Norman Int'l v. Admiral Ins. Co.
| Decision Date | 10 August 2022 |
| Docket Number | A-24-21 |
| Parties | Norman International, Inc., and Richfield Window Coverings, LLC, d/b/a Nien Made (USA), Inc., Plaintiffs-Respondents, v. Admiral Insurance Company, Defendant-Appellant. |
| Court | New Jersey Supreme Court |
Argued February 28, 2022
This appeal concerns an exclusionary clause in a commercial general liability insurance policy issued by Admiral Insurance Company (Admiral) to Richfield Window Coverings LLC (Richfield). The clause states that the policy does not cover any liability "arising out of, related to, caused by, contributed to by, or in any way connected with [a]ny operations or activities performed by or on behalf of any insured" in certain counties in New York, including Nassau County.
Richfield sells window coverage products, including blinds, to national retailers like Home Depot and provides retailers with machines to cut the blinds to meet the specifications of the retailers' customers. Its representatives answer questions the employees may have about the operation of the cutting machines and window covering products. Richfield's representatives thereafter visit the retailers' establishments to maintain and repair the machines and replace the cutting blades as needed. Richfield also provides a user manual for retailers' employees to learn how to use the cutting machine and conducts onsite training for employees. The field sales representative in this case visited the Home Depot store at issue every two to three weeks.
Colleen Lorito, an employee of a Home Depot located in Nassau County was injured while operating the blind cutting machine. She and her husband filed a civil action against Richfield asserting claims for product liability, breach of warranty, and loss of spousal services. Admiral denied any obligation to defend or indemnify, asserting the claims were not covered under the policy based on the Designated New York Counties Exclusion.
Richfield filed a declaratory judgment action seeking to compel Admiral to defend it in the Lorito case and, if necessary, indemnify it against any monetary damages awarded to the plaintiffs. The Law Division granted summary judgment in favor of Admiral. The Appellate Division reversed, finding that "Richfield's limited activities and operations have no causal relationship to the causes of action or allegations." The Court granted certification. 248 N.J. 540 (2021).
HELD: The policy's broad and unambiguous language makes clear that a causal relationship is not required in order for the exclusionary clause to apply; rather, any claim "in any way connected with" the insured's operations or activities in a county identified in the exclusionary clause is not covered under the policy. Richfield's operations in an excluded county are alleged to be connected with the injuries for which recovery is sought, so the exclusion applies. Admiral has no duty to defend a claim that it is not contractually obligated to indemnify.
1. Generally, to ascertain whether there is a duty to defend, the complaint should be laid alongside the policy and a determination made as to whether, if the allegations are sustained, the insurer will be required to pay the resulting judgment, with any doubts resolved in favor of the insured. There are times, however, when comparing the causes of action in the complaint to the exclusionary clause will not provide an answer as to whether there is a potentially covered claim. That situation occurs "when coverage, i.e., the duty to pay, depends upon a factual issue which will not be resolved by the trial." Burd v. Sussex Mut. Ins. Co., 56 N.J. 383, 388 (1970). In such cases, "the duty to defend may depend upon the actual facts and not upon the allegations in the complaint." Ibid. (pp. 14-15)
2. Here, the threshold question is whether the claims asserted by Lorito are covered by the Admiral policy, whereas the underlying issues in the complaint would require the factfinder to decide whether there was a manufacturing defect, design defect, or a failure to provide adequate warnings, and whether Richfield was negligent in causing Lorito's injuries. None of those underlying issues would require the factfinder to address the applicability of the policy exclusion. The Appellate Division did not cite Burd in its analysis, instead setting forth the general standard that a "complaint should be laid alongside the policy" to determine a duty to defend. Going forward, in similar situations, courts should indicate when an issue requires consideration of facts beyond the complaint. (pp. 16-17)
3. Insurance policies are reviewed using contract principles, and the agreement will be enforced as written when its terms are clear in order that the expectations of the parties will be fulfilled. If the policy exclusion uses terms that make it plain that coverage is unrelated to any causal link, it will be applied as written and courts will "not read a causal nexus into the otherwise plain terms." Flomerfelt v. Cardiello, 202 N.J. 432, 443 (2010). The Court has not directly considered the meaning of the language "in any way connected with." But, in Flomerfelt, the Court found the phrases "incident to" and "in connection with" to apply broadly, meaning "the injury is connected in any fashion, however remote or tangential." Id. at 456. (pp. 18-21)
4. Here, there is no dispute that Lorito was injured in Nassau County, one of the counties listed in the exclusionary clause. Therefore, the relevant issue is whether Richfield's activities at the store are sufficient to trigger the exclusion -- that is, did they "actually or allegedly aris[e] out of, [or are they] related to, caused by, contributed to by, or in any way connected with" the activities of Richfield or "on behalf of" Richfield? To focus on a causal relationship reads key language out of the policy because the phrases "in any way connected with" and "related to" do not require any element of causation. Lorito was injured while using the blind cutting machine, which was provided by Richfield. The fact that Richfield provided the machine to Home Depot is enough to trigger the exclusion because the phrase "in any way connected with" merely requires that the two are linked in some way, even if they are only tangentially connected. Richfield employees also went to the store on a regular basis to change the blades and fix the machine, and Richfield provided a manual and trained employees on how to use the machine. Given those facts, the injuries were also "related to" Richfield's actions at the store. The activities by the insured constitute a sufficient basis to trigger the policy's Designated New York Counties Exclusion. The claim filed by Richfield is not covered under the policy and Admiral did not have a duty to defend. (pp. 21-23)
REVERSED and REMANDED to the trial court.
On certification to the Superior Court, Appellate Division.
Justin N. Kinney argued the cause for appellant (Kinney Lisovicz Reilly &Wolff, attorneys; Justin N. Kinney, Michael S. Chuven, and Timothy P. Smith, of counsel and on the briefs).
Ryan Milun argued the cause for respondents (The Milun Law Firm, attorneys; Ryan Milun, on the brief).
FUENTES, P.J.A.D. (temporarily assigned), writing for a unanimous Court.
OPINIONFUENTES, JUDGE (temporarily assigned) This appeal concerns an exclusionary clause in a commercial general liability insurance policy. This exclusionary provision specifically denies coverage for any incidents, costs, or expenses arising out of or related to operations or activities performed by or on behalf of the insured in certain counties in the State of New York.
Richfield Window Coverings, LLC, d/b/a Nien Made (USA), Inc. (Richfield), is a seller of window coverings, blinds, shades, and shutters headquartered in Santa Fe Springs, California. Richfield sells its products to national retailers such as Home Depot, Walmart, and Bed Bath &Beyond. Richfield also provides the retailers with cutting machines designed to cut the blinds to meet the customers' specifications.
Admiral Insurance Company (Admiral), located in Mount Laurel, New Jersey, issued a general liability insurance policy to Richfield containing an exclusionary clause, which expressly states that the policy does not provide coverage for any liability "arising out of, related to, caused by, contributed to by, or in any way connected with . . . [a]ny operations or activities performed by or on behalf of any insured" in certain specifically identified counties in New York, including Nassau County. The exclusionary clause also states the insurer "shall have no duty to investigate, defend or indemnify any insured against any loss, claim, [or] 'suit'" arising in an excluded county.
Here, an employee of a Home Depot store located in Freeport, in Nassau County, New York, was injured while operating a blind cutting machine provided to Home Depot and maintained by Richfield. The Home Depot employee filed a civil action in Nassau County against Richfield seeking compensatory damages. When Richfield notified Admiral of the lawsuit, the insurer invoked the policy's exclusionary clause and asserted it was not contractually obligated to assign counsel to represent Richfield in the Nassau County litigation, or to indemnify Richfield against any damages awarded to the Home Depot employee.
Richfield filed a declaratory judgment action in the Superior Court and argued Admiral had a duty to defend the insured because the terms "operations" and "activities" in the policy's Designated New York Counties Exclusion were ambiguous and subject to multiple interpretations, and thus must be construed in favor of the insured. The Law Division judge...
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