Flomerfelt v. Cardiello

• Decision Date: 07 July 2010
• Parties: Wendy M. FLOMERFELT, Plaintiff,v.Matthew P. CARDIELLO, Gary P. Cardiello, and Janet Cardiello, Defendants.Matthew P. Cardiello, Plaintiff-Appellant,v.Pennsylvania General Insurance Company, Defendant-Respondent,andNew Jersey Skylands Insurance Companies, Gary P. Cardiello, and Janet Cardiello, Defendants.
• Court: New Jersey Supreme Court

202 N.J. 432

997 A.2d 991

Wendy M. FLOMERFELT, Plaintiff,

v.Matthew P. CARDIELLO, Gary P. Cardiello, and Janet Cardiello, Defendants.

Matthew P. Cardiello, Plaintiff-Appellant,

v.Pennsylvania General Insurance Company, Defendant-Respondent,andNew Jersey Skylands Insurance Companies, Gary P. Cardiello, and Janet Cardiello, Defendants.

Supreme Court of New Jersey.

Argued Nov. 9, 2009.

Decided July 7, 2010.

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Anthony V. D'Elia, Secaucus, argued the cause for appellant (Chasan Leyner & Lamparello, attorneys).

Vincent E. Reilly, Morristown, argued the cause for respondent (Coughlin Duffy, attorneys).

Justice HOENS delivered the opinion of the Court.

Plaintiff Wendy Flomerfelt sustained temporary and permanent injuries after she overdosed on alcohol and drugs during a party hosted by defendant Matthew Cardiello at his parents' home while they were out of town. Plaintiff has little recollection of what she drank or ingested either before she arrived or during the party itself. Her complaint, however, asserted that her injuries were caused by defendant, who provided her with drugs and alcohol, served her alcohol when she was visibly intoxicated, and failed to promptly summon the rescue squad when she was found, unconscious, on the porch the next day.

Defendant turned to Pennsylvania General Insurance Company, his parents' homeowners' insurer, tendering to it the defense of Flomerfelt's complaint and seeking indemnification under the terms of the policy. Pennsylvania General, in response, declined either to provide a defense against the claim or to indemnify him, pointing to the language of its policy that excluded claims “[a]rising out of the use, ... transfer or possession” of controlled dangerous substances.

The parties dispute the meaning of that language and the scope of the exclusion as it bears on both the insurer's duty to defend and its obligation to indemnify. Accordingly, this appeal requires us to consider the insurer's duties to defend and indemnify when the precise manner in which the injury was caused is in dispute and when the parties disagree about the role that controlled dangerous substances for which the policy excludes coverage, played in bringing about plaintiff's injury.

I.

Plaintiff was a guest at a Saturday evening party hosted by defendant Matthew Cardiello while his parents,¹ the owners of the home, were out of town. At the time, Flomerfelt was twenty-one years old. Cardiello, who was only twenty years old, admitted that he provided his guests with beer, that he was aware that a variety of drugs were being used at the event, and that during the party he saw Flomerfelt ingest cocaine. Although he denied providing plaintiff with drugs, he admitted that he took “Ultracet,” a prescription medication, and that empty individual-dose packets of that drug were found in the household trash after the party.

Flomerfelt has little recollection of the party. She concedes that prior to arriving at defendant's home she may have smoked marijuana, but cannot recall what else she might have ingested either before or during the party. In her complaint, however, plaintiff alleged that defendant provided her with alcohol and drugs, including the prescription drug “Ultracet,” ² which contains opiates. Each of those allegations is connected to a toxicology report that identified traces of numerous substances in her urine.

Late Saturday evening or early Sunday morning, Flomerfelt became ill and unresponsive, although precisely when that occurred is unclear from the record. Defendant denies that he was aware of Flomerfelt's plight prior to Sunday afternoon when he finally awoke for the day. According to several of the partygoers, it was not until then that defendant and others found plaintiff on the porch and were unable to rouse her. Defendant admits that he first tried to have plaintiff's sister come to the house and transport her to the hospital. Only after that effort failed did he summon rescue personnel, who took her to the emergency room. Plaintiff contends that defendant delayed calling for help because he was afraid that the police would discover the illegal drugs in the house and because he did not want his parents to learn about the party he had hosted in their absence.

Plaintiff was treated in the Emergency Room and in the Intensive Care Unit for kidney and liver failure. A toxicology report identified alcohol, marijuana, opiates and cocaine in plaintiff's system and her hospital discharge summary included an initial diagnosis of numerous conditions “probably secondary to drug overdose.” When plaintiff was released from the hospital, she had recovered from the effects of the acute liver and kidney conditions but she contends that she suffers from permanent partial hearing loss.

During discovery, two experts provided opinions concerning the cause of plaintiff's injuries, both temporary and permanent. Plaintiff's expert, Dr. Michael Buccigrossi, concluded that her injuries were caused by the ingestion of multiple drugs and alcohol, and that the injuries were exacerbated by a delay in receiving medical attention. He did not attempt to quantify the amounts of each of the substances found in her system or to determine when each substance may have been ingested. Rather, he based his conclusions on reports identifying each of the substances, that is drugs or alcohol ingestion alone, as the potential causative agent for each of plaintiff's injuries.

Defendant offered the expert opinion of Dr. James Cinberg, who concluded that “[t]he toxins found in Wendy Flomerfelt's urine have been associated with rapid and irreversible high frequency loss of hearing and with tinnitus.” Dr. Cinberg suggested that plaintiff's injuries might have resulted from prior drug abuse pointing to a reported case history in which hearing loss was linked to regular marijuana use and other drug ingestion that preceded an overdose. He also noted the possibility that Flomerfelt had a genetic predisposition to hearing loss that contributed to her injury. Finally, Dr. Cinberg rejected plaintiff's assertion that defendant's delay in summoning aid had caused or contributed to her injuries. He opined that “[t]reatment that might have been instituted hours earlier would not be expected to have improved her current status.”

II.

Following the service of plaintiff's complaint, defendant tendered the defense and sought indemnification for plaintiff's claims to Pennsylvania General, his parents' homeowners' insurer. Pennsylvania General declined to defend or indemnify, pointing to the exclusion in the policy for claims “[a]rising out of the use, ... transfer or possession” of controlled dangerous substances. In April 2007, defendant filed a declaratory judgment action, seeking a declaration that Pennsylvania General was obligated both to defend and to indemnify him. That complaint was consolidated with plaintiff's pending personal injury action for discovery and trial.

Early in 2008, Pennsylvania General and defendant cross-moved for summary judgment on the issues raised in the declaratory judgment aspect of the litigation. The insurer argued that the “arising out of” language is unrelated to causation, but instead equates with concepts such as “incident to” or “in connection with.” Asserting that all of the evidence ties plaintiff's injuries at least in part to her ingestion of illegal drugs at the party, the insurer argued that it had neither a duty to defend nor a duty to indemnify.

Defendant opposed that motion, arguing that the “arising out of” language is ambiguous. He asserted that because the complaint also alleged that the injuries were caused by alcohol or by the failure to promptly summon assistance, judgment could not be entered in favor of the insurer. Based upon the ambiguity in the phrase, defendant argued that the insurer was obligated to provide him with a defense unless and until it could be proven that alcohol was neither the sole nor a contributing cause and, depending on the outcome of the trial of plaintiff's complaint, that it was obligated to indemnify him as well.

The trial court denied the insurer's motion and granted defendant's, directing Pennsylvania General to provide both a defense and indemnity pursuant to the policy. In a brief statement of reasons, the court explained that the insurer has the burden of proving that the exclusion applies and that in the context of a summary judgment motion, defendant was entitled to the benefit of factual inferences in his favor. The court then commented that the insurer could not rely on the exclusion because the experts were not able to specifically attribute plaintiff's injuries to either the drugs or the alcohol. The court reasoned that although plaintiff's complaint referred to both drugs and alcohol, defendant was entitled to the benefit of an inference that the injuries were caused by a covered, as opposed to an excluded, risk. The court therefore concluded that the insurer was required to defend and indemnify defendant.

The Appellate Division, in an interlocutory appeal, reversed the trial court's denial of Pennsylvania General's motion and its grant of relief in favor of defendant. In doing so, the panel employed a broad interpretation of the phrase “arising out of” as it was used in the policy's exclusion and utilized a substantial nexus test for purposes of evaluating the indemnification question. Following that logic, the panel concluded that because the expert proofs linked plaintiff's injuries to both drugs and alcohol, those injuries “arose out of” the excluded acts of “use, ... transfer or possession” of illegal drugs. The panel did not engage in a separate analysis of the duty to defend, because it concluded that the exclusion barred coverage under any circumstances. The panel therefore directed that judgment be entered in favor of Pennsylvania General.

We granted defendant's motion for leave to appeal, 200 N.J. 203, 976 A.2d 381 (2009)...