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MERCHANTS INSURANCE COMPANY OF NEW HAMPSHIRE, INC. v. HESSLER

August 15, 2005.

MERCHANTS INSURANCE COMPANY of NEW HAMPSHIRE, INC., Plaintiff,
v.
VERONICA and TIMOTHY HESSLER t/a, COASTAL PAINTING and RESTORATION CO., and GEORGE and STACEY DEPOE, Defendant.



The opinion of the court was delivered by: ANNE THOMPSON, Senior District Judge

[EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.] MEMORANDUM & ORDER

This matter comes before the Court on Plaintiff's Motion for Summary Judgment pursuant to Fed.R.Civ.P. 56. The Court has decided this motion based on the submissions of the parties. Pursuant to Fed.R.Civ.P. 78, no oral argument was heard. For the following reasons, Plaintiff's motion is granted in part and denied in part.

BACKGROUND

  On January 16, 2003, George and Stacy DePoe instituted a lawsuit against Veronica and Timothy Hessler, trading as Coastal Painting and Restoration Co. (hereinafter "Coastal"), in the Superior Court of New Jersey, Law Division, Monmouth County (hereinafter referred to as the "underlying action"). In the underlying action, Mr. and Mrs. DePoe seek a judgment for bodily injury and property damage resulting from alleged exposure to lead, toxic fumes and dust. The DePoes claim that after contracting with Coastal to paint the exterior of their home, Coastal negligently performed the job causing the aforementioned exposure.

  As a result of the underlying action, Coastal sought a legal defense and indemnification under their insurance policy with Merchants Insurance Co. of New Hampshire (hereinafter "Merchants"). Merchants agreed to provide a defense in the underlying action, but reserved the right to seek judicial resolution of the coverage issues in a declaratory judgment action pursuant to the terms of a Non-Waiver agreement. On December 11, 2003, Merchants filed this instant action against Coastal seeking declaratory relief. Specifically, Merchants' Complaint seeks a judgment: (1) that the insurance policy between it and Coastal does not cover the claims alleged in the underlying action; (2) that Merchants owes no duty to provide a defense on behalf of Coastal in the underlying action; (3) and that Merchants owes no duty to indemnify Coastal in the event that an award or judgment is rendered against it in the underlying action.

  The insurance policy between Merchants and Coastal contains several noteworthy exclusions precluding coverage. The first is a total pollution exclusion endorsement, which provides as follows:
This insurance does not apply to
f. Pollution
(1) "Bodily Injury" or "property damage" which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants" at any time.
(2) Any loss, cost or expense arising out of any:
(a) Request, demand, order or statutory or regulatory requirement that any Insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of "pollutants"; or
(b) Claim or suit by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of, "pollutants".
(Pl.'s Br. Ex. D.) The policy also contained an exclusion for liability due to lead, which stated:
This insurance does not apply to:
"Bodily Injury" caused in whole or in part, either directly or indirectly, by lead paint or lead contamination, or arising out of or incidental to the inhalation, ingestion, use, handling or contact with lead paint or lead contamination.
Id. Third, the insurance policy excludes injuries and property damage "expected or intended from the standpoint of the insured." Further, the policy contains a provision excluding from coverage "`[b]odily injury' or `property damage' for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement." Id. Lastly, the insurance policy contains a number of business risk exclusions relating to damages arising from Coastal's "work product."

  Merchants claims that no coverage under the policy exists because the allegations in the underlying complaint against Coastal concern claims of lead exposure, and exposure to hazardous substances. As such, according to Merchants, summary judgment is appropriate.

  DISCUSSION

  I. Summary Judgment Standard

  A party seeking summary judgment must "show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358, 1366 (3d Cir. 1996). An issue involving a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In reviewing motions for summary judgment, the evidence is viewed in the light most favorable to the non-moving party. InterVest, Inc. v. Bloomberg, L.P., 340 F.3d 144, 159-60 (3d Cir. 2003).

  A motion for summary judgment is designed to go beyond the pleadings. Celotex, 477 U.S. at 322. Consequently, to defeat a motion for summary judgment, a party must do more than restate the initial allegations of the complaint, or provide unsupported conclusions of fact. Id. A non-moving party must point to concrete evidence in the record which supports each element of the claim. Id. Failure of the non-moving party to provide such evidence entitles the moving party to judgment as a matter of law. Fed.R.Civ.P. 56.

  II. Interpretation of Insurance Policies

  New Jersey Courts recognize that insurance policies are adhesion contracts. See e.g., Voorhees v. Preferred Mutual Ins. Co., 128 N.J. 165, 175 (1992). Therefore, "courts must assume a particularly vigilant role in ensuring [that insurance policies conform] to public policy and principles of fairness." Id. To that end, while courts will give an insurance policy's words their plain, ordinary meaning, "[i]f the policy is ambiguous, the policy will be construed in favor of the insured." Nav-Its, Inc., v. Selective Ins. Co. of Am., 183 N.J. 110, 118 (2005). Additionally, exclusions within an insurance policy are narrowly interpreted, and construed in "accord with the objectively reasonable expectations of the insured." Id. at 118; see also Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997).

  In the present matter, the issue is whether the complaint in the underlying action alleges claims that are covered under Coastal's insurance policy with Merchants. "Whether an insurer has a duty to defend is determined by comparing the allegations in the complaint with the language of the policy. When the two correspond, the duty ...


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