On appeal from Superior Court, Chancery Division, Atlantic County.
Seidman, Michels and Devine. The opinion of the court was delivered by Seidman, P.J.A.D.
[172 NJSuper Page 13] These consolidated appeals by two liability insurance carriers involve questions of coverage for a common law, negligence, personal injury action instituted against the insured corporation, Variety Farms, Inc., and its president, John N. Bertino, on behalf of a 15-year-old youth, Alan J. Sindoni, who suffered a serious injury while in the employ of the corporation. Both carriers disclaimed coverage, whereupon the insured and its president filed a declaratory judgment action seeking a determination that the carriers were obligated to afford coverage for and defend them in that suit. The Sindonis, who were joined as defendants, moved for summary judgment, as did plaintiffs.*fn1 The motions were granted, the trial judge finding as a matter of law that the liability policy issued by New Jersey Manufacturers Insurance Co. (NJM) provided coverage to Variety Farms for compensatory damages and that the one issued by Insurance Company of North America (INA) provided excess coverage to Variety Farms and Bertino for compensatory and punitive damages "over and above the retained limit of such policy."
The complaint in the underlying personal injury action recites that on July 1, 1975 the infant plaintiff was employed by Variety Farms at its plant in Hammonton, where various agricultural products were packaged. He suffered the traumatic amputation of his left arm on that date when it was caught in a moving conveyor roller. The employer and its president were charged with negligence in permitting the infant plaintiff to work in, about or in connection with power-driven machinery, a type of employment prohibited to minors under 16 years of age by N.J.S.A. 34:2-21.17.
At the time of the accident Variety Farms was insured by NJM under a standard workers' compensation and employers' liability policy. NJM was obligated under Coverage A (workers' compensation) of its policy to pay all compensation and other benefits required of the insured by the Workers' Compensation Law. Under Coverage B (employers' liability) it was required to pay on behalf of the insured "all sums which the insured shall become legally obligated to pay as damages because of bodily injury by accident . . . sustained . . . by any employee of the insured arising out of and in the course of his employment. . . ." But Coverage B also contained an exclusion "with respect to any employee employed in violation of law with the knowledge or acquiescence of the insured or any executive officer thereof."
Variety Farms was additionally insured by INA under an Excess Blanket Catastrophe Liability Policy, in which the insurer undertook to indemnify the insured "for the ultimate net loss in excess of the retained limit which the insured shall become legally obligated to pay as damages" because of personal injury or property damage.*fn2 The policy noted in a relevant schedule
the existence of a "Standard Workmen's Compensation and Employers' Liability" policy. Unlike the NJM policy, the INA policy covered not only Variety Farms but also Bertino, who was an additional insured thereunder by virtue of his position as an "officer, executive [or] employee" of the company.
In opposition to the motions for summary judgment, NJM relied upon the Coverage B exclusion in its policy. It sought to establish through affidavits, depositions and other documents that the minor was illegally employed with plaintiffs' knowledge or acquiescence. Plaintiffs, on the other hand, contended that the exclusion did not apply unless the employer had actual knowledge that the employment was in violation of law. They maintained that they were unaware of the pertinent statute until advised of it by their attorney following the accident.
INA's position was that it could not lawfully insure against an employer's liability to an employee when both are subject to the Workers' Compensation Law, and that an exclusion to that effect, inadvertently omitted from the policy when it was issued, was later retroactively included by endorsement.
We consider first the coverage of the NJM policy. In his letter opinion the trial judge apparently assumed, as had the litigants, that the exclusion under Coverage B was the critical issue to be resolved. He therefore found it necessary to explore factually whether Variety Farms, through its officers or agents, knew that the Child Labor Law, N.J.S.A. 34:2-21.17, forbade the employment of a minor under 16 in, about or in connection with
power-driven machinery. He construed the exclusion to require actual knowledge of such law on the part of the employer, and in that regard took into account plaintiffs' denial in answers to interrogatories that they knew it was a violation of law to expose a minor employee under 16 to power-driven machinery. The trial judge rejected as hearsay and untimely NJM's answering affidavit by an associate in its attorneys' office relating a conversation with a representative of the State Wage and Hour Bureau, from which it appeared that plaintiffs had been told of the law and given an abstract of it to post in a conspicuous place. The conclusion reached was that NJM had "failed to produce any competent evidential material that would raise a factual issue" of the applicability of the exclusion; consequently, the trial judge held that the NJM policy covered plaintiffs with respect to the minor's negligence action.
While we agree that the NJM policy provides coverage for that lawsuit, our concurrence with the trial judge's conclusion in that respect is not to be construed as an endorsement of his rationale. Passing the question of whether, despite the trial judge's contrary view, there was a genuine factual dispute concerning the applicability of the exclusion, thus precluding the entry of summary judgment, R. 4:46-2; Judson v. Peoples Bank & Trust Co. of Westfield , 17 N.J. 67, 73 75 (1954), we are firmly convinced on the facts here involved that the exclusion should have had no place whatsoever in the trial judge's consideration and determination of the issue of coverage.
Our concern here is with a youth, then under the age of 16, who concededly had been employed by Variety Farms to work in its packing plant and who, in the course of his employment, suffered a grievous injury. It is not in dispute, at least for the purpose of the declaratory judgment action, that the minor's arm was caught in and traumatically ...