Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.



May 29, 1998


The opinion of the court was delivered by: WOLIN


 WOLIN, District Judge

 Pursuant to Local Civil Rule 7.1(g), Elizabethtown Water Company ("Elizabethtown") moves for reargument of this Court's Opinion and Order dated March 27, 1998. Although Elizabethtown has presented the Court with two creative arguments, the Court will deny Elizabethtown's motion because the arguments do not alter the Court's initial analysis.


 On March 27, 1998, this Court issued an Opinion and Order denying Centennial Insurance Company's ("Centennial"), defendant, motion for summary judgment and granting Hartford Casualty Insurance Company's ("Hartford"), defendant, motion for summary judgment. Only two of the Court's rulings are relevant for the purposes of considering Elizabethtown's motion for reargument. First, the Court determined that a genuine issue of material fact existed as to whether an "occurrence," which the insurance policies defined as an accident, caused the damages that the developers sustained. In reaching that decision, the Court explained that an insured can prove that there was an occurrence (accident) by proving the elements for a negligence cause of action. The Court then stated: "Elizabethtown settled its case with the developers on the negligence cause of action. . . . A settlement termed as negligence does not prove . . . a negligence cause of action." Thus, the Court found that a jury must decide whether Elizabethtown was negligent in its dealings with the developers. The Court added that Elizabethtown would have to provide independent proof of its negligence.

 Second, the Court found that Hartford's General Exclusion K(3)(b), which provided that Hartford did not have to 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," barred Elizabethtown's claim for coverage. The Court reasoned that the exclusion applied "because the developers' damages were the lost use of their property . . . and because Elizabethtown did not fulfill its agreement." The Court explained:


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 . . . .


 I. Relevant Standard

 Local Civil Rule 7.1(g) provides that the moving party "set forth concisely the matters or controlling decisions which counsel believes the Court has overlooked." "A proper motion to alter or amend judgment must rely on one of three major grounds: (1) an intervening change in controlling law; (2) the availability of new evidence not available previously; or (3) the need to correct clear error [of law] or prevent manifest injustice." North River Ins. Co. v. CIGNA Reins. Co., 52 F.3d 1194, 1218 (3d Cir. 1995). Moreover, the Rule "does not contemplate a Court looking to matters which were not originally presented." Florham Park Chevron, Inc. v. Chevron U.S.A., Inc., 680 F. Supp. 159, 162 (D.N.J. 1988). Thus, a party "must show more than a disagreement with the court's decision." Panna v. Firstrust Savings Bank, 760 F. Supp. 432, 435 (D.N.J. 1991). A mere "recapitulation of the cases and arguments considered by the court before rendering its original decision fails to carry the moving party's burden." Carteret Savings Bank, F.A. v. Shushan, 721 F. Supp. 705, 709 (D.N.J. 1989), appeal dismissed, 919 F.2d 225 (3d Cir. 1990), cert. denied, 506 U.S. 817, 121 L. Ed. 2d 29, 113 S. Ct. 61 (1992).

 Elizabethtown presents two arguments for why the Court should grant its motion for reargument.

 II. Occurrence v. General Exclusion K(3)(b)

 First, Elizabethtown asserts that the Court overlooked its ruling that a jury must decide whether there was an "occurrence" when it decided that the exclusion in Hartford's policy applied. In essence, Elizabethtown contends that if a jury decides that its negligence was an occurrence, then General Exclusion K(3)(b) cannot apply because it did not arise out of any breach of its agreement with the developers. Elizabethtown adds that contrary to the Court's Opinion, it did not argue that its settlement with the developers rendered General Exclusion K(3)(b) inapplicable. Elizabethtown concludes that its basis for coverage was the same throughout its brief--its negligence was an occurrence that required Hartford to provide coverage.

 The Court did not overlook its prior ruling on occurrence when it rendered its decisions on "occurrence" and on General Exclusion K(3)(b). First, the Court entertained the issue of negligence as an "occurrence" because the parties hotly debated the issue, because the Court wanted to engage in the academic and theoretical musing associated with the issue, and because the Court wanted to give the parties and future litigants guidance on a difficult issue.

 Second, the rulings are consistent because of the Court's consideration of Elizabethtown's settlement with the developers. In the first ruling, the Court showed that it was reluctant to enforce the settlement on its face. That reluctance arose out of an intuitive belief that Elizabethtown structured the settlement so that it could fall within the purview of its insurance contracts. Thus, the Court stressed that the settlement did not, in and of itself, prove that there was an occurrence. In the second ruling, the Court found that General Exclusion K(b)(3) clearly intended to cover the situation in this case. The Court then stated that relying solely on the settlement would thwart the intent of the insurance policy, and that the Court would not yield to form over substance. Thus, the Court's second ruling rendered the first ruling moot. Indeed, if there was no occurrence then there would be no need to reach the issue presented by General Exclusion K(3)(b). Hence, the latter provision thumps the issue of occurrence and in a sense obviates the need for a trial on the occurrence issue.

 Upon reviewing the parties' submissions, the Court is convinced that its prior rulings are correct. The Court found that General Exclusion K(3)(b) applied to this case because Elizabethtown "failed to . . . perform a contract or agreement in accordance with its terms." In reaching that decision, the Court rejected Elizabethtown's argument that its negligence, and not its breach of contract, caused the damages. The Court affirms and reiterates that decision because regardless of what Elizabethtown argues, it failed to fulfill its agreement to provide water, and that failure caused the developers' damages. *fn1"

 III. Waiver

 Elizabethtown's second argument is that Hartford waived its right to rely on General Exclusion K because Hartford did not list the exclusion when it sent Elizabethtown the letter disclaiming coverage in April 1993. Elizabethtown relies on Continental Insurance Co. v. Beecham, 836 F. Supp. 1027 (D.N.J. 1993), to support this argument. Elizabethtown concludes that the Court did not address the merits of this argument because it is not mentioned in the Opinion.

 The Court did not address this argument because Elizabethtown did not "actually" raise it in its opposition brief and because the Court found the arguments to be irrelevant. Elizabethtown now argues that it mistakenly used "estoppel" instead of "waiver" in footnote two on the thirty-ninth page of its opposition brief. Footnote two states: "Hartford should be estopped from asserting the . . . products liability exclusion here because it never formally disclaimed coverage on [that] ground[] but only raised [that] exclusion[] in their June 4, 1997[,] more specific answers to Elizabethtown's interrogatories." Eliz. Br. at 39 n.2 (citing Beecham, 836 F. Supp. 1027). Elizabethtown now contends that the import of its argument was that Hartford waived the right to use the exclusion in a motion for summary judgment because it failed to raise the exclusion in their letter disclaiming coverage.

 As stated supra, the Court generally refuses to hear new arguments on a motion for reargument. In this case, Elizabethtown's waiver argument is very close to a new argument. In its initial brief, Elizabethtown placed its "estoppel" argument in a one-sentence footnote on the thirty-ninth page. In its motion for reargument, Elizabethtown expanded its waiver argument to one and one-quarter pages in its moving brief and two single-spaced pages in its reply brief. If Elizabethtown wanted to rely on the waiver argument, it should have made the argument more prominent in its opposition brief so that defendants would have had the opportunity to address it.

 That being said, the Court will address the argument because "technically" Elizabethtown raised it and because the Court accepts Elizabethtown's concession that it confused the terms estoppel and waiver. The Court notes, however, that other Courts might not be so lenient, and that Elizabethtown should be more cautious when designing and writing its briefs.

 Waiver involves the intentional relinquishment of a known right. See Shebar v. Sanyo Bus. Sys. Corp., 111 N.J. 276, 291, 544 A.2d 377 (1988). To prove waiver, a party must show that the other party knew of its rights and deliberately intended to relinquish them. See id. "Questions of waiver, therefore, are usually questions of intent, which are factual determinations that should not be made on a motion for summary judgment." Id. Elizabethtown argues that Hartford must be deemed to know the provisions in its policies, and that its failure to raise the exclusion after a two-month investigation into Elizabethtown's claim '"constitutes a deliberate intention to relinquish or abandon those defenses and/or exclusions."

 The general rule, however, does not apply to this case because Hartford did not waive its right to raise General Exclusion K(3)(b). A brief review of the procedural history is necessary for a complete understanding of the issue. In September 1991, the developers filed the case that ultimately gave rise to this action. In or about the middle of June 1993, Elizabethtown informed defendants of its claim for coverage. On July 1, 1993, Elizabethtown forwarded its case file on the underlying action to Hartford. On August 9, 1993, Hartford wrote Elizabethtown a letter stating that it was going to investigate the case and was reserving its rights under the policy. An internal memorandum written during the investigation mentioned General Exclusion K(b)(3):


If by some chance, it was determined that there was an allegation of an occurrence in this complaint, our policy still probably includes an exclusion for . . . property that has not been physically injured, arising out of a delay or failure by the insured . . . to perform a contract or agreement in accordance with contract terms. *fn2"

 On August 31, 1993, Hartford informed Elizabethtown that it would not cover the losses because it did not believe that there was an occurrence or property damage as defined in the insurance policy. Thus, it appears as though Hartford did not rely on or discuss any of its exclusions because of its belief that the liability provisions did not provide coverage.

 In November 1994, Elizabethtown settled the underlying action with the developers. In July 1995, Elizabethtown filed its Complaint in this Court. In or around March 1996, defendants moved for partial summary judgment on the Third Count of Elizabethtown's Complaint, which stated a claim for "bad faith refusal to defend and indemnify." In its reply brief dated March 14, 1996, Hartford discussed its reasons for disclaiming coverage. In addition to the reasons stated in its letter of August 1993, Hartford addressed the exclusions. As for General Exclusion K(3)(b), Hartford stated:


Frankly, it is very difficult to see how the plaintiff will escape the effect of this particular exclusion. The exclusion seems to clearly apply in this particular case. Nevertheless, for the purposes of this motion, it is only necessary to cite this particular exclusion for the purpose of demonstrating once again that there were sound reasons for the denial of coverage on behalf of [] Hartford.

 The Court granted defendants motion for partial summary judgment in September 1996.

 The Court holds that Hartford did not waive its right to rely on General Exclusion K(b)(3) for the following five reasons. First, Elizabethtown has not shown that Hartford considered the exclusion and deliberately decided not to rely on it. After two years of discovery, Elizabethtown has not produced any direct proof that Hartford waived its right. In fact, Elizabethtown's decision to place its waiver argument in a footnote near the end of its opposition brief indicates that it did not strongly believe or place much confidence in the waiver argument.

  Second, Elizabethtown's attempt to show waiver through an inference is unpersuasive. Even if Elizabethtown is correct that Hartford is presumed to know the provisions in its policies, Elizabethtown has not shown that Hartford deliberately intended to relinquish its right to rely on General Exclusion K(b)(3) when it wrote the letter disclaiming coverage. Rather, the letter indicates that Hartford did not think it was necessary to discuss the exclusions in its letter disclaiming coverage because its position was that the liability provisions did not cover the damages to the developers. Furthermore, Hartford's internal memorandum shows that it knew about General Exclusion K(b)(3), but that it would not rely on the exclusion unless a court determined that there was an occurrence. Thus, in light of these factors, the Court does not accept the inference that Elizabethtown has suggested.

 Third, Elizabethtown's reliance on Beecham is misplaced because in that case, Judge Barry found that an insurer could not invoke exclusions for the first time in a motion for summary judgment after discovery had been completed. 836 F. Supp. at 1045. Moreover, in Beecham the insurer had stated its grounds for disclaiming coverage when it filed its declaratory judgment action to determine whether there was coverage. Id. In this case, Hartford informed Elizabethtown of General Exclusion K(b)(3) approximately two years before it filed its motion for summary judgment. Therefore, Hartford did not surprise Elizabethtown, and gave Elizabethtown ample notice to prepare proofs and arguments why the exclusion did not apply.

 Fourth, Hartford's failure to list General Exclusion K(b)(3) in its initial letter disclaiming coverage does not mean that it is permanently barred from claiming that that exclusion prohibits coverage. The Court refuses to adopt the view that a delay in raising an exclusion is equal to a waiver. As shown in Beecham, courts will allow insurers to raise exclusions during litigation if they give insureds ample time to prepare arguments and to obtain discovery on why the exclusion should not apply.

 Fifth, the fact that Hartford did not inform Elizabethtown of its intention to rely on the exclusion from August 1993 to March 1996 is not dispositive because Elizabethtown defended itself in the underlying action and did not file suit against Hartford for approximately two years after Hartford had written its letter disclaiming coverage. In any event, the notice in March 1996 provided Elizabethtown with sufficient time to prepare an attack on General Exclusion K(b)(3).


 For the reasons stated supra, the Court will deny Elizabethtown's motion for reargument.

 An appropriate Order is attached.

 Dated: May 29, 1998



 In accordance with the Court's Opinion filed herewith,

 It is on this 29th May of May, 1998

 ORDERED that plaintiff Elizabethtown Water Company's motion for reargument of this Court's Opinion and Order dated March 27, 1998 is denied.


Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.