for vandalism ceases. His company has no form of policy to cover a house which remains vacant for more than 30 days and does not insure vacant houses for vandalism because a house vacant for more than 30 days "is more open to kids or practical jokers, whatever, coming in, and why they damage I don't know, but they do." He admitted that under the policy if a house were 99% completed he "would not say the building was done" and would consider it as "in the course of construction" if the builder were "actively pursuing doing that work." We observe that the policy does not impose any such limitation on the phrase, "course of construction."

At the conclusion of the evidence the trial court granted plaintiff's motion for judgment on the issue of defendant's liability to plaintiff under the terms of the policy. The issues of compensatory and punitive damages were submitted to the jury and resulted in a verdict for plaintiff of $17,000 for compensatory damages and $5,000 punitive damages. 1

Plaintiff brought a post judgment motion for assessment of prejudgment interest on both the compensatory and punitive awards and for attorney's fees. Defendant moved for a judgment notwithstanding the verdict, alternatively for a new trial, and also moved to strike the award of punitive damages. The judge denied plaintiff's motions for interest on the compensatory verdict and for attorney's fees. He denied defendant's motion for a judgment n.o.v. and for a new trial but granted the motion to strike the award of punitive damages. He held that he had erred in submitting that issue to the jury. This determination mooted plaintiff's request for prejudgment interest on that award.

Plaintiff appeals the denial of prejudgment interest on the award of compensatory damages, the denial of attorney's fees and asserts the court erred in setting aside the punitive verdict. Defendant cross-appeals contending that the judge erred in holding as a matter of law that its policy afforded coverage for plaintiff's loss.


We will first address defendant's cross-appeal. Defendant argues that a fact question existed as to whether the house was still "in the course of construction" because plaintiff's president admitted in his signed statement of June 24, 1980 that the house was "completed sometime in February 1980," but, on the other hand, gave conflicting trial testimony that the house was only 95% completed at the time of loss. We find no merit in this argument and agree with the trial judge's conclusion that the determinative question as to coverage in the factual complex here presented is not whether the house was still "in the course of construction." The coverage here sought was for vandalism and the exclusion defendant asserted was dependent upon whether the building was "vacant beyond a period of 30 consecutive days immediately preceding the loss." The facts relevant to this question were not in dispute and the policy nowhere defined the term "vacant." The task of interpretation was therefore one for the court rather than the jury. Cronan v. Travelers Indemnity Co., 126 N.J.L. 56, 59, 18 A.2d 13 (E. & A.1940); J.G. Ries & Sons, Inc. v. Automobile Ins. Co., 121 N.J.L. 493, 496, 3 A.2d 610 (E. & A.1938); 2 Couch on Insurance, § 15:3 (rev. ed. 1984).

The trial judge took particular note that defendant in writing this policy obviously was aware of two distinct situations, i.e., "vacancy" and "unoccupancy," because it had utilized these words in various places in the policy and therefore "did not mean them to be interchangeable." He noted that the policy gave "[p]ermission ... for the premises to be vacant or unoccupied without limit of time except as otherwise provided in this policy as to specified perils" (vandalism is such a specified peril) but noted that as to coverage for vandalism, the policy exclusion was "triggered" not by unoccupancy but by the vacancy of the building "beyond a period of 30 consecutive days immediately preceding the loss." The judge held that defendant's employment of the word "vacant," when "unoccupied" could have been used, implicated "a concept having nothing to do with people utilizing the building but, rather, has to do with the presence or absence of inanimate objects...." He held that here it was undisputed that the building "was being used by a realtor company, in conjunction with the development of this project, as a model home and sales office and within the building itself was at least a desk, a telephone and some chairs...." This view of the case is understandable. There is authority for the view that "vacant" can connote the absence of inanimate furnishings in a house, while "unoccupied" means the absence of inhabitants. 4A Appleman, Insurance Law and Practice § 2833 p. 489-91 (1969) and cases cited therein.

Plaintiff, however, asserts, and we agree, that this builder's risk policy should not be interpreted as are policies insuring ordinary homeowners. Homeowners' policies may, and usually do, require the insured dwelling to be occupied as a place of abode. Thus...

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