[103 NJSuper Page 410] This is an action for declaratory judgment brought by Donald Rotwein and Edward Blake, t/a D. S. Rotwein, Edward Blake, Associated Architects, against two insurance companies, The General Accident Group and Continental Casualty Company, each authorized to do business in the State of New Jersey. By their complaint plaintiffs, who are professional architects licensed in the State of New Jersey, seek an adjudication that either or both of defendant insurance companies are obligated to defend an action brought against them in the United States District Court for the District of New Jersey charging negligent performance of architectural services and to pay any adverse judgment which may result from that action.
By their answers defendants do not deny most of the essential allegations of the complaint with respect to the issuance of insurance policies in favor of plaintiffs, the rendering of architectural services by plaintiffs, and the filing and pendency of the Federal District Court action alleging negligent acts, errors or omissions. Each alleges, however, that under its respective policy of insurance it is not obliged either to defend that action or to pay any judgment adverse to plaintiffs.
By motions and cross-motions for summary judgment all of the parties seek a judgment vindicating their respective contentions.
I. THE GENERAL ACCIDENT GROUP
With respect to the controversy involving The General Accident Group (hereinafter referred to as "General Accident"), the pleadings and affidavits disclose no genuine controversy as to any material fact. General Accident issued a policy of insurance known as an Architects Professional Liability Policy in favor of plaintiffs as its insured covering a period from April 15, 1961 through April 14, 1964. In July 1966, at which time plaintiffs no longer had an insurance policy with General Accident, plaintiffs were named as defendants in a complaint filed in the Federal District Court alleging negligence on their part in the performance of architectural services in April 1963. The alleged negligence related solely to the drawing and preparation of plans and specifications submitted to a general contractor for the construction of an industrial building in New York. After the submission of these plans and specifications plaintiffs had no further connection with that project; they performed no other architectural services and had no responsibility for any continuing supervision or inspection of the construction work or the completed job. Defects in the work materials came to the attention of the parties directly involved in the New York construction project as early as 1964, but plaintiffs had no knowledge of any defects and were not notified thereof at that time. The first notice of the defects was
received by plaintiffs when they were served with a copy of the complaint charging them with negligence in July 1966. They immediately notified General Accident of this complaint and General Accident disclaimed any responsibility to either defend that action or to pay any adverse judgment.
Paragraph IV under "Insuring Agreements" of the General Accident policy provided:
" Policy Period, Territory. This policy applies only to negligent acts, errors or omissions from services rendered during the policy period and then only if such cause an accident during the policy period, and further provided claim, suit or other action arising therefrom is reported during the policy period and is commenced in the United States of America. * * *"
General Accident argues that under the clear terms of this provision it is not obligated to provide insurance for plaintiffs. General Accident's position is that this provision of its policy posits three conditions of insurability which must be met within the policy period: (1) the occurrence of negligent acts, errors or omissions; (2) an accident caused by such negligent acts, errors or omissions, and (3) the reporting and commencement of a claim, suit or other action arising therefrom. While the allegedly negligent acts in the form of architectural services occurred, if at all, during the policy period, namely in 1963, no claim, suit or other action arising therefrom was reported or commenced during the policy period.
Plaintiff's urge that a strict construction of the operative provision would render the policy invalid. They contend that the language of paragraph IV of the "Insuring Agreements", taken in conjunction with other provisions of the policy, reveals an ambiguity or uncertainty as to whether a claim arising from negligence during the policy period must be made during the policy period. Plaintiffs ask that this ambiguity be resolved in their favor, and more specifically that they not be bound by the condition in paragraph IV that a claim must be brought or reported within the policy period.
Plaintiffs emphasize that under paragraph 4 of the "Conditions" of the policy the limit of liability of the insurer is specifically defined without any reference to when a claim must be made, viz.:
"The limit of liability stated in the declarations is the limit of the Company's liability for all damages arising out of negligent acts, errors or omissions occurring during the policy period."
Plaintiffs also stress that such a requirement is absent from paragraph 3 of the "Conditions" which provides:
"If claim is made or suit is brought against the Insured, the Insured shall immediately forward to the Company every demand, notice, summons or other process received by him or his representative."
Furthermore, it is pointed out that under the "Exclusions" of the policy there is no requirement that a claim arising out of negligent acts, errors or omissions be reported or brought within the policy period. Plaintiffs argue that these provisions generate uncertainty as to when a claim must be brought and that paragraph IV of the "Insuring Agreements," read fairly in context, requires only that there be an "occurrence" of the negligent acts, errors or omissions within the policy period, without regard to when a claim might be reported or brought.
It is a cardinal principle of judicial construction of insurance contracts that all doubts arising from ambiguous language or terms of uncertain meaning or import will be resolved in favor of the insured. Allen v. Metropolitan Life Ins. Co., 44 N.J. 294 (1965); Parnell v. Rohrer Chevrolet Co., 95 N.J. Super. 471 (App. Div. 1967); Capece v. Allstate Ins. Co., 88 N.J. Super. 535 (Law Div. 1965). It is equally well established that courts will not engage in creating ambiguity where none exists in order to apply such a rule of construction. The courts are bound to enforce a policy as written when unambiguous terms are used. Linden Motor Freight Co., Inc. v. Travelers Ins. Co., 40 N.J. 511
"The language [of a policy] should be revealing to the ordinary man." Merchants Ind. Corp. v. Eggleston, 37 N.J. 114, 122 (1962). It follows as a cognate rule of construction that a party's "reasonable expectations" will not be defeated by "hidden pitfalls," Linden Motor Freight Co., Inc. v. Travelers Ins. Co., supra; Gerhardt v. Continental Ins. Cos., 48 N.J. 291 (1966), or by "technical encumbrances" which nullify substantially the protection purchased by the insured. Kievit v. Loyal Protect. Life Ins. Co., 34 N.J. 475 (1961); Hoboken Camera Ctr., Inc. v. Hartford Acc. & Ind. Co., 93 N.J. Super. 484 (App. Div. 1967).
In construing the policy here in question and applying its language, paragraph IV of the "Insuring Agreements" defines the ambit of coverage in clear and unmistakable language. As defined therein an insured could reasonably expect to be protected only as to negligent acts, errors or omissions in the performance of architectural services, where an accident arises therefrom, and a claim or suit is reported and instituted; and each of these incidents of coverage must eventuate within the period of the policy.
This clear definition of the extent of coverage is not, as claimed by plaintiffs, rendered uncertain or ambiguous by other provisions of the policy. Paragraph 4 of the "Conditions" refers not to the scope or area of coverage but rather to the insured's "limit of liability," as disclosed by the caption of the paragraph; it means simply that the limit of its liability is stated in the declarations of the policy (i.e., in a particular dollar amount) and is restricted to "liability for all damages arising out of negligent acts, etc. occurring during the policy period." (Emphasis added.) With respect to paragraph 3 of the "Conditions," the language therein ...