Rodriguez-Ortiz v. Interstate Racking & Shelving, II, Inc.

• Court: New Jersey Superior Court — Appellate Division
• Writing for the Court: PER CURIAM.
• Decision Date: 03 September 2021
• Docket Number: A-1614-19
• Citation: Rodriguez-Ortiz v. Interstate Racking & Shelving, II, Inc., A-1614-19 (N.J. Super. App. Div. Sep 03, 2021)
• Parties: OLVIN LEONEL RODRIGUEZ-ORTIZ, Plaintiff, v. INTERSTATE RACKING & SHELVING, II, INC., LIT/GREEK RT. 130, LLC, MEDICA, and TITAN RACK & SHELVING, LLC, Defendants, and INTERSTATE RACKING & SHELVING, II, INC., Plaintiff-Appellant, v. BERKSHIRE HATHAWAY, INC., GUARD INSURANCE COMPANY, a/k/a AMGUARD INSURANCE COMPANY, and BERKSHIRE HATHAWAY GUARD, a/k/a BERKSHIRE HATHAWAY GUARD INSURANCE COMPANY, Defendants-Respondents.

OLVIN LEONEL RODRIGUEZ-ORTIZ, Plaintiff, v. INTERSTATE RACKING & SHELVING, II, INC., LIT/GREEK RT. 130, LLC, MEDICA, and TITAN RACK & SHELVING, LLC, Defendants, and INTERSTATE RACKING & SHELVING, II, INC., Plaintiff-Appellant, v. BERKSHIRE HATHAWAY, INC., GUARD INSURANCE COMPANY, a/k/a AMGUARD INSURANCE COMPANY, and BERKSHIRE HATHAWAY GUARD, a/k/a BERKSHIRE HATHAWAY GUARD INSURANCE COMPANY, Defendants-Respondents.

No. A-1614-19

Superior Court of New Jersey, Appellate Division

September 3, 2021

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 27, 2021

On appeal from the Superior Court of New Jersey, Law Division Ocean County, Docket Nos. L-1477-15 and L-1563-18.

H Alton Neff argued the cause for appellant.

Robert M. Wolf argued the cause for respondent AmGuard Insurance Company (Finazzo Cossolini O'Leary Meola &Hager, LLC attorneys; Jeremiah O'Leary and Robert M. Wolf, on the brief).

Before Judges Ostrer, Accurso, and Enright.

PER CURIAM.

Interstate Racking &Shelving, II, Inc. (Interstate) contends that its workers' compensation and employer's liability insurer, AmGuard Insurance Company (AmGuard), should have provided it a defense to a tort suit brought by an Interstate employee who was injured on the job. The employee was already receiving workers' compensation benefits. His lawsuit sought additional damages based on common law claims that Interstate (and others) acted intentionally as well as negligently, recklessly and carelessly. Eventually Interstate sued AmGuard for a defense. While Interstate's claim was pending, the court dismissed the employee's underlying suit - which Interstate defended with its own attorney - because he could not prove an intentional wrong to surmount the Workers' Compensation Act's exclusivity provision, N.J.S.A. 34:15-8. Later, on cross-motions for summary judgment in the coverage action, the trial court dismissed Interstate's complaint seeking defense costs and denied Interstate's motion for a declaration of coverage. The court held that exclusions in the employer's liability part of Interstate's policy barred its claim.

On appeal, Interstate challenges the trial court's interpretation of the policy. Interstate also argues that, to the extent the policy does bar recovery, it is void because it limits the scope of statutorily mandated coverage. Interpreting the employer's liability policy anew, we conclude it excludes coverage for Interstate's defense costs. However, AmGuard concedes that the workers' compensation portion of its policy afforded coverage of defense costs of negligence-based claims. Therefore, we reverse in part and remand for a determination whether, and to what extent, Interstate may recover costs associated with defending the negligence-based claims.

I.

The facts are largely undisputed. Interstate employee Olvin Rodriguez-Ortiz fell off a warehouse racking system that he was dismantling and suffered serious injuries. He was not wearing a harness or other safety equipment. At the time, AmGuard insured Interstate under a Workers' Compensation and Employer's Liability Policy. Rodriguez-Ortiz filed a petition for workers' compensation benefits, on which AmGuard has paid in excess of $1 million.

Almost a year after the accident, Rodriguez-Ortiz also sued Interstate in Superior Court, seeking compensatory and punitive damages arising out of the same injuries. Rodriguez-Ortiz also sued numerous mainly fictitiously-named business entities and individuals who were somehow connected to the accident or the property and equipment involved. The prolix complaint, as later amended, alleged: Interstate and others failed to warn Rodriguez-Ortiz, to provide him needed safety equipment, or to take other measures to assure his safety; they created or permitted a "known dangerous hazard . . . which presented an unreasonable risk of harm"; their "negligence, recklessness and carelessness" caused Rodriguez-Ortiz's fall; and they were "strictly liable in tort." Rodriguez-Ortiz also alleged that Interstate's conduct "was especially egregious, wanton and/or intentional and amounted to conduct of a character so reprehensible as to warrant the award of punitive damages."

Interstate's attorney forwarded the summons and complaint to Interstate's commercial general liability insurer, Essex Insurance Company (Essex), and demanded a defense and indemnification up to the policy's limit, if necessary. Separately, Interstate's owner sent a similar demand to Interstate's insurance producer, who evidently procured both the Essex and AmGuard policies. Shortly after Interstate filed its answer, Rodriguez-Ortiz's attorney delivered a copy of the complaint to AmGuard. Interstate's attorney also communicated with AmGuard about the suit. But the record includes no express written demand for a defense like the one sent to Essex.

Three years into the employee's pending tort action, Interstate sued AmGuard for its defense costs, an assumption of the defense, and a declaratory judgment of coverage under the employer's liability portion of its policy. Interstate contended it was entitled to a defense from AmGuard because Rodriguez-Ortiz alleged that Interstate acted intentionally. The "verified" complaint stated that Interstate demanded a defense "by notification through its insurance agent."^[1] In addition to its breach of contract claim, Interstate asserted a breach of the covenant of good faith and fair dealing, a breach of the duty of care, fraud, wrongful denial of insurance coverage, and violation of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -224. Interstate also sought attorney's fees and punitive damages.

In its answer, AmGuard asserted that its policy excluded coverage of Rodriguez-Ortiz's intentional tort claim because it excluded claims for intentional wrongs and actions that the insured knows are "substantially certain" to cause death or injury; and the policy excluded a duty to defend uncovered claims. Interstate's coverage action was consolidated with Rodriguez-Ortiz's tort suit.

After discovery in the tort suit, Interstate succeeded in having the complaint dismissed on summary judgment. The court, citing Millison v. E.I. du Pont de Nemours &Co., 101 N.J. 161 (1985) and Laidlow v. Hariton Machinery Co., 170 N.J. 602 (2002), held that Rodriguez-Ortiz could not satisfy the "intentional wrong" exception to the Workers' Compensation Act's exclusivity provision, N.J.S.A. 34:15-8.^[2] The court concluded that Rodriguez-Ortiz failed to prove that Interstate knew its actions were substantially certain to cause Rodriguez-Ortiz's injury, and failed to prove that Rodriguez-Ortiz's injury was more than what may "commonly arise within an industrial life."

And, a few months later, on cross-motions for summary judgment in the coverage action, the court held that the AmGuard employer's liability policy excluded coverage for Interstate's defense costs. The court noted that the employer's liability policy excluded coverage for claims that the workers' compensation part of the policy covered. And the employer's liability policy also excluded coverage for intentional wrongs, including those that would satisfy the "substantially certain" test in Millison and Laidlow. Because the policy denied a duty to defend uncovered claims, Interstate was not entitled to its defense costs.

Interstate serves up a dozen points on appeal. Reduced to their essence, Interstate presents three main arguments: (1) AmGuard was required to defend because Rodriguez-Ortiz grounded claims in negligence, and the AmGuard employer's liability policy did not exclude negligence claims; (2) the exclusion of intentional wrongs, including actions substantially certain to cause injury, was void because it limited coverage Interstate was compelled to obtain; and (3) AmGuard was estopped from denying coverage.

II.

As the record discloses no genuine issue of material fact, Interstate's appeal turns on purely legal issues that we review de novo: does the AmGuard policy exclude coverage; does the compulsory insurance law override its terms; and was AmGuard estopped from denying coverage. See Abboud v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 450 N.J.Super. 400, 406 (App. Div. 2017) (stating that interpreting an insurance policy is a legal question that we review de novo); Pickett ex rel. Est. of Pickett v. Moore's Lounge, 464 N.J.Super. 549, 555 (App. Div. 2020) (stating that resolution of insurance policy interpretation issue will determine whether insurer was entitled to summary judgment where "the record discloses no genuine issue of material fact").

A.

Turning first to the AmGuard policy, we are "guided by general principles: 'coverage provisions are to be read broadly, exclusions are to be read narrowly, potential ambiguities must be resolved in favor of the insured, and the policy is to be read in a manner that fulfills the insured's reasonable expectations.'" Sosa v. Mass. Bay Ins. Co., 458 N.J.Super. 639, 646 (App. Div. 2019) (quoting Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt. Osteopathic Med., 210 N.J. 597, 605 (2012)). We apply the policy language's "plain, ordinary meaning." Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001). We liberally construe the policy in the insured's favor "to the end that coverage is afforded 'to the full extent that any fair interpretation will allow.'" Progressive Cas. Ins. Co. v. Hurley, 166 N.J. 260, 273 (2001) (quoting Kievit v. Loyal Protective Life Ins. Co., 34 N.J. 475, 482 (1961)). "In determining whether there is ambiguity, we consider whether an average policyholder could reasonably understand the scope of coverage, and whether better drafting could put the issue beyond debate." Sosa, 458 N.J.Super. at 646.

We must examine the scope of the...