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.
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.