Rastelli Brothers, Inc. v. Netherlands Insurance Company
| Decision Date | 01 January 1999 |
| Docket Number | Civil No. 98-2526 (JBS) |
| Parties | RASTELLI BROTHERS, INC., Plaintiff, v. NETHERLANDS INSURANCE COMPANY T/A PEERLESS INSURANCE, Defendant. |
| Court | New Jersey County Court. New Jersey County Court — Probate Division |
Angelo J. Falciani, Esq., Angelo J. Falciani, P.A., Woodbury, New Jersey, Attorney for Plaintiff.
Joel N. Werbel, Esq., Methfessel & Werbel, Esqs., Rahway, New Jersey, Attorney for Defendant.
This case arises from a disputed insurance claim. The principal issue is whether an insurance policy's appraisal clause for resolving disputes about the amount of loss—but not liability for insurance coverage upon the loss—is enforceable as an arbitration clause under the Federal Arbitration Act. According to the Complaint, plaintiff, Rastelli Brothers, Inc., submitted a claim to its insurer, defendant, Netherlands Insurance Company t/a Peerless Insurance, for $306,717.83 in costs incurred in setting up a replacement location after plaintiff's warehouse burned down, and defendant paid plaintiff $63,307.63 on that claim. (Compl. 8-9.) The parties began the appraisal process listed in the insurance policy, from which defendant unilaterally withdrew while it was ongoing but before a decision had been reached. (Id. at ¶ 11.) Plaintiff filed a Complaint in this Court pursuant to the Federal Arbitration Act, 9 U.S.C. § 1, et seq. ("FAA"), seeking specific performance of the appraisal clause of the policy. (Id. at ¶ 12.) Now before the Court are the parties' cross-motions for summary judgment. For the reasons stated herein, plaintiff's motion for summary judgment shall be denied, but defendant's motion for summary judgment shall be granted, and this case will be dismissed.
On June 17, 1995, plaintiff, Rastelli Brothers, Inc., was a tenant at 641 Cattell Road in Deptford, New Jersey ("original location"), where it operated a warehouse and food processing plant. (Rastelli Examination Under Oath at 8:7-23.)1 On July 17, 1995, a fire occurred at the site. (Id. at 8:7-10.) Plaintiff thereafter relocated its business operations to 1688 Delsea Drive, in Deptford, New Jersey. (Pl.'s Statement of Undisputed Facts ¶ 7.) Plaintiff had purchased the Delsea Drive building in January of 1995 and planned to move into that location within two years, allowing time to obtain necessary building permits. (Rastelli Verified Statement ¶ 3.) As a result of the fire, plaintiff first tried to set up a temporary business at the original location and then sought other temporary locations. (Id. at ¶ 4.) When none could be found, plaintiff sought emergency approval from the township to set up temporary operations at 1688 Delsea Drive. (Id. at ¶ 5.) Plaintiff made renovations to the property in order to occupy it as a warehouse and plant (id.), and some of the renovations remained incorporated in the building after plaintiff obtained its building permit and began building a permanent warehouse and plant.
According to plaintiff, as a result of the move, it incurred extra expenses in connection with the cost to equip and operate the replacement location. (Id.) Plaintiff submitted to defendant a claim and sworn proof of loss for that extra expense in the amount of $306,717.83 (id. at ¶ 8), and defendant paid out $63,307.63 on that claim. (Id. at ¶ 9.)
The parties' insurance policy contains an appraisal clause which reads as follows:
E. PROPERTY LOSS CONDITIONS
***
2. Appraisal
If we and you disagree on the amount of the loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will
a. Pay its chosen appraiser and
b. Bear the other expenses of the appraisal and umpire equally
If there is an appraisal, we will still retain our right to deny the claim.
(Id. at ¶ 10.) The appraisal clause thus deals exclusively with the method of handling a dispute about "the amount of loss." The policy's narrowness of the appraisal clause is demonstrated by the fact that the defendant still retains its "right to deny the claim" (i.e., coverage) even if there has been an appraisal of the loss. (Id.)
In accordance with the policy, the parties selected appraisers, and the appraisers selected an umpire. (Id. at ¶ 11.) However, while the appraisal was ongoing but before the panel reached its agreement on the amount of the loss, defendant withdrew from the process. (Id.) Defendant sent plaintiff a letter dated December 3, 1997 which indicated as follows:
It appears that the dispute between Peerless and the insured has nothing to do with respect to the amount of the expenses incurred by the insured following the fire, but whether or not the items are covered at all. As I indicated in the past, the appraisal process cannot be utilized to make coverage determinations.
In that regard, the Peerless Insurance Company will stipulate that the expenses incurred by Rastelli as presented in the claims process were in fact incurred to move into the new business location, and that the expenses incurred were reasonable.
On the other hand, coverage for the expenses, which have not otherwise been paid to date by Peerless, is hereby denied. The reason why these expenses are denied was based upon the language of the extra expense coverage as contained in the policy, which provides as follows.
We will pay necessary extra expense you incur during the "period of restoration" that you would have not incurred if there had been no direct physical loss or damage to property at the described premises. . .
It is the position of Peerless Insurance Company that those items presented as a claim for extra expenses which have not been paid to date by Peerless would of been incurred whether or not the prior location was fire damaged. In other words, the premises would have been modified to accommodate the business operations of Rastelli whether or not there had been a fire. As coverage is being denied by Peerless for these items of extra expense, the appraisal process is hereby terminated.
2
Plaintiff filed a Complaint in this Court on June 1, 1998, alleging diversity jurisdiction, and asking this Court, pursuant to the FAA, to "enter an order to have the appraisal proceed in accordance with the terms of the appraisal clause." (Compl. ¶ 12.) On October 27, 1998, plaintiff filed a motion for summary judgment, arguing that this Court should order the defendant to pay the remaining $243,410.20, or, in the alternative, to order the defendant to continue with the appraisal. Defendant responded with its own cross-motion for summary judgment.
The Court has jurisdiction over this case pursuant to 28 U.S.C. § 1332. For the reasons stated herein, plaintiff's motion for summary judgment will be denied, and defendant's cross-motion for summary judgment will be granted.
Summary judgment is appropriate when the materials of record "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is "material" only if it might affect the outcome of the suit under the applicable rule of law. Id. Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment. Id.
The moving party always bears the initial burden of showing that no genuine issue of material fact exists, regardless of which party ultimately would have the burden of persuasion at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Jalil v. Avdel Corp., 873 F.2d 701, 706 (3d Cir. 1989), cert. denied, 493 U.S. 1023 (1990). However, where the nonmoving party bears the burden of persuasion at trial, "the burden on the moving party may be discharged by `showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Celotex Corp., 477 U.S. at 325.
The non-moving party, here the plaintiff, "may not rest upon the mere allegations or denials of" its pleading in order to show the existence of a genuine issue. Fed. R. Civ. P. 56(e). Once the moving party has carried its burden of establishing the absence of a genuine issue of material fact, "its opponent must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Thus, if the non-movant's evidence is merely "colorable" or is "not significantly probative," the court may grant summary judgment. Anderson, 477 U.S. at 249-50.
Plaintiff argues that this Court should grant summary judgment on its request for an appraisal under the Federal Arbitration Act, 9 U.S.C. § 1, et seq. (the "Act" or "FAA"). The purpose of the Act is to ensure that courts enforce parties' decisions, as evidenced by contractual agreements, to resolve disputes through arbitration. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625-626 (1985). As the Fifth Circuit stated in Hartford Lloyd's Insurance Co. v. Teachworth, 898 F.2d 1058, 1061 (5th Cir. 1990), "[t]he sine qua non of the FAA's applicability to a particular dispute is an agreement to arbitrate the dispute in a contract which evidences a transaction in interstate commerce." Id.
The FAA creates "a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act."...
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