Wickner v. American Reliance Ins. Co.

• Decision Date: 06 June 1994
• Citation: 273 N.J.Super. 560,642 A.2d 1046
• Parties: Harvey WICKNER and Bonita Wickner, Plaintiffs-Respondents, v. AMERICAN RELIANCE INSURANCE COMPANY, Defendant-Appellant. and Fitchburg Mutual Insurance Companies and Jeffrey C. Symeonides, Defendants-Respondents, and Crum & Forster Insurance Companies, Defendant.
• Court: New Jersey Superior Court — Appellate Division

Page 560

273 N.J.Super. 560

642 A.2d 1046

Harvey WICKNER and Bonita Wickner, Plaintiffs-Respondents, v. AMERICAN RELIANCE INSURANCE COMPANY, Defendant-Appellant and Fitchburg Mutual Insurance Companies and Jeffrey C Symeonides, Defendants-Respondents and Crum & Forster Insurance Companies, Defendant.

Superior Court of New Jersey Appellate Division.

Argued May 3, 1994.

Decided June 6, 1994.

Nicholas Kierniesky, Vineland, for appellant (J.H. Greenblatt, attorney; Mr. Greenblatt and Mr. Kierniesky, on the brief).

Thomas J. Giblin, Union, for respondents Harvey Wickner and Bonita Wickner (Giblin & Lynch, attorneys; Mr. Giblin and James J. Marchwinski, on the brief).

Methfessel & Werbel, Rahway, for respondent Fitchburg Mut. Ins. Co. (Joseph W. Pender, on the brief).

No brief timely filed by respondent Jeffrey C. Symeonides.

Before Judges PRESSLER, DREIER and KLEINER.

The opinion of the court was delivered by

DREIER, J.A.D.

Defendant American Reliance Insurance Company appeals from a summary judgment entered in favor of plaintiffs, Harvey and Bonita Wickner, for defense costs incurred in a separate personal injury action. The trial judge certified this judgment as final, notwithstanding the pendency of other claims. R. 4:42-2. Plaintiffs brought this declaratory judgment action against defendants Crum & Forster Insurance Companies (an excess carrier), Fitchburg Mutual Insurance Company (the insurer of 328 Warren Street, Harrison, during the time plaintiffs owned the property), American Reliance Insurance Company (plaintiffs' homeowner's insurer), and Jeffrey C. Symeonides (a Fitchburg agent) for failure to afford defense counsel when plaintiffs were sued by Marina Avila.

On appeal, American Reliance asserts that the judge erred in construing the insurance policy to afford coverage, notwithstanding the exclusions of the policy, and that the declaratory judgment action was barred by application of the entire controversy doctrine. We agree with the insurer's arguments that the exclusions of its policy preclude this claim, and therefore do not reach the entire controversy doctrine issue.

On May 10, 1984, plaintiffs purchased a three-family residence at 328 Warren Street in Harrison. Contemporaneous with the purchase of the property, plaintiffs obtained liability insurance coverage for the property from Fitchburg through Symeonides, a Fitchburg agent. Plaintiffs resided at 620 Bergen Street in Harrison, and never moved into the Warren Street property, as may have been originally intended. They rented out the Warren Street property, and in 1985 reported $11,800 in rental income on their tax returns.

Plaintiffs obtained insurance coverage from another company, American Reliance, for their "residence premises," listed on the declaration sheet as 620 Bergen Street, Harrison, and for the rear of 74 First Street, Keyport, presumably a vacation residence. The policy covered one year, from June 12, 1985, to June 12, 1986. Included in the policy is section two, titled "Home and Personal Liability Coverage," providing personal liability protection up to $100,000. The applicable provision states:

Coverage (E)--Personal Liability to Others

This provides for payment on behalf of an insured of sums which the insured becomes legally obligated to pay as damages because of loss covered here. We agree to pay such sums that arise out of bodily injury or property damage caused by an occurrence.

We will provide a defense by counsel of our choice in a suit against an insured seeking damages on account of a loss covered by this agreement.

On July 11, 1985, plaintiffs sold the Warren Street property. On August 5, 1985, less than a month after the sale by plaintiffs, Avila allegedly tripped and fell on the sidewalk abutting 328 Warren Street and sustained serious injuries. On August 4, 1987 she filed a lawsuit against the new owners of 328 Warren Street, as well as plaintiffs as former owners of the property, and the original builder. Avila claimed that her injuries were the result of negligent construction, maintenance, and repair of the sidewalk abutting 328 Warren Street.

Plaintiffs requested that Fitchburg and American Reliance provide defense counsel and coverage for the Avila case. American Reliance, plaintiffs' homeowner's carrier, refused, stating that "none of the policies that American Reliance wrote for the Wickners covered the loss location 328 Warren Street. We must, therefore, formally deny any coverage ... due to the fact that this was not a primary residence, in an insured location, or a property that was added within thirty days of purchase." As the Fitchburg policy had been canceled prior to the Avila fall, it also denied coverage, so plaintiffs were forced to retain their own attorney.

Avila's slip-and-fall case was litigated in May 1989, and plaintiffs, the builder of the property, and the present owners prevailed. Avila successfully appealed the verdict and we remanded for a new trial. Before the second trial, plaintiffs were voluntarily dismissed from the case. Their expenditures for legal costs, however, have exceeded $143,000.

Plaintiffs filed a declaratory judgment action against Crum & Forster, Fitchburg, and American Reliance, asserting that all three insurance companies had wrongfully denied coverage for the occurrence alleged by Avila and that all had been required to provide plaintiffs with a defense in that lawsuit. In an amended complaint, plaintiffs added Symeonides, a Fitchburg insurance agent, as a defendant, asserting that he had negligently, intentionally, or wrongfully canceled the Fitchburg policy and misrepresented plaintiffs' intent. Plaintiffs' case against Fitchburg and Symeonides went to trial and resulted in a jury verdict in favor of both defendants.

After cross-motions by all parties in the declaratory judgment action, the trial judge entered an order granting summary judgment to plaintiffs against the homeowner's carrier, American Reliance, and denying the other motions and cross-motions for summary judgment. ¹ The judge also denied American Reliance's motions for reconsideration, clarification and a stay.

The judge signed a final order for judgment against American Reliance, for $65,453.04 for failure to provide coverage in the Avila lawsuit and $77,855.98 for costs, counsel fees, and interest in this suit to enforce liability coverage and for legal assistance which had been wrongfully denied. The order states: "ORDERED that the findings of liability as recited in this Court's Order of April 3, 1992 and the fixing of attorney's fees shall be certified as a Final Judgment against American Reliance Insurance Company pursuant to Rule 4:42-2." ²

At oral argument on April 3, 1992, American Reliance claimed that two exclusions in the insurance policy, numbers 3 and 5 denied coverage to plaintiff. They read:

Exclusions--we are not liable for any loss:

....

3. arising out of any business activities of an insured, except:

a. activities which are not undertaken in relation to business and which are activities otherwise covered here;

b. those within the term business pursuits; or

c. the part time activities of an insured who is a student under the age of 18; ....

5. arising out of a premises owned, rented, or controlled by an insured, other than an insured premises--but this does not apply to bodily injury to a residence employee arising out of and in the course of employment by an insured....

In short, American Reliance maintained it did not have to afford coverage or provide defense counsel because the alleged injuries were losses "arising out of ... business activities of the insured" or losses "arising out of premises owned by the insured, other than an insured premises."

On April 3, 1992, the trial judge determined that neither exclusion was applicable and granted plaintiffs' summary judgment motion against American Reliance. He stated that plaintiffs' liability in the Avila case had been based on a separate basis, namely that imposed under the holding in Cogliati v. Ecco High Frequency Corp., 92 N.J. 402, 456 A.2d 524 (1983) (holding that there is a cause of action for persons injured due to a hazard that was created, or left uncorrected, by a previous owner of a property). The judge thus found American Reliance's policy covered plaintiffs under the personal liability section of the policy.

Addressing whether the non-listed premises exclusion applied, the judge focused on whether the Warren Street property was "premises owned by an insured" and on the meaning of the word "owned." He stated: "Different languages have different structures. There are present participles, there are past participles. Some languages have perspective aspects to their verbs. What does owned mean? That's a defect in the English language." Thus, the judge questioned whether "owned" property included property both presently and previously owned.

Addressing the business activities exclusion, the judge held that this was not an accident arising out of business activities or business pursuits because, having already sold the property, plaintiffs were no longer pursuing a business on the premises. The judge stated: "We have here one of those general legal obligations created by law, not created by ownership during the policy period." He then turned to the reasonable expectations of the insured and concluded that an insured would believe that liability insurance covers "those things that are implied by law--not necessarily by his own activities or by his own design." The judge determined that both the business activities and owned premises exclusions "do not refer to liabilities imposed by law or occurrences happening with[in] the policy period." "These liabilities ... do not arise out of presently owned properties which are what the insurance company expects to be listed. They arise by operation of law, and I think liability coverage has to be broad enough to cover those things that are...