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Middle Department Inspection Agency v. Home Insurance Co.

Decided: November 21, 1977.

MIDDLE DEPARTMENT INSPECTION AGENCY, PLAINTIFF-APPELLANT,
v.
THE HOME INSURANCE COMPANY AND THE CALIFORNIA UNION INSURANCE COMPANY, DEFENDANTS-RESPONDENTS. MIDDLE DEPARTMENT INSPECTION AGENCY, PLAINTIFF-APPELLANT, V. THE HOME INSURANCE COMPANY AND THE CALIFORNIA UNION INSURANCE COMPANY, DEFENDANTS-RESPONDENTS



Halpern, Larner and King. The opinion of the court was delivered by Larner, J.A.D.

Larner

Plaintiff Middle Department Inspection Agency (Middle Department) is the successor in interest of Middle Department Association of Fire Underwriters (Association). Both companies were engaged in the business of inspecting electrical installations to assure compliance with applicable laws and regulations. In July 1970 Association was insured under a liability policy issued by The Home Insurance Company (Home). It was at that time that Association, in the course of its business, inspected the electrical wiring of a building in Long Branch, New Jersey.

In May 1973 a fire occurred in that building causing property damage, which resulted in a lawsuit against Middle Department seeking damages on an allegation of negligent inspection. As of the time of this occurrence the Home policy was no longer in force. However, Middle Department did have at that time an Errors and Omissions policy with The California Union Insurance Company (California).

When plaintiff was served with the summons and complaint it forwarded them to Home, the liability carrier as of the time of the allegedly negligent inspection. Home disclaimed and declined to assume the defense or indemnification on the ground that its policy had expired as of the time of the fire.

Thereupon Middle Department forwarded the suit papers to California. By letter dated August 27, 1975 California observed that the inspection which triggered the cause of action in negligence took place before its policy went into effect. Nevertheless, it offered to investigate and undertake the defense upon a reservation of its rights to "deny coverage and defense" if further investigation disclosed noncoverage. This reservation of rights agreement was accepted by Middle Department through an appropriate signature on a copy of the letter.

On September 18, 1975 counsel for California moved to be relieved in the tort action because of the company's

decision to disclaim because of noncoverage, and an order was entered to that effect on October 17, 1975. As a result Middle Department instituted this declaratory judgment action against both companies seeking a declaration as to the obligation of either or both to defend and to indemnify it for any losses arising out of the litigation with the claimant.

All parties moved for summary judgment. The trial judge granted summary judgment in favor of Home and California and denied plaintiff's motion. In effect, therefore, the judge declared that neither policy provided coverage to plaintiff for the claim arising out of the fire of May 1973. Plaintiff appeals from the summary judgment and from the order denying its motion to set aside said judgment, asserting that (1) one or both of the policies obligate the respective companies to defend and pay, (2) California is estopped from disclaiming coverage, and (3) summary judgment for Home was unwarranted because it was based upon a specimen policy.

Points 2 and 3 relating to estoppel and reliance upon a specimen policy are clearly without merit. R. 2:11-3(e)(1)(E). We shall therefore limit the scope of this opinion to the substantive issue of coverage under each of the policies.

I

The Home policy provided general liability coverage for damage "caused by an occurrence." "Occurrence," in turn, is defined as "an accident * * * which results, during the policy period, in bodily injury or property damage." Thus, in order for an occurrence to qualify for coverage under this policy the damage must occur within the policy period.

Although the allegedly negligent act of Middle Department took place within the policy period, the fire and the damage both occurred after the policy expired. It is therefore manifest that the occurrence involved therein was not ...


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