Northfield Mass. Assocs. v. The Travelers Indem. Co.

• Court: New Jersey Superior Court
• Writing for the Court: Petrillo, J.S.C.
• Docket Number: ESX-L-1080-22
• Decision Date: 30 October 2025
• Citation: Northfield Mass. Assocs. v. The Travelers Indem. Co., ESX-L-1080-22 (N.J. Super. Oct 30, 2025)
• Parties: NORTHFIELD MASS ASSOCIATES LLC and BNE INVESTORS VII, LLC, Plaintiffs, v. THE TRAVELERS INDEMNITY COMPANY, UNITED SPECIALTY INSURANCE COMPANY, SCOTTSDALE INSURANCE COMPANY, ARCH SPECIALTY INSURANCE COMPANY, et al., Defendants.

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NORTHFIELD MASS ASSOCIATES LLC and BNE INVESTORS VII, LLC, Plaintiffs, v. THE TRAVELERS INDEMNITY COMPANY, UNITED SPECIALTY INSURANCE COMPANY, SCOTTSDALE INSURANCE COMPANY, ARCH SPECIALTY INSURANCE COMPANY, et al., Defendants.

No. ESX-L-1080-22

Superior Court of New Jersey, Law Division, Essex Vicinage

October 30, 2025

OPINION

Petrillo, J.S.C.

I. INTRODUCTION

This matter comes before the court on plaintiffs Northfield Mass Associates, LLC and BNE Investors VIL LLC's ("plaintiffs") Motion for Partial Summary Judgment seeking declaratory relief against defendants United Specialty Insurance Company ("USIC"), Scottsdale Insurance Company ("Scottsdale"), and Arch Specialty Insurance Company ("Arch") (collectively, "defendants"), with respect to policy provisions that purport to limit coverage for continuous or progressive damage arising out of alleged construction defects at the Vizcaya Condominium project. Defendants oppose the motion and, in the case of Arch, cross-move for summary judgment seeking enforcement of the contested policy exclusions.

After careful review of the parties' submissions and the controlling legal precedents in New Jersey regarding the continuous trigger doctrine and noncumulation provisions, the court finds the policy limitations at issue unenforceable as a matter of law with respect to continuous or progressive damage in construction defect claims. The court further finds defendants' factual and procedural objections unpersuasive and insufficient to preclude summary judgment. Plaintiffs' motion is hereby GRANTED, and defendant Arch's cross-motions is DENIED.

II. FACTUAL BACKGROUND

Plaintiffs are insureds or additional insureds under various commercial general liability insurance policies issued respectively by each defendant. The policies contain endorsements and exclusions purporting to restrict coverage for "property damage" that commenced prior to the inception date of the policy, or that is a continuation of pre-existing damage. Specifically, the USIC Policies contain a "Pre-Existing Injury or Damage Exclusion" (PEID), the Scottsdale Policies contain a "Continuing or Ongoing Damage Exclusion" (CODE), and the Arch Policy contains a prior injury/damage exclusion in both its insuring agreement and an endorsement.

Plaintiffs are defendants in the underlying case: Vizcaya Condominium Ass'n, Inc, v. Northfield Mass. Assocs., LLC, et al., ESX-L-7766-17, wherein the plaintiff condominium association alleges damages that include continuous and progressive water infiltration spanning multiple policy periods. Plaintiffs in this case tendered their claims for defense and indemnification to defendants, who invoked the above- referenced policy exclusions to deny or limit coverage.

The operative policies include:

o Travelers Policy (Jan. 28, 2010 - Jan. 28, 2011)^[1];

• USIC Policies (2015-2016 and 2016-2017) with Pre-Existing Injury /Damage Exclusion (SUMF ¶¶ 4-6);

• Scottsdale Policies (2010-2011, 2011 -2012) with Continuing/Ongoing Damage Exclusion (SUMF ¶¶ 7-9);

• Arch Policy (Aug. 11, 2012 - Aug. 11,2013) with express exclusion for damage commencing prior to the effective date (SUMF ¶¶ 10-11).

The relevant insurance policies all contain, in substantially similar forms, language that purports to:

• Limit coverage where property damage is "ongoing" or "progressive," if such damage began before the inception of the particular policy;

• Exclude coverage for damage that is a "continuation of' or "arises out of' injury or damage that commenced prior to the policy period; • Or, as in some instances, reduce the available "Each Occurrence" limit by amounts previously paid under prior policies (so-called "non-cumulation clauses").

III. SUMMARY OF THE MOTIONS

A. Plaintiffs' Motion for Partial Summary Judgment

Plaintiffs seek a declaration that the USIC PEID Exclusion, the Scottsdale CODE Exclusion, and the Arch Prior Injury Exclusion (the "Non-Cumulation Provisions") are unenforceable under New Jersey law as applied to continuous or progressive damage in construction defect cases. Plaintiffs rely chiefly on the New Jersey Supreme Court's reasoning in Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437 (1994), Spaulding Composites Co. v. Aetna Cas. & Sur. Co., 176 N.J. 25 (2003), and Air Master & Cooling, Inc. v. Selective Ins. Co. of Am., 452 N.J.Super. 35 (App. Div. 2017). '

B. Defendants' Oppositions and Cross-motions

Defendants argue that the exclusions are not, strictly speaking, "noncumulation clauses," and that their enforcement is not contrary to public policy. Defendants also contend that plaintiffs have failed to establish that the damage alleged in the underlying litigation is truly progressive or indivisible, and that the motion is premature because fact discovery is ongoing. Arch cross-moves for summary judgment, arguing that its policy language unambiguously excludes coverage for damage commencing prior to the policy inception date.

IV- legal analysis

A. New Jersey's Continuous Trigger Doctrine and Public Policy

1. Continuous Trigger and Allocation of Coverage

The seminal case of Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437 (1994), established the doctrine of the continuous trigger for progressive, indivisible injury or property damage, allowing coverage to be triggered in each policy year from initial exposure or damage through its manifestation. The purpose, as reaffirmed in subsequent cases, is to maximize insurance coverage in the face of long-tail losses, especially where injuries or damage cannot be distinctly allocated to a single point or policy period.

This doctrine has since been extended to construction defect cases involving latent, progressive properly damage, as confirmed by Air Master & Cooling, Inc. v. Selective Ins. Co. of America, 452 N.J.Super. 35 (App. Div. 2017), and The Palisades At Ft. Lee Condominium Association, Inc. v. 100 Old Palisade, LLC, 230 N.J. 427,434 (2017). The public policy underlying these decisions is the recognition that damages from construction defects, such as water infiltration, may progress undetected over time, warranting coverage across all implicated policy years. Plaintiffs rely heavily on the decision in Air Master, 452 N.J.Super. 35, and cite The Palisades, 230 N.J. 427, to support their position that the "continuous trigger" theory applies to construction defect cases in New Jersey.

In their briefing, plaintiffs note that New Jersey courts recognize that the public policy underlying application of the continuous trigger to toxic or environmental contamination applies with equal force to cases involving construction defects. See Air Master, 452 N.J. Super, at 42 ("The public policies favoring a continuous-trigger approach in progressive injury matters are likewise germane here ... The progressively-worsening nature of a variety of construction defects, such as water infiltration or mold, logically support the application of the continuous-trigger doctrine."); Potomac Ins. Co. of Illinois ex rel. OneBeacon Ins. Co. v. Pennsylvania Mfrs.' Ass'n Ins. Co., 215 N.J. 409, 425 (2013) (noting the continuous trigger methodology has "been applied to a variety of disputes"); The Palisades, 230 N.J. 427, 434 (highlighting the public policy concern that "many construction defects will not be obvious immediately"). That this is the law of New Jersey is not at all in dispute and that it operates here, to support the relief requested is, to this court, is equally obvious.

The court further finds persuasive plaintiffs' argument in their reply brief regarding the relevance of the holding in Air Master: "As the New Jersey Appellate Division in Air Master explained, 'The progressively-worsening nature of a variety of construction defects, such as water infiltration or mold, logically support the application of the continuous-trigger doctrine.'" Air Master, 452 N.J. Super, at 48 (citing The Palisades, 230 N.J. at 454); see also Air Master, 452 N.J. Super, at 47 (holding "a continuous-trigger theory of CGL coverage sensibly applies to claims for third-party, progressive property damage in construction defect cases'). The complaint in the underlying litigation, which seeks damages because of alleged property damage and consequential damage caused by purportedly defective work at the Vizcaya Condominium project, including but not limited to "water infiltration to various [condominium] units" falls squarely within the purview of Air Master and necessitates application of the continuous-trigger doctrine.

2. Non-Cumulation Provisions and Exclusions

In Spaulding, 176 N.J. 25, the New Jersey Supreme Court addressed whether insurers could enforce non-cumulation clauses to avoid their pro-rata share of liability for progressive losses spanning multiple triggered policies. The Court ruled that such clauses are void and without effect in circumstances where the continuous trigger applies, because enforcement would frustrate the pro-rata allocation and coverage maximization central to Owens-Illinois. Spaulding, 176 N.J. at 44.

The Supreme Court in Spaulding, specifically held that these clauses-which purport to reduce liability or accumulation of limits for damages spanning multiple policy periods-are incompatible with the continuous trigger and pro rata allocation methodology of Owens-Illinois: "[O]nce the court turns to pro rata allocation, it makes sense that the non-cumulation clause, which would allow the insurer to avoid its fair share of responsibility, drops out of the policy." Spaulding, 176 N.J. at 44.

Plaintiffs relying on Spaulding argue that the exclusions at issue-although not always explicitly labeled "non-cumulation" clauses-operate in precisely the same manner, seeking to bar or reduce coverage triggered in...