[123 NJSuper Page 354] Plaintiff, a professional engineer, seeks a judgment declaring that he has coverage under a policy of insurance issued by defendant and called "Architects and Engineers Policy." The initial policy issued by this defendant was for a period commencing February 23, 1965 to February 23, 1966, and thereafter the policy was renewed yearly until February 23, 1970. By an amendment to the last policy, the policy was amended to include the period from February 23, 1969 to April 5, 1970.
The first policy, as noted, was issued in 1965. Plaintiff testified he read it at that time but did not understand all of its provisions and did not seek any explanation of the terms.
Plaintiff discontinued coverage by defendant-company in 1970 when he was in financial difficulties. He went into receivership and was unable to pay the premiums charged. The premium for the last year of coverage was $10,000.
The facts which call for this declaratory judgment are as follows.
On August 8, 1966 the City of Millville engaged plaintiff as a consulting engineer for the construction of a multi-million dollar sewer plant. Bids were received and the city entered into a contract for the construction of the sewer plant with Pagano Construction Company on December 17, 1968. Several of the large tanks that composed the sewer treatment plant began to settle, and on March 12, 1970 plaintiff notified the contractor that the final settling tanks were not level and directed him to correct the deficiency. Thereafter the contractor instituted a lawsuit on a book account asking for payment of the balance of the money due him. Defendant in that action was the City of Millville, who counterclaimed for the costs of correcting the alleged improper work. Plaintiff Jones was not a party to the proceeding until Pagano Construction Company joined him as a third-party defendant on August 18, 1971. Receipt of the suit papers that day was Jones' first knowledge of the claim or suit against him. This was more than 16 months after the expiration of the last policy of insurance issued by defendant. The suit papers were forwarded by plaintiff to defendant the next day. They were received by defendant on August 23, 1971. Defendant then forwarded the papers to the law firm of Kisselman, Deighan, Montano, King and Summers, who appeared in defense of a motion on August 27, 1971 in Bridgeton.
An investigator for defendant company went to the office of plaintiff in Mount Holly and received pertinent information pertaining to the claim, and attorneys from the firm of
Kisselman, Deighan, Montano, King and Summers attended a meeting with the City Commissioners of Millville on August 31, 1971. Other than the writing of one additional speed letter on September 8, 1971, no action was taken by defendant in connection with the defense of the matter. No answer was filed. The suit papers were returned to plaintiff. Coverage was denied. Plaintiff was informed he should obtain his own counsel to defend the matter.
This lawsuit revolves around the interpretation to be given to the following provisions of the policy, it being the contention of defendant that the claim and lawsuit in question fall outside of the policy period as that is defined in the policy itself.
IV. Policy Period, Territory.
(a) During the Policy Period.
The insurance afforded by this policy applies to errors, omissions or negligent acts which occur * * * during this policy period if claim therefor is first made against the insured during this policy period.
(b) Prior to the Policy Period.
The insurance afforded by this policy also applies to errors, omissions or negligent acts which occur within the United States of America, * * * prior to the effective date of this policy if claim therefor is first made against the insured during this policy period and if all of the following requirements are present:
(1) the error, omission, or negligent act was also insured by this Company under the prior policy (as defined below) * * *
(2) no insured, at the effective date of the prior policy (as defined below), had any knowledge of a pending claim which might be made against any insured or had any knowledge or any circumstance which may reasonably be expected to create a claim against any insured.
Prior policy (for the purpose of this insuring agreement) means the combined total of all architects' and/or engineers' professional liability policies issued by this Company beginning with the first architects ' and/or engineers' professional liability policy followed continuously by successive architects' and/or engineers' professional liability ...