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United States Fidelity and Guaranty Co. v. Greater Essex Security Inc.

Decided: March 21, 1991.


Yanoff, J.s.c. (retired and temporarily assigned on recall).


In a sense, this is a continuation of the issues raised by West v. MacDonald, et al., 103 N.J. Super. 201, 247 A.2d 20 (App.Div.1967), aff'd 52 N.J. 536, 247 A.2d 129 (1968), of which more later. Two issues have been raised: the first, whether the "completed operations hazard" provision of defendant's insurance policy bars recovery under the facts in this case; the second, whether the carrier is equitably estopped from disclaiming coverage by reason of having assumed, under a "non-waiver" agreement, defense of the case. This need not be answered because I have concluded that there is coverage.

This litigation arose out of a fire on June 19, 1988 at Roval Lumber & Millwork Company ("Roval"). After a number of claims had been consolidated, I ordered the action of United States Fidelity & Guaranty Company ("USF & G"), for a declaratory judgment that its insurance policy for the policy period September 24, 1987 to September 24, 1988 did not cover the loss, to be tried separately. The case was tried without a jury.

The facts are not complex. Greater Essex Security, Inc. ("Essex") has, since approximately June 1980, serviced Roval's fire alarm system under an oral agreement. Essex consists of Gary Cocchia, who is an expert in the installation and servicing of such systems. The system involved is a fire alarm system which he did not install and which is connected by a Gamewall Masterbox to the fire department of Belleville. Under the agreement, Essex came monthly to test the fire alarm system and charged, during the applicable period, $30 each month.

The agreement required Essex to be on call for emergencies, 24 hours a day. If something was wrong with the system, Essex repaired it and, where the repair was significant, rendered an extra bill. Essex also submitted with the bill, a report stating what had been done to the system.

Essex' last inspection before the fire occurred on June 8, 1988. Its June 8 report showed everything in order except "one pneumatic fire circuit 28C-NT." According to Cocchia, "NT" means that the circuit was not working.

Cocchia did not repair the circuit on June 8 because he needed specialized equipment which he did not have with him. He planned to come back another time to make the repair. Cocchia stated that this was part of his maintenance contract and I find, as a fact, that this is so. The fire on June 19 did not involve the portion of the lumber yard protected by the defective circuit. On the date of the fire, Cocchia was called by the Belleville Fire Department early in the morning and got to the scene approximately 40 minutes later.

Access to the Gamewall Masterbox can be had only by opening a lock. Only Cocchia and the Belleville Fire Department had keys to the lock.

Cocchia testified that when he tested the Roval fire alarm system on June 8, he shut off the connection to the Belleville Fire Department in the Gamewall Masterbox. This he did by disengaging a triparm. He stated that, after the June 8 inspection, he replaced the triparm so that the connection to the Belleville Fire Department was functioning. However, when he examined the Gamewall Masterbox the day of the fire, he found that the triparm had been completely pulled out of the mechanism which meant that connection to the Belleville Fire Department was not functioning. Cocchia was certain that when he left the box on June 8, it had been locked.

Although Cocchia's report of June 8 states that the system was left in service, it is a fact that the area serviced by No.

28C -- not involved in the fire -- was not covered. Essex' relationship with USF & G went back to at least 1985.

Eleanor Milano testified on behalf of USF & G. At all pertinent times and presently, she was and is the employee of RLM Agency, Inc., which actually wrote the policy. She testified that, as a matter of routine, she spoke to Cocchia on the telephone and offered him "completed operations" coverage which he refused. This, Cocchia denied, stating instead that he told the agency the nature of his business and accepted the agency's recommendation as to the form of insurance.

The policy is entitled "Comprehensive General Liability Insurance." On the cover page, the business of the insured is stated as "Security System Installation." However, in the "coverage part" of the policy, under the heading "premises/operations" is stated "electrical apparatus/installation, servicing or repair," followed by No. 17313. On the same line is stated the premium base, the rates, and the premiums for both bodily injury and property damage. Milano stated that this description of Essex' business controlled the premium.

I have concluded that it does not matter whether Milano offered Cocchia the broader coverage and Cocchia refused. The policy provides:

"completed operations hazard" includes bodily injury and property damage arising out of operations or reliance upon a representation or warranty made at any time with respect thereto, but only if the bodily injury or property damage occurs after such operations have been completed or abandoned and occurs away from premises owned by or rented to the Named Insured. "Operations" include materials, parts or equipment furnished in connection therewith. Operations shall be deemed completed at the earliest of the following times:

(1) when all operations to be performed by or on behalf of the Named Insured under the contract have been completed,

(2) when all operations to be performed by or on behalf of the Named Insured at the site of the ...

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