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NN&R, Inc. v. One Beacon Insurance Group

June 26, 2006


The opinion of the court was delivered by: Simandle, U.S. District Judge



This action arises from the structural collapse of a building at 326 Market Street, Camden, New Jersey. Plaintiff NN&R, Inc. ("NN&R"), a New Jersey corporation and the owner of a restaurant, Bill's Deli, and apartment units located at that address, alleges that the building was severely damaged in February 2000 when the contiguous property collapsed and was then legally demolished. Prior to that event, CGU Insurance, the predecessor to OneBeacon Insurance Group ("OneBeacon"), issued insurance policies to NN&R through Triester, Rossman & Associates, Inc. ("Triester" or "TRA") which provided property and liability coverage.

Currently Pending Before the Court are the Following Motions

1. Motion for summary judgment by OneBeacon against Plaintiff [Docket Item 60];

2. Motion for summary judgment by Plaintiff against OneBeacon [Docket Item 86];

3. Motion for summary judgment by OneBeacon against Triester [Docket Item 85];

4. Motion for summary judgment by Triester against Plaintiff [Docket Item 84];

5. Motions in limine to preclude testimony of Julian Toneatto by OneBeacon [Docket Item 82], Triester [Docket Item 96] and Hargrove [Docket Item 91]; and

6. Motions in limine to preclude testimony of James Klagholz by OneBeacon [Docket Item 83] and Triester [Docket Item 97].

The Court heard oral argument on these motions on Wednesday, May 18, 2006. The Court will decide at this time only the cross-motions for summary judgment by Plaintiff and OneBeacon, the motions in limine to preclude testimony of Julian Toneatto, and the motion for summary judgment by Triester against Plaintiff. The Court will reserve decision as to the remaining motions.


A. The Policy

In 1994, TRA completed an application on behalf of NN&R for a Concept One Policy, covering personal property, general liability, real property, and business interruption losses, which it submitted to OneBeacon. As the policy was approaching the July 1999 renewal, Triester wrote to OneBeacon requesting a reduction of the premium rate on the policy.*fn1 Maureen Herr, the underwriter for OneBeacon, responded that due to a high loss ratio, OneBeacon would not decrease the premium on the policy. On May 28, 1999, a renewal policy was issued for a one-year period commencing July 11, 1999. The building coverage limit on the policy was $228,000 on a replacement cost valuation, with no coinsurance and a $500 deductible. The policy further provided for business income loss coverage on an "actual loss sustained" basis with no waiting period applicable. TRA transmitted the renewal policy to NN&R on June 1, 1999, requesting that NN&R review the policy.*fn2 The letter also stated that the premium for the policy would be directly invoiced by CGU.

By letter dated July 8, 1999, Ms. Herr requested a cost estimator within 45 days, advising that if one were not received the policy would be endorsed to 80% coinsurance with actual (as opposed to replacement) cash value. According to Mr. Kaysen, he then contacted NN&R and advised that OneBeacon wanted to conduct a replacement cost evaluation. Mr. Kaysen testified at his deposition in this matter that he told NN&R that the building was likely valued in excess of $228,000 and, therefore, that OneBeacon would increase the premium unless NN&R agreed to coinsure at actual cash value. According to Mr. Kaysen, however, NN&R did not want to pay higher premiums and, thus, agreed to modify the conditions of coverage to be actual cash value instead of replacement value. Mr. Kaysen therefore responded to OneBeacon's request to forward a cost estimator for the property: "OK, 80% coinsurance." That response, communicated by a hand written notation on the July 8, 1999 letter from Ms. Herr, was faxed by TRA to CGU on July 12, 1999.*fn3

On July 16, 1999, CGU reissued a policy commencing July 11, 1999 for a term of one year. That policy included building coverage at actual cash value with a limit of $228,000 and 80% coinsurance. The business income and rental loss portion of the coverage were also changed to a stated limit ($30,800) as opposed to an actual loss sustained basis. The effective date of those changes, according to the Endorsement accompanying the renewal policy, was July 11, 1999. OneBeacon maintains that these changes are consistent with its underwriting guidelines which had previously been furnished to TRA. Though the endorsement was sent to TRA and NN&R, both Mr. Kaysen and NN&R maintain that they were unaware that the business interruption coverage would be changed.

B. Payments Under the Policy

On February 25, 2000, the properties contiguous to 326 Market Street collapsed onto themselves, causing damage to Plaintiff's property. Shortly thereafter, Plaintiff called TRA, which in turn contacted OneBeacon, to advise of the collapse. Eventually, the City of Camden hired W. Hargrove Demolition Co., Inc. ("Hargrove") to raze the partially collapsed buildings adjacent to Plaintiff's property. According to the Complaint, the demolition further damaged NN&R's property.*fn4

On May 15, 2000, OneBeacon made a $15,000 payment to NN&R under the Duties After Loss provision of the Commercial Property Conditions section under the policy. The May 15th payment was followed by payments of $12,000 and $10,000 under the Business Interruption Coverage provision on June 14, 2000 and September 18, 2000 respectively.

On May 2, 2002, OneBeacon issued a $20,000 check to NN&R for business interruption, and an additional $15,000 for damage to the building. On May 19, 2002, OneBeacon paid what it considered the remainder due under the policy, $109,908.01. In total OneBeacon has paid $181,908.01, consisting of $42,000 on the business income coverage,*fn5 and $139,908.01 for the property damage. According to OneBeacon, because the policy was written on an actual cash value basis, a "depreciation holdback" of $13,322.99 was applied to the property loss.

C. Department of Banking and Insurance Proceedings On April 17, 2001,

OneBeacon mailed to Plaintiff a notice of non-renewal of insurance, stating that the policy would not be renewed after its expiration on July 11, 2001. According to the notice, "the reason for the non-renewal is due to the company's overall poor loss experience for this class of business, the company is reducing its restaurant exposures." (Pl. Ex. 18.)

On April 30, 2001, William Rosenberg filed a complaint with the New Jersey Department of Banking and Insurance ("NJDBI"), Office of Insurance and Consumer Protection, alleging (1) that CGU had cancelled its coverage, and (2) that CGU had not made sufficient payments under the policy for business interruption loss. (Pl. Ex. 19.) By letter to the NJDBI dated June 5, 2001, OneBeacon responded to the complaint, explaining (1) that the loss ratio of the property for years 1994-99 was excessive; and (2) that the renewal policy re-issued on July 16, 1999 was written on an actual cash value basis at 80% coinsurance. (Pl. Ex. 5.) On October 5, 2001, TRA wrote to the NJDBI alleging that OneBeacon "forced" TRA to agree to change the policy to actual cash value. In any event, TRA stated, OneBeacon did not advise that the Business Income Loss portion of the policy would also be changed to a stated limit from actual loss sustained.

On January 2, 2002, NJDBI wrote to OneBeacon, stating, in part:

In this instance, the insured was not informed of the automatic coverage reduction of his Business Interruption coverage when he elected to reduce his property coverage to Actual Cash Value from Replacement Cost coverage. As a result, when a loss occurred, the insured did not receive as much Business Interruption benefits as he expected. OneBeacon is responsible for the actions of its agents; as such, this claim should be reconsidered for payment of the full Business Interruption benefits as originally available on this policy. (Pl. Ex. 22.) On January 3, 2002, NJDBI notified William Rosenberg that his complaint against OneBeacon had been forwarded on to the Office of the Insurance Ombudsman. (Pl. Ex. 23.)

By letter dated February 12, 2002, OneBeacon notified the Office of the Insurance Claims Ombudsman that the NN&R policy would be changed from actual cash value to replacement cash value and, thus, that "the stated amount coverage of $30,800 is no longer in effect." (Pl. Ex. 24.) Accordingly, OneBeacon acknowledged that it would pay NN&R's claim for business interruption for up to one year with no monthly limit. (Id.) According to OneBeacon's calculations, that amount totaled $60,036.*fn6 (Pl. Ex. 25.)

D. Related State Court Actions

On July 6, 2001, Plaintiff filed a complaint in the Superior Court of New Jersey, Law Division, Camden County, against Triple C Enterprises and Christine Allen Jackson, owners of the property adjacent to Bill's Deli, to recover damages for, inter alia, the cost of repair of the property, lost wages and lost business.

(OneBeacon Ex. Q.) NN&R obtained a $450,000 judgment against Triple C Enterprises, which resulted in a lien against the properties owned by Triple C Enterprises for that amount

Meanwhile, in 2003 OneBeacon filed a subrogation action against Triple C Enterprises, Christine Allen Jackson, and Hargrove in Superior Court of New Jersey, Camden County, Law Division, seeking a determination of allocation of liability among the parties for the damage sustained by NN&R.*fn7 On July 21, 2005, Plaintiff brought an action against Hargrove in Superior Court, Camden County, for damages to the property and loss of business income. (OneBeacon Ex. U.)

E. Procedural History

On September 5, 2003, Plaintiff, together with William Rosenberg, NN&R's sole shareholder, filed a complaint against OneBeacon in Superior Court, Camden County, New Jersey, alleging claims of breach of contract and common law fraud, as well as claims under the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -20. (Compl.) The case was removed to this Court by OneBeacon on October 22, 2003. On October 28, 2003, OneBeacon filed a third-party complaint against Triester alleging negligence and breach of the Agency Agreement between Triester and OneBeacon's predecessor, CGU, executed on December 18, 1998. (See Third-Party Compl. ¶¶ 24, 25.)

OneBeacon subsequently moved on March 11, 2004 for dismissal and a more particularized pleading of the fraud claims asserted by Plaintiff in the original complaint. By Order dated May 7, 2004, this Court dismissed all claims asserted by William Rosenberg individually, and granted OneBeacon's motion for a more particularized pleading, requiring Plaintiff to file and serve an amended complaint. Plaintiff filed its Amended Complaint on May 27, 2004 against OneBeacon and Triester, claiming breach of contract, bad faith dealing and common law fraud, as well violations of the New Jersey Consumer Fraud Act and the New Jersey Unfair Claim Settlement Practices Act, N.J.S.A. 17B:30-13.1. (Am. Compl.)

On July 19, 2004, Triester filed a cross-claim against OneBeacon for contribution and/or indemnity. On April 8, 2005 OneBeacon filed a cross-claim against Triester identical in substance to its third-party claim. On October 6, 2005, Triester made a demand for indemnification, including attorney's fees and costs, against all liability arising out of the errors and omissions of OneBeacon. Defendant Third-Party Plaintiff OneBeacon moved to sever and compel arbitration of all claims between itself and Defendant/Third-Party Defendant Triester. In an Opinion and Order dated January 30, 2006, the Court held that OneBeacon had waived its right to compel arbitration and, therefore, denied the motion.*fn8

Meanwhile, OneBeacon filed a motion to dismiss Plaintiff's Amended Complaint on August 5, 2004. On October 14, 2004, Triester filed a motion under Fed. R. Civ. P. 12(c), seeking judgment on the pleadings in its favor and against Plaintiff. The Court treated with the motions separately, granting each in part, in Opinions and Orders filed March 15, 2005 and June 28, 2005, respectively.


Summary judgment is appropriate when the materials of record "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). In deciding whether there is a disputed issue of material fact, the court must view the evidence in favor of the non-moving party by extending any reasonable favorable inference to that party; in other words, "the nonmoving party's evidence 'is to be believed, and all justifiable inferences are to be drawn in [that party's] favor.'" Hunt v. Cromartie, 526 U.S. 541, 552 (1999) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). The threshold inquiry is whether there are "any genuine factual issues that properly can be resolved only by a finder of ...

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