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March 27, 1998


The opinion of the court was delivered by: WOLIN


 This matter is before the Court on Centennial Insurance Co.'s ("Centennial") motion for summary judgment on Elizabethtown Water Company's ("Elizabethtown") claims for indemnity. Hartford Casualty Insurance Company ("Hartford") also moves for summary judgment of Elizabethtown's claims for indemnity. The Court has decided these motions upon the written submissions of the parties pursuant to Rule 78 of the Federal Rules of Civil Procedure. Elizabethtown also moves the Court to strike sections of Centennial's reply brief.


 In an underlying action, Big Sheepy Partnership ("Big Sheepy") and Sheep Hill Associates (collectively "developers") filed a complaint in New Jersey Superior Court against Elizabethtown. Developers alleged that in 1986, Big Sheepy purchased a large tract of land for development in Somerset County because Elizabethtown represented that it would and could supply adequate water to the future development. Developers alleged that in 1988, Big Sheepy entered into an agreement with Elizabethtown in which Big Sheepy agreed to pay for an extension of water mains from Elizabethtown's water supply to the houses built in the development. Implicit in the contract was that Elizabethtown would be able to provide water service to all the houses. (Centennial Ex. A).

 According to the underlying complaint, Elizabethtown failed to supply water for all of the houses until October 1990, even though the water mains were complete in July 1988, and even though Elizabethtown had the ability to provide water to all of the houses and lots. Developers claimed that Elizabethtown's failure to provide water caused them to lose numerous sales and adversely affected their reputation. Thus, developers sought equitable relief and compensatory, punitive, and treble damages based on breach of contract, breach of the implied covenant of good faith and fair dealing, negligence, equitable fraud, and the New Jersey Consumer Fraud Act. (Centennial Ex. A). In an answer to an interrogatory, developers claimed that the injury to their business reputation was $ 1,000,000, and that their carrying costs, i.e., property taxes, mortgage payments, auction expenses, promotion expenses, and Internal Revenue Service expenses, exceeded $ 2,000,000. *fn1" Developers also claimed lost sales.

 Centennial and Hartford ("defendants") are Elizabethtown's insurers. Centennial issued Elizabethtown two Comprehensive General Liability Policies ("CGL Policy") with effective dates of June 30, 1987, to June 30, 1988, and June 30, 1988, to June 30, 1989. Centennial also issued a Commercial Umbrella Policy ("Umbrella Policy") with effective dates of June 30, 1988, to June 30, 1989. Hartford issued two Comprehensive General Liability Policies ("Hartford Policy") to Elizabethtown with effective dates of June 30, 1989, to June 30, 1990, and June 30, 1990, to June 30, 1991.

 Defendants allege that they received their first notice of the existence of the underlying lawsuit in mid-1993, almost two years after the underlying litigation commenced. After receiving notice of the underlying suit, defendants replied with independent letters discussing their interpretations of the relevant policy provisions and concluding that they would not cover Elizabethtown's alleged loss. (Centennial Ex. B; Hartford Ex. E).

 Centennial denied coverage because the underlying complaint did not allege "bodily injury" or "property damage" caused by an "occurrence" as defined by the CGL Policy and did not allege "advertising injury," "personal liability injury," or "property damage liability" caused by an "occurrence" as defined by the Umbrella Policy. The CGL Policy defines "property damage" as:


(1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.

 The CGL Policy defines "occurrence" as: "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." Centennial also informed Elizabethtown that it was denying coverage because Elizabethtown failed to comply with the policies when it failed to notify Centennial "as soon as practicable" of an "occurrence," to forward a summons "immediately," and to "cooperate" with Centennial in its defense. (Centennial Ex. B).

 Hartford denied coverage on the grounds that the allegations and circumstances surrounding plaintiff's case did not comport with the definitions for "occurrence" or "property damage" in the Hartford Policy. (Hartford Ex. E). The Hartford Policy defines "property damage" as:


a. Physical injury that occurs during the policy period to tangible property, including all resulting loss of use of that property; or


b. Loss of use that occurs during the policy period of tangible property that is not physically injured, provided such loss of use is caused by an occurrence during the policy period.

 The Hartford Policy defines "occurrence" with respect to bodily injury and property damage as: "a. Bodily injury or property damage: an accident, including continuous or repeated exposure to substantially the same general conditions." In an earlier letter, Hartford informed Elizabethtown that "serious coverage questions" existed in that Elizabethtown failed to provide immediate notice of its claim and that the date of the underlying loss may have occurred outside the period covered by the Hartford Policy. (Hartford Ex. C). *fn2"

 The Hartford Policy also contains a "Water Utilities Limitation Endorsement," which provides:


It is agreed that the insurance does not apply to property damage arising out of the inability of the insured to supply water in quantities of pressure sufficient to meet the demands of the insured's customers, unless such inability is the result of an occurrence not related to a shortage of water or distributional capacity nor fluctuation in the level of demand of the insured's customers.

 The Hartford Policy also contains general exclusions, including:


K. Property Damage to:


. . .


(3) Property of which your product or your work forms a part or property that has not been physically injured, arising out of:


(b) A delay or failure by any insured or anyone acting on an insured's behalf to perform a contract or agreement in accordance with its terms.

 On November 3, 1994, Elizabethtown wrote defendants letters advising them that the underlying case had settled, and that Elizabethtown would pay $ 1.75 million to developers. In reaching their settlement, the parties entered into a release in which they agreed that "the monies are being paid because of [Elizabethtown's] potential liability to developers on the negligence count only." (Centennial Ex. C). Centennial promptly responded that it was disclaiming coverage. (Centennial Ex. D).

 In August 1995, Centennial sent Elizabethtown a letter supplementing its prior disclaimers in order to inform Elizabethtown that it also disclaimed coverage under the "Failure to Supply Water Endorsements" in the CGL and Umbrella Policies. (Centennial Ex. F). The CGL Policy's Failure to Supply Water Endorsement provides:


It is agreed that this policy does not apply to personal injury or bodily injury arising out of the interruption or [impairment] of electrical, gas or water service.


Property damage shall not include damage arising out of inability of the insured to supply gas and/or electricity or water in quantities sufficient to meet the demands of the insured's customers unless such liability shall be the result of a sudden and unforseen occurrence resulting from physical damage to tangible property and which is not related to a shortage of gas, electricity, water, distributional or generating capacity not fluctuation, or fluctuation in the level of demand of the insured's customers. *fn3"

 The 1988-89 Umbrella policy included a "Failure To Supply Endorsement" that provided: "It is agreed that this policy does not apply to personal injury[,] bodily injury or property damage arising out of the interruption or impairment of electrical, gas or water service."

 In July 1995, Elizabethtown filed a three-count complaint. In the First Count, Elizabethtown sought a declaratory judgment that defendants are obligated to reimburse it for money it paid to developers unless the claims fall outside the policy period and for legal fees and costs. In the Second Count, Elizabethtown claimed that defendants breached their contracts by failing to defend and indemnify Elizabethtown. On September 30, 1996, this Court granted defendants' motions for partial summary judgment on Elizabethtown's Third Count.

 Defendants now move the Court to enter summary judgment on the remainder of Elizabethtown's claims because Elizabethtown's failure to provide water to developers is not covered in the insurance policies they issued to Elizabethtown.


 I. Standard for Summary Judgment

 Summary judgment shall be granted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a 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). In making this determination, a court must draw all reasonable inferences in favor of the non-movant. See Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307 n.2 (3d Cir. 1983), cert. dismissed, 465 U.S. 1091, 104 S. Ct. 2144, 79 L. Ed. 2d 910 (1984). Whether a fact is "material" is determined by the substantive law defining the claims. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); United States v. 225 Cartons, 871 F.2d 409, 419 (3d Cir. 1989).

 "At the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249. Summary judgment must be granted if no reasonable trier of fact could find for the non-moving party. See id.

 When the non-moving party bears the burden of proof at trial, the moving party's burden can be "discharged by 'showing'--that is, pointing out to the District Court--that there is an absence of evidence to support the non-moving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). If the moving party has carried its burden of establishing the absence of a genuine issue of material fact, the burden shifts to the non-moving party to "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). When the non-moving party's evidence in opposition to a properly-supported motion for summary judgment is merely "colorable" or "not significantly probative," the Court may grant summary judgment. See Anderson, 477 U.S. at 249-50.

 Further, when a non-moving party who bears the burden of proof at trial has failed, in opposition to a motion for summary judgment, to raise a disputed fact issue as to any essential element of his or her claim, summary judgment should be granted because "a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex, 477 U.S. at 322-23.

 II. Interpreting the Insurance Policies

 Centennial contends that summary judgment should be entered for two reasons: (1) the claims for which Elizabethtown seeks indemnity do not constitute property damage under the policies; (2) the Failure to Supply Water Endorsements exclusions bar Elizabethtown's request for coverage. Hartford adopts Centennial's arguments because the wording of the provisions is similar and because the intent behind the provisions is the same. Hartford also asserts that General Exclusion K bars coverage of Elizabethtown's losses.

 A court should construe insurance policies liberally in favor of the insured in order to ensure that coverage is extended to any fair interpretation of the policy. See Longobardi v. Chubb Ins. Co. of N.J., 121 N.J. 530, 537, 582 A.2d 1257 (1990). Moreover, insurance contracts are to be construed in accordance with the insured's reasonable expectations. See Sparks v. St. Paul Ins. Co., 100 N.J. 325, 338, 495 A.2d 406 (1985). However, "the words of an insurance policy should be given their ordinary meaning, and in the absence of an ambiguity, a court should not engage in a strained construction to support the imposition of liability." Longobardi, 121 N.J. at 537.

  When construing an insurance policy, courts must answer two questions.


First, [it] must determine if any patent ambiguity exists in the policy language such that coverage must be provided. Second, if such an ambiguity does not exist, [it] must determine, were coverage denied, whether the policy language is insufficiently clear such that the average policyholder would be deprived of a reasonable expectation of coverage.

 Oritani Sav. and Loan Ass'n v. Fidelity and Deposit Co. of Md., 989 F.2d at 635, 638 (3d Cir. 1993). An ambiguity can arise from either the plain language or the application of the language to a set of facts. See MacBean v. St. Paul Title Ins. Corp., 169 N.J. Super. 502, 507, 405 A.2d 405 (App. Div. 1979).

 Elizabethtown and defendants agree that Elizabethtown's claim for indemnity under the CGL Policy and the Hartford Policy is based on the "loss of use" portion of the definition for property damage. Thus, the Court will focus on that portion of the definitions.

 The Court notes that Centennial's and Hartford's definitions for property damage and occurrence are substantially similar such that they will be treated as one and the same. Both definitions of property damage include loss of use of tangible property, which is not physically injured or destroyed provided such loss is caused by an occurrence. Both definitions define occurrence as an accident, but Centennial modifies "accident" with "which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." The Court finds the difference in the definitions to be insignificant, and will limit its interpretation of occurrence to "accident" because the two definitions clearly intended to cover the same circumstances.

 Defendants argue that the circumstances and facts surrounding developers' claims do not constitute a loss of use. Elizabethtown contends that its negligence was an occurrence that caused developers to suffer a loss of use of their real property, i.e., the opportunity to develop the property for sale. It adds that the definitions of property damage and occurrence are patently ambiguous because defendants' construction of the language in the insurance policies conflicts with the plain language in the policies, New Jersey case law, and its reasonable expectations. *fn4"

 A. Loss of Use

 Elizabethtown argues that their negligence caused developers to lose the use of their property, i.e., they lost the ability to develop the property, subdivide the property, and ultimately sell the property. Elizabethtown also states that developers' inability to use their property caused developers to sustain damages in that they paid carrying costs, lost sales, and suffered injury to their reputation. Defendants focus their analysis on damages. They contend that lost profits and goodwill do not constitute the loss of use of tangible property.

 No New Jersey court has interpreted the phrase "loss of use of tangible property." However, CGL policies throughout the country generally contain the same language and definitions, and the evolution and inclusion of the phrase in the definition of property damage is clear. In 1973, insurers revised their definition of "property damage" and adopted the current two-prong definition because the old definition, "injury to or destruction of tangible property," resulted in inconsistent interpretations of the phrase--some courts found that the definition included non-physical injuries while other courts denied coverage unless physical contact between the insured and the injured property existed. See Lucker Mfg. v. Home Ins. Co., 23 F.3d 808, 815 (3d Cir. 1994). "The revised language . . . allows coverage for both physical and non-physical injuries." Id.


The classic example of a loss of use injury is a case in which a manufacturer of construction cranes sells a defective crane which collapses in front of a restaurant, thereby impairing the restaurant's income. If the restaurant sues the manufacturer and recovers the lost income, the manufacturer would be covered by the "loss of use" component of the CGL policy.

 Id. at 815 n.6.

 Moreover, in interpreting the same language in an insurance policy involving Wisconsin and Pennsylvania, the Third Circuit concluded that losing the opportunity to sell a product is a "loss of use." Id. at 816. In Lucker, Lucker contracted to design and manufacture a product for Shell Oil Company. Lucker purchased castings, a component, for its product from Grede. Those castings were defective, and Shell required Lucker to alter the design of the product to ensure that the defective castings would not make the ultimate product defective. Lucker sued Grede, and ultimately settled the case for $ 600,000. Lucker then sued Grede's insurer, Home Insurance Company, because Home had not defended Grede and because Lucker received Grede's right to sue Home as part of the settlement. The district court found that no loss of use existed and granted summary judgment for Home. Id. at 810-12.

 In reversing on the issue of "loss of use," the Third Circuit framed the interpretation as "whether the lost 'use' has to have been a lost physical use of the property, or whether it can also include a lost non-physical or economic use of the property." Id. at 815. The panel determined "that both the purposes behind liability insurance and the case law interpreting liability insurance suggest that the loss of a non-physical use of a product, such as offering it for sale, should be considered a 'loss of use.'" Id. at 816. Thus, it found that the reduced value of Lucker's product caused by Shell's rejection constituted a loss of use. Id. The panel concluded that the language was somewhat ambiguous, and that its ruling complied with the principle that ambiguities be decided in favor of the insured. Id. at 818. Ultimately, the Court affirmed because it found that Lucker's design was not tangible property. Id. at 821.

 Developers' damages in this case are quite similar to that in Lucker. Here, developers could not use their property for its intended use because no person would purchase a lot or house that did not have an adequate water supply. Moreover, this case is no different from the classic example. Like the restaurant owners, developers cannot use their land because Elizabethtown did not connect its water supply to developers' water main extension. As stated in the classic example, if the injured party sues and recovers, the insured is covered by the loss of use provision. Therefore, Elizabethtown has shown that developers lost the use of the property.

 Defendants' reliance on Heldor Industries, Inc. v. Atlantic Mutual Insurance Co., 229 N.J. Super. 390, 551 A.2d 1001 (App. Div. 1988), and Elizabethtown's reliance on Great American Insurance Co. v. Lerman Motors, Inc., 200 N.J. Super. 319, 491 A.2d 729 (App. Div. 1985), are misplaced because neither panel interpreted or dealt with "the loss of use" provision. However, both panels found that a plaintiff could recover lost profits as consequential damages of property damage under CGL policies. Heldor, 229 N.J. Super. at 397; Great American, 200 N.J. Super. at 326. Heldor limited its ruling to situations where a link could be provided between the lost profits and physical damage to property. 229 N.J. Super. at 397-98.

 Heldor's and Great American's basic proposition is consistent with Lucker. Heldor's limitation does not, however, comport with the second prong of the definition of property damage. The Court finds no reason to follow Heldor because it is inconsistent with Lucker and because the panel in Heldor did not consider the loss of use provision when it limited the availability of lost profits. Moreover, if Heldor applied to all cases involving property damage and consequential damages, it would render the loss of use provision meaningless. Thus, the Court finds that Elizabethtown has shown that developers lost the use of their property.

 B. Occurrence

 One of the reasons why defendants refused to cover Elizabethtown's claim was that they believed that there was no occurrence. As stated supra, defendants' policies define occurrence as an accident.

 "The insurance company limits its coverage to accidental occurrences to preclude coverage for insureds whose conduct is intentionally-wrongful." Voorhees v. Preferred Mutual Ins. Co., 128 N.J. 165, 180, 607 A.2d 1255 (1992). In New Jersey, "the accidental nature of an occurrence is determined by analyzing whether the alleged wrongdoer intended or expected to cause an injury. If not, then the resulting injury is 'accidental,' even if the act that caused the injury was intentional." Id. at 183. Courts should examine an insured's subjective intent when determining whether to deny coverage because of intentional conduct. Id. at 185.

 The Court has discussed the insurer's ability to disclaim coverage when the insured acts intentionally because Elizabethtown bases its argument that defendants should provide coverage on its lack of intent. Elizabethtown asserts that summary judgment should not be granted because defendants have failed to show that it subjectively intended to injure developers. It also argues that the "expected or intended" language in Centennial's policy is ambiguous. Those arguments are irrelevant because the critical question is whether a genuine issue of material fact exists as to whether an accident caused the developers to lose the use of their property.

 Elizabethtown claims that its negligence (and negligent misrepresentation) was the accident. It asserts that developers would not have purchased the property if Elizabethtown had not told them that it could supply them with water. Hartford responds that summary judgment should be granted because an occurrence is not defined as negligence. In fact, Hartford argues that "while negligence may cause an accident, the negligence itself is not the accident." (Hartford Reply Br. at 4).

 An accident for purposes of insurance "is an event happening without any human agency, or if happening through such agency, an event which, under the circumstances, is unusual and not expected by the person to whom it happens." Black's Law Dictionary 15 (6th ed. 1990). Hartford's assertion that negligent conduct causes accidents, but negligence is not an accident is misleading because negligence can either be improper conduct or a cause of action.

 When negligence means improper conduct, an accident arises only when the negligence leads to an injury, i.e., an accident is negligent conduct plus a resulting injury. For example, a driver acts negligently when he runs a stop sign, but the negligence in and of itself is not sufficient to create an accident--if the person drives away from the stop sign without hitting anyone or anything, then no accident occurs. If, on the other hand, the driver hits and injures a pedestrian, then an accident occurs. Likewise, if a municipality fails to repair a crack in a sidewalk after a resident complains about the crack, then the municipality's failure to act is negligent. If someone trips over the crack and injures himself as a result of this omission, then an accident occurs. If not, there is no accident. Thus, both active and passive negligence can cause an accident. See Black's Law Dictionary, supra, 1034.

 For negligence to constitute a cause of action, a plaintiff must prove three elements: a duty or obligation, a breach of that duty, and causation to the damages, i.e., the breach caused the plaintiff's injuries. See Prosser and Keeton on the Law of Torts 164-65 (5th ed. 1984). Thus, if a plaintiff proves the elements of the negligence cause of action, he has shown that an accident happened for purposes of a CGL policy because the cause of action contains both improper conduct (breach of a duty) and an injury (damages).

 In this case, Elizabethtown settled its case with the developers on the negligence cause of action. Thus, it contends that an accident occurred. A settlement termed as negligence does not prove the three elements of a negligence cause of action. The Court, therefore, finds that it cannot determine at this juncture whether an accident occurred, and that a jury must decide the issue. Moreover, Elizabethtown will have to assert independent proof of negligent conduct and an injury at trial to establish that there was an occurrence, i.e., an accident.

 Hartford's focus on the conduct aspect of negligence is not necessarily misplaced because Elizabethtown spends a lot of time discussing how its negligence, i.e., failure to provide water and wrongful misrepresentations, caused the developers to lose money. If Elizabethtown is correct, then an accident occurred. If, on the other hand, Elizabethtown is incorrect, then no accident occurred.

 C. Limitations Based on Failure to Provide Water Supply

 "Exclusionary clauses are enforceable only if clearly applicable, are narrowly read and any ambiguities are resolved in favor of the insured." Morrone v. Harleysville Mutual Ins. Co., 283 N.J. Super. 411, 420, 662 A.2d 562 (App. Div. 1996). Moreover, courts must construe exclusionary clauses strictly. See Ellmex Constr. Co., Inc. v. Republic Ins. Co., 202 N.J. Super. 195, 205, 494 A.2d 339 (App. Div. 1985), certif. denied, 103 N.J. 453 (1986). When construing exclusionary clauses, courts should consider whether the insurer could have used more precise language such that the matter would be beyond a reasonable question. See Aetna Ins. Co. v. Weiss, 174 N.J. Super. 292, 296, 416 A.2d 426 (App. Div.) (quotation omitted), certif. denied, 85 N.J. 127 (1980). The insurer has the burden of showing that the exclusion bars coverage, and that the insured's interpretation of the exclusion is entirely unreasonable. See id.

 Centennial asserts that the Failure to Supply Water Exclusions in the CGL and Umbrella policies bar coverage in this case. Hartford also argues that its Water Utilities Limitation Exclusions *fn5" bars the coverage of Elizabethtown's claim. Even though the words of the exclusions differ, Hartford asserts that its Exclusion should be treated the same as Centennial's Exclusions because the intent and meaning of the Exclusions are the same. Hartford is wrong.

 The second paragraph of the Failure to Supply Exclusion in the CGL Policy excludes from the definition of "property damage," an injury that arises out of the insured's failure to supply water in quantities sufficient to meet the demands of the insured's customers. However, such damage is covered if the liability arises out "of a sudden and unforseen occurrence resulting from physical damage to tangible property." The Umbrella Policy provides that the policy does not cover, inter alia, property damage that arises out of the interruption or impairment of water service. Hartford's Exclusion provides that property damage does not include damage caused by the inability to supply water, unless the damage arises out of an occurrence unrelated to, inter alia, a shortage of water.

 The Court declines to treat the provisions the same because the difference in word choice is significant. Centennial's exception to the Failure to Supply Water Exclusion in the CGL Policy is limited to occurrences resulting from physical damage to tangible property. The exception, therefore, does not include property damage that is a "loss of use" of property. The Umbrella Policy's Exclusion does not contain any exceptions, and flatly excludes coverage related to property damage from the interruption or impairment of water service.

 Although the Court is inclined to grant Centennial's motion for summary judgment based on the plain language of the Failure to Supply Water Exclusions, it must refrain from doing so because Elizabethtown has created a genuine issue of material fact as to whether those Exclusions are ambiguous. Theresa Walczak, a Centennial employee who handled Elizabethtown's claim, wrote in her computer notepad: "Conferenced file with superior and claim manager. They agreed that a disclaimer is in order but they felt that the 'Failure to Supply Endorsement' was not applicable." (Woodward Decl. Ex. A). The previous day, Walczak wrote that she believed that Centennial should disclaim coverage because of, inter alia, the Failure to Supply Water Exclusion. (Woodward Decl. Ex. A). Thus, Walczak's diary makes the Exclusions ambiguous, and Centennial will have to explain why Walczak's superiors believed that the Exclusions did not bar Elizabethtown's claim. The Court, therefore, denies Centennial's motion on this issue.

 Hartford's Exclusion, on the other hand, permits coverage where the damage arises out of an occurrence, which is defined as an accident. As discussed supra, a jury question exists as to whether an occurrence exists in this case. Thus, the Water Supply Limitation Exclusion in the Hartford Policy is ambiguous, and the Court must deny Hartford's motion on this issue.

 Elizabethtown also argues that the phrase "interruption or impairment" of water service in the Umbrella Policy is ambiguous because it does not indicate whether the Exclusion applies to a situation where no water supply system is in place. In essence, Elizabethtown believes that a jury should decide whether "interruption or impairment" includes delaying the initial supply of water. The Court agrees with Elizabethtown that "interruption or impairment" is ambiguous as applied to the facts of this case, and that a jury should determine whether the parties intended "interruption or impairment" to cover the situation in this case.

 Elizabethtown also argues that Centennial failed to provide it with the proper coverage in the Umbrella Policy. It states that the parties agreed in 1987 that the Failure to Supply Water Exclusion would permit coverage for property damage arising out of an occurrence. Elizabethtown states that the current language was placed in the policy in 1988. Centennial disagrees with Elizabethtown's account of the negotiations, and asserts that the current language offers more coverage than the old Exclusion. The Court will not address this issue because the ruling that the Exclusions are ambiguous makes it moot.

 D. General Exclusion K

 Hartford claims that General Exclusion K bars coverage in this case. Elizabethtown asserts that General Exclusion K is ambiguous, and that the doctrine of ejusdem generis mandates that the Court not construe the exception in its broadest sense. Elizabethtown also labels this exclusion "The Products Liability Exclusion" because the exclusion omits damage to the insured's work or product or damage to another's property from the insured's work or property because of the insured's defective product or failure to fulfill its obligations under a contract.

 Ejusdem generis is a general rule of construction that provides "where general words follow the enumeration of . . . things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to . . . things of the same general kind or class as those specifically mentioned." Black's Law Dictionary, supra, 515; see also Cooper Dist. Co., Inc. v. Amana Refrig., Inc., 63 F.3d 262, 280 (3d Cir. 1995). (same).

 General Exclusion K provides that Hartford would not cover "property damage to . . . property that has not been physically injured, arising out of . . . failure by any insured . . . to perform a contract or agreement in accordance with its terms." Elizabethtown asserts that the Exclusion should not be construed to its widest extent because it appears in an exclusion dealing with defective products. Elizabethtown adds that because its negligence caused the injuries, the Exclusion should not apply. It reasons that it could not have expected that the Exclusion would apply to damages arising out of negligence.

 Elizabethtown's arguments beg the question of whether the Exclusion applies. Ejusdem generis does not apply because general words do not follow specific words in the Exclusion. Moreover, its expectations are irrelevant when the words of the Exclusion are as clear as they are in this case. The exclusion bars coverage of Elizabethtown's liability because the developers' damages were the lost use of their property, i.e., "property that has not been physically injured," and because Elizabethtown did not fulfill its agreement. The Court recognizes that Elizabethtown based its settlement with the developers on an asserted negligence claim, but to permit Elizabethtown to use "negligence" to frustrate the plain and unambiguous language of the exclusion would yield to form rather than substance. The exclusion was intended to cover situations like this one, and thus, the Court will enter summary judgment in favor of Hartford.

 III. Motion to Strike

 It is axiomatic that reply briefs should respond to the respondent's arguments or explain a position in the initial brief that the respondent has refuted. See Egert v. Connecticut Gen. Life Ins. Co., 900 F.2d 1032, 1035 (7th Cir. 1990) ("Arguments withheld until the reply brief ordinarily will not be considered.").

 Elizabethtown contends that Centennial has improperly asserted two new grounds for summary judgment in its reply brief. In its initial brief, Centennial argued that summary judgment should be granted because Elizabethtown could not meet the definition of property damage and because The Failure to Supply Exclusions barred coverage. In its reply brief, Centennial argues that it need not cover Elizabethtown's loss because the damages arose after the end of the policy period (Point II.A), and that Elizabethtown is time barred from arguing that the language is ambiguous because of the negotiations (Point II.C). Thus, Elizabethtown moves the Court to strike the new arguments from the reply brief.

 The Court agrees with Elizabethtown that Centennial improperly raised Point II.A in its reply brief, and will therefore strike it from the reply brief. The Court notes, however, that Elizabethtown will have to provide proof that developers' injury occurred prior to July 1988 in order to maintain its claim under the policy that ran from June 30, 1987, to June 30, 1988. A jury will decide whether the damages occurred during the policy period.

 Point II.C, on the other hand, properly responded to Elizabethtown's argument and factual recitation of the negotiations. Thus, the Court will not strike Point II.C from the reply brief. The Court notes that Point II.C was not critical to the outcome of this motion.


 For the reasons stated supra, the Court grants Hartford's motion for summary judgment and denies Centennial's motion for summary judgment. The Court also grants Elizabethtown's motion to strike Point II.A of Centennial's reply brief, but denies the motion as to Point II.C.

 An appropriate Order is attached.

 Dated: March 27, 1998




 In accordance with the Court's Opinion filed herewith,

 It is on this day of March, 1998

  ORDERED that defendant Hartford Casualty Insurance Company's motion for summary judgment is granted; and it is further

  ORDERED that defendant Centennial Insurance Company's motion for summary judgment is denied; and it is further

  ORDERED that plaintiff Elizabethtown Water Company's motion to strike Point II.A of Centennial's reply brief is granted, but the motion as to Point II.C is denied; and it is further

  ORDERED that trial is scheduled for May 5, 1998; and it is further

  ORDERED that Elizabethtown and Centennial meet with Magistrate Judge Joel A. Pisano for a pre-trial conference.


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