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HAARDT v. FARMER'S MUT. FIRE INS. CO.

July 2, 1992

FRED HAARDT; VIRGINIA HAARDT, Plaintiffs,
v.
THE FARMER'S MUTUAL FIRE INSURANCE COMPANY OF SALEM COUNTY; JOHN DOES, Defendants.



The opinion of the court was delivered by: STANLEY S. BROTMAN

 BROTMAN, District Judge:

 This action arises out of several property insurance policies issued by the Farmer's Mutual Fire Insurance Company of Salem County ("Defendant Insurance Company") to the plaintiffs Fred and Virginia Haardt. The court has jurisdiction pursuant to 28 U.S.C. ยง 1332. Presently before the court is the motion of the Defendant Insurance Company for summary judgment.

 I. FACTUAL AND PROCEDURAL HISTORY

 In their complaint filed January 19, 1991, *fn1" Fred and Virginia Haardt seek to recover on insurance policies issued by the Defendant Insurance Company for losses allegedly sustained at their property at 5425 Simpson Avenue in Ocean City, New Jersey and covered by the insurance policies. They also seek to recover consequential and punitive damages for the bad faith refusal of the Defendant Insurance Company to pay for these losses. The Haardts contend that the Defendant Insurance Company refused to reimburse them for losses sustained to the Ocean City property due to a June 18, 1983 windstorm and the January 22, 1985 freezing and breaking of pipes caused by below zero temperatures. The Haardts seek damages as a result of the June 18, 1983 and January 22, 1985 incidents as follows: 1) $ 156,000.00 due to the June 18, 1983 windstorm; 2) $ 170,000.00 due to the January 22, 1985 freezing and breaking of pipes; 3) damages for the devaluation of the Ocean City property; 4) damages for lost rents; and 5) punitive damages. *fn2"

 On June 18, 1983, the Ocean City property was covered by Defendant Insurance Company under a contents and dwelling fire insurance policy, F171347 and under a fire insurance policy for rental value, F171331. The Defendant Insurance Company denied coverage for the June 18, 1983 incident by way of letter dated July 25, 1985 sent from its adjuster, Ed Harrold, to the Haardts' attorney, David Frisch.

 On January 22, 1985, the Ocean City property was covered by the Defendant Insurance Company under a combination dwelling policy, CD12074. This policy contained a "suit limitation" provision requiring that suits under the policy be commenced within twelve months after the loss and a "cooperation clause" requiring the Haardts to cooperate with the Defendant Insurance Company during its investigation of any losses. In addition, the policy contained a "freezing pipe" exclusion which excluded losses from freezing occurring while the property was unoccupied unless the Haardts exercised caution and diligence to prevent freezing, and a provision providing coverage for lost rents.

 The Haardts notified the Defendant Insurance Company of its claim on January 28, 1985, six days after the alleged loss. On February 12, 1985, Jack King, an adjuster for the Defendant Insurance Company, wrote a preliminary report in connection with the January 22, 1985 claim. He stated that he made an inspection of the Ocean City property on February 6, 1985 and that the:

 The Defendant Insurance Company requested repair estimates from the Haardts in late April or early May of 1985. It is unclear whether the Haardts ever supplied these estimates but the Defendant Insurance Company admits to having received estimates on June 21, 1985. Although Virginia Haardt failed to appear at a July 14, 1985 appointment with the Defendant Insurance Company's adjusters, King and Harrold, Frisch met with these adjusters on July 24, 1985 at the Ocean City property to review his clients' claims.

 On December 11, 1985, the Defendant Insurance Company informed the Haardts that its adjusters could no longer deal directly with them regarding their claims since the Haardts had hired Frisch to represent them. The Defendant Insurance Company closed its file for this loss on April 14, 1986 because it claimed it did not hear from Frisch. Even though the Defendant Insurance Company denied liability for the June 18, 1983 claim on July 25, 1985, there is no record of it ever notifying the Haardts that it denied liability for the January 22, 1985 claim.

 In its motion for summary judgment, the Defendant Insurance Company makes the following arguments: 1) the Haardts claim for the June 18, 1983 loss is barred by the six year New Jersey statute of limitations governing contract actions, N.J.S.A. 2A:14-1; 2) the Haardts claim for the January 22, 1985 loss cannot be maintained since they did not comply with the insurance policy's "suit limitation" provision and "cooperation clause" and because the insurance policy contained a "freezing pipe" exclusion; and 3) the Haardts claims for the devaluation of property, loss of rents and punitive damages are barred since New Jersey courts do not permit consequential or punitive damages to be recovered in an insurance contract dispute.

 II. DISCUSSION

 The standard for granting summary judgment is a stringent one. A court may grant summary judgment only when the materials of record "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see Hersh v. Allen Prods. Co., 789 F.2d 230, 232 (3d Cir. 1986); Lang v. New York Life Ins. Co., 721 F.2d 118, 119 (3d Cir. 1983). In deciding whether there is a disputed issue of material fact the court must view all doubt in favor of the non-moving party. Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307 n.2 (3d Cir. 1983), cert. denied, 465 U.S. 1091, 104 S. Ct. 2144, 79 L. Ed. 2d 910 (1984); Smith v. Pittsburgh Gage & Supply Co., 464 F.2d 870, 874 (3d Cir. 1972). The threshold inquiry is whether there are "any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).

 Supreme Court decisions mandate that "a motion for summary judgment must be granted unless the party opposing the motion can produce evidence which, when considered in light of that party's burden of proof at trial, could be the basis for a jury finding in that party's favor." J.E. Mamiye & Sons, Inc. v. Fidelity Bank, 813 F.2d 610, 618 (3d Cir. 1987) (Becker, J., concurring) (citing Anderson, 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505, and Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)). Moreover, once the moving party has carried its burden of establishing the absence of a genuine issue of material fact, "its opponent must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). Thus, if the non-movant's evidence is merely "colorable" or is "not significantly probative, "the court may grant summary judgment. Anderson, 477 U.S. at 249-50.

 The Defendant Insurance Company argues that the Haardts filed their complaint on January 19, 1991, over six years from the date of the alleged June 18, 1983 loss resulting from the windstorm. As a result, it argues that the Haardt's claim for the June 18, 1983 loss is barred by the six year New Jersey statute of limitations governing contract actions, N.J.S.A. 2A:14-1. The Haardts argue that their complaint was filed within the six year statute of limitations period since their cause of action for the June 18, 1983 loss did not accrue until June 25, 1985, the date the Defendant Insurance Company denied their claim for damages.

 Section 2A:14-1 provides in relevant part that "every action at law . . . for recovery upon a contractual claim or liability, express or implied . . . shall be commenced within [six] years after the cause of any such action shall have accrued." In New Jersey, the statute of limitations applicable to a suit on a policy of insurance is six years "absent a provision in the insurance policy or an express statute to the contrary." Walkowitz v. Royal Globe Insurance Company, 149 N.J.Super. 442, 448, 374 A.2d 40 (App.Div. 1977); see also Garcia v. Snedeker, 199 N.J.Super. 254, 261, 489 A.2d 175 (App.Div. 1985); Casey v. Selected Risks Insurance Co., 176 N.J.Super. 22, 28, 422 A.2d 83 (App.Div. 1980). A cause of action accrues and the statute of limitations begins to run when the plaintiff "discovers, or by exercise of reasonable diligence and intelligence should have discovered, facts which form the basis of a cause of action." O'Keeffe v. Snyder, 83 N.J. 478, 491, 416 A.2d 862 (1980); accord Mancuso v. Mancuso, 209 N.J.Super. 51, 56-57, 506 A.2d 1253 (App.Div. 1986).

 In Royal Indemnity Co. v. Petrozzino, 598 F.2d 816 (3d Cir. 1979), the Third Circuit invoked this New Jersey discovery principle to toll the six year statute of limitations, N.J.S.A. 2A:14-1. It held that a bank insurer had timely filed an action against a bank robber even though the action was filed over six years after the robbery occurred. Id. at 821. Since none of the eyewitnesses were able to identify the bank robber immediately after the robbery and since it took sixteen months for the state law enforcement officials to compile sufficient evidence to file a criminal information against the bank robber, the Third Circuit held that reasonable diligence on the part of the bank insurer would have failed to disclose the existence of an ...


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