On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-8325-01.
Before Judges Lefelt, Fuentes and Falcone.
The opinion of the court was delivered by: Lefelt, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted February 8, 2005
John E. Feit, Jr., and Joyce Unger Feit appeal from a summary judgment, which concluded that their homeowners' insurance carrier, Prudential Property and Casualty Insurance Company of New Jersey, had no duty to defend or indemnify the Feits in a civil action brought against them by Karen McClellan. McClellan's suit sought recovery of remediation costs allegedly caused by the Feits' misrepresentation that there were no underground oil storage tanks on residential property the Feits had sold to McClellan some five years earlier. The motion judge found that Prudential did not have to supply a defense to the McClellan action because the Feits' homeowners' policy excluded intentional acts.
We agree that the intentional misrepresentation claim was correctly excluded from coverage. We conclude, however, that a prior policy, which required a defense for the negligent misrepresentation claim that McClellan also asserted against the Feits, may have been controlling. Consequently, we reverse and remand.
Here is how the Feits coverage claim arose. The Feits were former owners of residential property in Voorhees. In 1996, the Feits sold the property to McClellan. Before selling the property, the Feits converted their oil heating system to gas and hired Atmostemp to"close and abandon" their underground heating oil storage tank. Upon selling the home to McClellan, the Feits represented in the agreement of sale that"Seller warrants that to the best of Seller's knowledge" there were no underground fuel tanks on the property and that any tanks have been removed. The Feits then handwrote"permit 930698 9/28/93." The referenced permit had been issued by Voorhees Township and granted Atmostemp permission to abandon the underground tank. The referenced date was the date of abandonment. In the"Seller's Statement To Buyer Regarding Residential Property," the Feits were asked whether they were"aware of any... [u]nderground storage tanks on the property." The Feits answered in the negative.
Almost five years later, when McClellan was selling the Voorhees property, an underground oil storage tank was discovered on the property. The tank had been leaking, so McClellan had to remove the tank and remediate the soil and underground water. She filed suit against the Feits to recover the remediation costs.*fn1
McClellan's complaint alleged the Feits were aware of the presence of the underground tank on the property, but misrepresented by failing to notify or disclose this information to the buyer. In addition to misrepresentation, McClellan also alleged, among other claims, fraud, breach of contract, equitable fraud, failure to disclose a material fact, and breach of the Consumer Fraud statute.
When the Feits purchased the Voorhees property, they obtained homeowners' insurance from Prudential and received the 1986 version of Prudential's HO 3 homeowners' policy. In December 1994, a few years before the Feits' sale of the property to McClellan, Prudential amended its HO 3 homeowners' insurance policy, and subsequently replaced the Feits' policy with the new 1994 version. There is no evidence in the record of any other amendment of the relevant homeowners' policy, and therefore, when the Feits sold the house to McClellan in 1996, the pertinent homeowners' insurance policy was the 1994 version.
Upon receiving McClellan's complaint, the Feits sought a defense from Prudential under their homeowners' policy. Prudential denied coverage. The insurance company took the position that the damages sought were not"property damage" as defined under the policy. Even if"property damage" occurred during the policy period, Prudential contended that the claim did not constitute an"occurrence" under the policy. Prudential also asserted that the policy excluded coverage for intentional acts, and the date of the loss contained in McClellan's complaint fell outside the Feits' policy period, which ended on June 28, 1996 when the property was sold to McClellan.
After Prudential declined to change its position upon the Feits' reconsideration request, the Feits joined Prudential in the McClellan suit as a third-party defendant. They alleged that the insurance company had exhibited bad faith, breached the insurance contract, breached the implied covenant of good faith and fair dealing, and engaged in deceptive trade practices.
Eventually the dispute came before a motion judge on the parties' cross motions for summary judgment. The judge granted Prudential's summary judgment motion and denied the Feits' cross motion. The judge found no obligation to defend because the 1994 policy excluded intentional acts, and the judge determined that McClellan's complaint alleged"only intentional acts." The judge also believed that the claim, which arose out of an agreement of sale, was excluded because the 1994 policy does"not ...