Wear v. Selective Ins. Co., DOCKET NO. A-5526-15T1

• Decision Date: 20 July 2018
• Docket Number: DOCKET NO. A-5526-15T1,A-0033-16T1
• Parties: Theresa WEAR and Richard Wear, Plaintiffs/Intervenors-Appellants, v. SELECTIVE INSURANCE COMPANY, Defendant-Respondent. Woodbury Medical CenterAssociates, LLP, Plaintiff-Respondent, v. Selective Insurance Company, Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

455 N.J.Super. 440

190 A.3d 519

Theresa WEAR and Richard Wear, Plaintiffs/Intervenors-Appellants,

v.SELECTIVE INSURANCE COMPANY, Defendant-Respondent.

Woodbury Medical CenterAssociates, LLP, Plaintiff-Respondent,

v.Selective Insurance Company, Defendant-Appellant.

DOCKET NO. A-5526-15T1

A-0033-16T1

Superior Court of New Jersey, Appellate Division.

Argued April 18, 2018

Decided July 20, 2018

Bruce H. Zamost, Princeton argued the cause for appellants Theresa Wear and Richard Wear (in A-5526-15) and respondents (in A-0033-16) (Helmer, Conley & Kasselman, PA, attorneys; Bruce H. Zamost, Princeton of counsel and on the brief).

Richard J. Mirra, argued the cause for respondent Selective Insurance (in A-5526-15) and appellant in (A-0033-16) (Hoagland, Longo, Moran, Dunst & Doukas, LLP, attorneys; Richard J. Mirra, of counsel and on the briefs; John C. Simons New Brunswick, on the briefs).

Mitchell H. Kizner, argued the cause for respondent Woodbury Medical Center Associates, LLP (Flaster Greenberg, PC, attorneys; Mitchell H. Kizner, Cherry Hill, of counsel and on the brief).

Before Judges Koblitz, Manahan and Suter.

The opinion of the court was delivered by

MANAHAN, J.A.D.

The instant case presents another example of the complexities sometimes involved with the resolution of insurance coverage disputes based upon exceptions to coverage. The principal issue is whether exclusionary language in a policy issued to Woodbury Medical Center Associates, LLP (Woodbury Medical) by Selective Insurance Company (Selective) precluded coverage for an environmental personal injury claim by Theresa Wear and a per quod claim by Richard Wear (collectively the Wears).

Having considered the record in light of controlling law, we affirm in part and reverse in part.

I.

Woodbury Medical is the owner of an office building in Woodbury, New Jersey. Theresa Wear worked in the building as a registered nurse (RN) for Underwood Medical Center. She claimed to suffer injuries due to exposure to alleged toxic conditions in the building. In their complaint against Woodbury Medical, the Wears averred that Theresa was injured due to "exposure to mold and the HVAC [ (heating, ventilation and air conditioning) ] filter fragments from when the HVAC system was activated in the basement of the property." The Wears further averred that Woodbury Medical had a duty to keep the premises safe from: "1) hazardous toxic condition[s]; 2) dangerous air pollutants; 3) aspergillus fungus/mold hazards; and 4) other environmental dangers."

Selective issued a commercial umbrella and business owners insurance policy (the policy) to Woodbury Medical, which was in effect at the time of the Wears' claim. The policy provided Woodbury Medical with "protection for business liability for any bodily injury ‘to which this insurance applies.’ " The policy included a fungi or bacteria exclusion:

A. The following exclusion is added to Paragraph B.1., Exclusions – Application To Business Liability Coverage:

q. Fungi or Bacteria

(1) "Bodily injury[,"] "property damage" or "personal and advertising injury" which would not have occurred, in whole or in part, but for the actual, alleged or threatened inhalation of, ingestion of, contact with, exposure to, existence of, or presence of, any "fungi" or bacteria on or within a building or structure, including its contents, regardless of whether any other cause, event, material or product contributed concurrently or in any sequence to such injury or damage.

(2) Any loss, cost or expenses arising out of the abating, testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, remediating or disposing of, or in any way responding to, or assessing the effects of, "fungi" or bacteria, by an insured or by any other person or entity.

....

B. The following definition is added [to] Paragraph F. Liability And Medical Expenses Definitions:

1. "Fungi" means any type or form of fungus, including mold or mildew and any mycotoxins, spores, scents or by-products produced or release [sic] by fungi.

[ (Emphasis added).]

Woodbury Medical notified Selective of the Wears' claim in May 2011. In August 2012, after conducting an investigation, Selective issued a denial of coverage letter referencing the exclusionary language in the policy. The letter stated that the "policy in effect for Woodbury does not provide coverage for any and all bodily injuries alleged by Theresa Wear arising out of her exposure to mold, mildew, fungi or bacteria or medical expenses" as they were, among other unrelated reasons, "excluded by virtue of Fungi or Bacteria Exclusion Endorsement Forms ... contained in the policies." Selective did not issue a reservation of rights letter as it took the position that the anti-concurrent and anti-sequential language in the exclusion precluded coverage even if there were other causes which may have contributed to the injury.

Woodbury Medical instituted an action against Selective, later amended, seeking a declaration that Selective was required to defend and indemnify Woodbury Medical in the Wears' litigation. Woodbury Medical moved for partial summary judgment. Selective filed a cross-motion for summary judgment maintaining there was no coverage for the claims.

On January 9, 2015, the judge granted Woodbury Medical's motion for partial summary judgment and ordered that Selective immediately fund Woodbury Medical's defense in the underlying action, reimburse Woodbury Medical for expenses it already incurred in the defense of the Wears' litigation, and pay attorneys' fees incurred by Woodbury Medical in the declaratory judgment action.¹ In a separate order, also dated January 9, 2015, the judge denied Selective's cross-motion for summary judgment. On January 22, 2015, in a supplemental order, the judge clarified that the January 9, 2015 order was "to be considered an interlocutory order applying ONLY to the defense obligations of Selective ...."

The supplemental order also provided that the trial in the declaratory judgment action was to be adjourned until a resolution was reached in the Wears' litigation.

In reaching the determination on Selective's obligation to defend, the judge stated:

The [c]ourt certainly reviewed the factual basis as alleged by Ms. Ware, [sic] who claims that she suffered bodily injury as a result of exposure to hazardous conditions.

I acknowledge that there is an allegation that relates to the mold, but I am in agreement with the plaintiff's counsel. There also definitely is an allegation that pertains to the fibers from the filter, the air conditioning system, or the filter fragments. It is an environmental hazard that is claimed. It is something besides the mold issue, the [c]ourt finds.

I understand your arguments. But I do find that there has been an indication of other environmental damages and based on the case law, I find that there is a duty to defend in this instance. I have examined the complaint. I have reviewed the policy limitations. But if there are any doubts, they are to be resolved in favor of the insured.

Based on the cases as cited by plaintiff's counsel, I do find that the insurance company is required to defend in this instance.

[D]efendant does owe the plaintiff the duty in the underlying lawsuit. It's appropriate here because there is another cause for Ms. Ware's [sic] injuries.

Selective moved for leave to appeal, which we denied. Selective then moved before the Law Division to stay the order compelling it to fund Woodbury Medical's defense, which was denied. Thereafter, Woodbury Medical moved to enforce litigant's rights and Selective cross-moved for reconsideration of both the order requiring Selective to provide a defense and the order denying a stay. The judge granted Woodbury Medical's motion to enforce litigant's rights and ordered Selective to pay Woodbury Medical counsel fees for its defense in the Wears' litigation within thirty days. Selective again moved for leave to appeal, which we denied.²

By agreement of the parties, the Wears' litigation was submitted to arbitration. At the conclusion of the testimonial hearing, the arbitrator rendered a one-page written award in favor of the Wears for $300,000. The arbitrator noted that the award was for a "claim by RN for workplace exposure to toxic aspergillus mold."

After the rendering of the award, the Wears and Woodbury Medical entered into a consent order amicably resolving the Wears' litigation. The consent order contained the following essential terms. A judgment would be entered in favor of the Wears against Woodbury Medical in the amount of $300,000. Woodbury Medical would assign its coverage rights to the Wears, who then bore the burden of proceeding against Selective "with respect to Selective's obligation to indemnify [Woodbury Medical] for the claims brought and judgment obtained ... under liability insurance policies issued by Selective." The Wears would "never ... execute upon [Woodbury Medical] or its assets, or those of its past, present and future principals ... in order to collect the [j]udgment, or ... in any other way seek payment of the [j]udgment or any other sum from [Woodbury Medical] ...." The Wears relinquished all claims against Woodbury Medical whether or not they were successful against Selective. The order stated: "[N]o injury was suffered by [the Wears] as a result of exposure to mold at premises owned by [Woodbury Medical]."

The Wears moved to intervene as plaintiffs in the declaratory action. Among other arguments, the Wears asserted Selective was obligated to pay the $300,000 judgment premised upon our Supreme Court's holding in Griggs v. Bertram, 88 N.J. 347, 443 A.2d 163 (1982) and premised upon principles of equitable estoppel due to Selective's bad faith and wrongful refusal to defend.

The motion to intervene was granted by order on June 26, 2015. The order limited intervention to "coverage and/or indemnification under the policy of insurance issued to Woodbury Medical ...." The order provided that the Wears were...