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Wickner v. American Reliance Ins. Co.

Decided: June 6, 1994.


On appeal from the Superior Court of New Jersey, Law Division, Hudson County.

Before Judges Pressler, Dreier and Kleiner.


The opinion of the court was delivered by DREIR, J.A.D.

Defendant American Reliance Insurance Company appeals from a summary judgment entered in favor of plaintiffs, Harvey and Bonita Wickner, for defense costs incurred in a separate personal injury action. The trial Judge certified this judgment as final, notwithstanding the pendency of other claims. R. 4:42-2. Plaintiffs brought this declaratory judgment action against defendants Crum & Forster Insurance Companies (an excess carrier), Fitchburg Mutual Insurance Company (the insurer of 328 Warren Street, Harrison, during the time plaintiffs owned the property), American Reliance Insurance Company (plaintiffs' homeowner's insurer), and Jeffrey C. Symeonides (a Fitchburg agent) for failure to afford defense counsel when plaintiffs were sued by Marina Avila.

On appeal, American Reliance asserts that the Judge erred in construing the insurance policy to afford coverage, notwithstanding the exclusions of the policy, and that the declaratory judgment action was barred by application of the entire controversy doctrine.

We agree with the insurer's arguments that the exclusions of its policy preclude this claim, and therefore do not reach the entire controversy doctrine issue.

On May 10, 1984, plaintiffs purchased a three-family residence at 328 Warren Street in Harrison. Contemporaneous with the purchase of the property, plaintiffs obtained liability insurance coverage for the property from Fitchburg through Symeonides, a Fitchburg agent. Plaintiffs resided at 620 Bergen Street in Harrison, and never moved into the Warren Street property, as may have been originally intended. They rented out the Warren Street property, and in 1985 reported $11,800 in rental income on their tax returns.

Plaintiffs obtained insurance coverage from another company, American Reliance, for their "residence premises," listed on the declaration sheet as 620 Bergen Street, Harrison, and for the rear of 74 First Street, Keyport, presumably a vacation residence. The policy covered one year, from June 12, 1985, to June 12, 1986. Included in the policy is section two, titled "Home and Personal Liability Coverage," providing personal liability protection up to $100,000. The applicable provision states:

Coverage (E) - Personal Liability to Others

This provides for payment on behalf of an insured of sums which the insured becomes legally obligated to pay as damages because of loss covered here. We agree to pay such sums that arise out of bodily injury or property damage caused by an occurrence.

We will provide a defense by counsel of our choice in a suit against an insured seeking damages on account of a loss covered by this agreement.

On July 11, 1985, plaintiffs sold the Warren Street property. On August 5, 1985, less than a month after the sale by plaintiffs, Avila allegedly tripped and fell on the sidewalk abutting 328 Warren Street and sustained serious injuries. On August 4, 1987 she filed a lawsuit against the new owners of 328 Warren Street, as well as plaintiffs as former owners of the property, and the original builder. Avila claimed that her injuries were the result of

negligent construction, maintenance, and repair of the sidewalk abutting 328 Warren Street.

Plaintiffs requested that Fitchburg and American Reliance provide defense counsel and coverage for the Avila case. American Reliance, plaintiffs' homeowner's carrier, refused, stating that "none of the policies that American Reliance wrote for the Wickners covered the loss location 328 Warren Street. We must, therefore, formally deny any coverage . . . due to the fact that this was not a primary residence, in an insured location, or a property that was added within thirty days of purchase." As the Fitchburg policy had been canceled prior to the Avila fall, it also denied coverage, so plaintiffs were forced to retain their own attorney.

Avila's slip-and-fall case was litigated in May 1989, and plaintiffs, the builder of the property, and the present owners prevailed. Avila successfully appealed the verdict and we remanded for a new trial. Before the second trial, plaintiffs were voluntarily dismissed from the case. Their expenditures for legal costs, however, have exceeded $143,000.

Plaintiffs filed a declaratory judgment action against Crum & Forster, Fitchburg, and American Reliance, asserting that all three insurance companies had wrongfully denied coverage for the occurrence alleged by Avila and that all had been required to provide plaintiffs with a defense in that lawsuit. In an amended complaint, plaintiffs added Symeonides, a Fitchburg insurance agent, as a defendant, asserting that he had negligently, intentionally, or wrongfully canceled the Fitchburg policy and misrepresented plaintiffs' intent. Plaintiffs' case against Fitchburg and Symeonides went to trial and resulted in a jury verdict in favor of both defendants.

After cross-motions by all parties in the declaratory judgment action, the trial Judge entered an order granting summary judgment to plaintiffs against the homeowner's carrier, American Reliance, and denying the other motions and cross-motions for

summary judgment.*fn1 The Judge also denied American Reliance's motions for reconsideration, clarification and a stay.

The Judge signed a final order for judgment against American Reliance, for $65,453.04 for failure to provide coverage in the Avila lawsuit and $77,855.98 for costs, counsel fees, and interest in this suit to enforce liability coverage and for legal assistance which had been wrongfully denied. The order states: "ORDERED that the findings of liability as recited in this Court's Order of April 3, 1992 and the fixing of attorney's fees shall be certified as a Final Judgment against American Reliance Insurance Company pursuant to Rule 4:42-2."*fn2

At oral argument on April 3, 1992, American Reliance claimed that two exclusions in the insurance policy, numbers 3 and 5 denied ...

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