your residence is vacant, unoccupied, under construction, or closed during an absence of all insureds. but such loss is covered if you, and those designated to care for the premises exercise caution and diligence to prevent freezing at such times.
The issue of whether the Haardts exercised caution and diligence to prevent the pipes from freezing on January 22, 1985 involves a factual determination that must be resolved by the finder of fact. See JMB Enterprises v. Atlantic Employers Insurance Co., 228 N.J.Super. 610, 550 A.2d 764 (App.Div. 1988). The finder of fact must determine what actions, if any, were taken by the Haardts to prevent freezing and whether the freezing was unavoidable despite these actions due to the extremely cold temperatures. Since the Defendant Insurance Company has not carried its burden of establishing the absence of a genuine issue of material fact, the court will deny its motion for summary judgment based on the "freezing pipe" exclusion as well.
3) Consequential and Punitive Damages
The Defendant Insurance Company also makes the argument that the Haardts claims for consequential damages-the devaluation of the property and the loss of rents-and punitive damages is barred since New Jersey courts do not permit the recovery of consequential and punitive damages in insurance actions. In response, the Haardts argue that their claim for lost rents is covered by the policy in effect on January 22, 1985.
The combination dwelling policy CD12074 provides that the Defendant Insurance Company provides coverage for "your loss of rents, less non-continuing expenses, incurred while that part of the residence premises regularly held by you for rental for others is made incapable of being occupied by a property loss we cover here." The court agrees with the Haardts that their claim for lost rents in covered by the policy in effect on January 22, 1985 and will deny the Defendant Insurance Company's motion with respect to that claim.
The court must still determine whether the Haardt's claims for consequential and punitive damages are permitted for the alleged bad faith refusal of the Defendant Insurance Company to pay its claim under the combination Dwelling policy CD12074 in effect on January 22, 1985. Under New Jersey law, an insured cannot maintain an action for punitive damages for the insurer's wrongful, bad faith refusal to provide coverage or for the bad faith delay in handling claims. Carfagno v. Aetna Casualty & Surety Co., 770 F.Supp. 245, 246 (D.N.J. 1991); Pickett v. Lloyds, 252 N.J.Super. 477, 600 A.2d 148 (App.Div. 1991). Whether an insured can maintain an action for consequential damages
for the insurer's refusal to pay benefits is unclear since the New Jersey Supreme Court has not decided the issue
and because the New Jersey federal and state courts which have recently considered the issue reach different conclusions.
The latest pronouncement by the New Jersey courts on the availability of consequential damages in an action for bad faith refusal to process and pay an insurance claim is by the Appellate Division of the Superior Court in Pickett. The Pickett court held that an insured has a cause of action against an insurer for consequential damages due to the insurer's bad faith in processing and paying a claim. Pickett at 485-490.
The Pickett court disagreed with the United States District Court of New Jersey holding in Wine Imports, Inc. v. Northbrook Property and Casualty, 708 F.Supp. 105 (D.N.J. 1989) that consequential damages are not recoverable since Wine Imports relied on six decisions of the New Jersey Superior Court, Appellate Division, five of which related to punitive damages
and one which related to damages for emotional and physical distress
for the bad faith breach on the part of the insurer. Pickett at 486-488; Wine Imports at 106-107. After the Wine Imports decision was rendered and before the Appellate Division of the New Jersey Superior Court decided Pickett, the United States District Court of New Jersey in Carfagno held that consequential damages were not recoverable relying on the decision of Wine Imports.
"An intermediate appellate state court . . . is a datum for ascertaining state law which is not to be disregarded by a federal court unless it is convinced by other persuasive data that the highest court of the state would decide otherwise." West v. American Telephone & Telegraph Co., 311 U.S. 223, 237, 85 L. Ed. 139, 61 S. Ct. 179 (1940). "In the absence of an authoritative pronouncement by a state's highest court, [a federal court] may give serious consideration to the opinion of an intermediate appellate court and look to that source for an indication of how the state Supreme Court would likely decide the question presented." Aetna Casualty & Surety Co. v. Farrell, 855 F.2d 146, 148-149 (3d Cir. 1988).
The court has reviewed the decisions of the Appellate Division of the New Jersey Superior Court relied on by the Wine Imports court and agrees with the Pickett and Oritani courts that none of them relate to the consequential damages at issue in this case. Moreover, since Carfagno is based on the reasoning of Wine Imports, the court cannot agree with its holding that, in New Jersey, consequential damages are barred for the bad faith refusal to pay a claim. Accordingly, the court will rely on the Appellate Division of the New Jersey Superior Court holding in Pickett for how the New Jersey Supreme Court would likely decide this issue and permit the Haardts' claims for consequential damages for the devaluation of the Ocean City property and lost rents. However, since punitive damages are not permitted based on the alleged bad faith breach on the part of an insurer, the court will grant the Defendant Insurance Company's motion for summary judgment with respect to that claim.
For the foregoing reasons, the Defendant Insurance Company's motion for summary judgment will be granted in part in that the June 18, 1983 insurance claim and the punitive damages claim will be dismissed. The motion for summary judgment will also be denied in part in that the January 22, 1985 insurance claim and the claim for consequential damages will not be dismissed. An appropriate order will be entered.
STANLEY S. BROTMAN
UNITED STATES DISTRICT JUDGE
Dated: July 2, 1992
EDITOR'S NOTE: The following court-provided text does not appear at this cite in 796 F. Supp. 804.
This matter having come before the court on the Defendant Insurance Company's motion for summary judgment;
The court having considered the submissions of the parties; and
For the reasons stated in the court's opinion of this date;
IT IS on this 2nd day of July, 1992 hereby
ORDERED that defendant's motion is GRANTED IN PART in that the June 18, 1983 insurance claim and the punitive damages claim will be DISMISSED WITH PREJUDICE; and
FURTHER ORDERED that defendant's motion is DENIED IN PART in that the January 22, 1985 claim and the consequential damages claims will not be dismissed.
STANLEY S. BROTMAN
UNITED STATES DISTRICT JUDGE