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S.T. Hudson Engineers, Inc. v. Pennsylvania National Mutual Casualty Co.

November 16, 2006

S.T. HUDSON ENGINEERS, INC., HUDSON CONSTRUCTION CONSULTANTS, INC., SAMUEL T. HUDSON, ROBERT S. HUDSON, AND AL STONER, PLAINTIFFS-RESPONDENTS,
v.
PENNSYLVANIA NATIONAL MUTUAL CASUALTY COMPANY, DEFENDANT-APPELLANT, AND AGRICULTURAL INSURANCE COMPANY, DEFENDANT.



On appeal from the Superior Court of New Jersey, Law Division, Camden County, L-1530-01.

The opinion of the court was delivered by: Lintner, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued October 10, 2006

Before Judges Lintner, Seltzer and C.L. Miniman.

On May 18, 2000, Pier 34, located on the western shore of the Delaware River in Philadelphia, collapsed into the river causing three deaths and numerous injuries to patrons of a restaurant/nightclub situated on the pier, along with significant property damage. Legal actions were filed in Pennsylvania on behalf of the dead and injured persons, the pier owner, and the restaurant/nightclub operator. Among the many defendants named were: S.T. Hudson Engineers, Inc. (Hudson Engineers), an engineering firm; Hudson Construction Consultants, Inc. (Hudson Construction), a construction consulting firm; and Samuel T. Hudson, Robert S. Hudson, and Alan Stoner, employees or officers of either or both of the firms (Hudson parties).

On March 12, 2001, while the underlying personal injury and property damage actions were pending, the Hudson parties filed a declaratory judgment action against defendant Pennsylvania National Mutual Casualty Company (Penn National), seeking insurance coverage and a defense, including counsel fees and costs, under a Comprehensive General Liability (CGL) policy and a Commercial Umbrella (CU) policy issued by Penn National.*fn1 Penn National answered and counterclaimed, seeking a declaration that it had no obligation under its policy to defend or indemnify the Hudson parties because the underlying claims involved performance of professional services for which there was no coverage. Penn National also sought a declaration that if coverage was found the only policies triggered by the pier collapse were those in effect at the time of the collapse, and that it had no obligation to permit its insureds to select counsel of their choosing.

Eventually, cross-motions for summary judgment were filed. On May 9, 2003, the motion judge denied Penn National's motion for summary judgment, finding that material issues of fact existed as to whether plaintiffs' actions came under the professional services exclusions in the CGL and CU policies. The judge did find, however, that the continuous trigger theory applied, rendering Penn National potentially liable on all its CGL policies from 1994 through 2001. Penn National moved for reconsideration. On June 25, 2003, the judge entered an order granting partial reconsideration, finding that the continuous trigger applied only to Penn National's potential liability for the property damage claims and not the bodily injury claims.

In January 2004, the underlying personal injury and property damage claims were dismissed as a result of a global settlement. Penn National contributed to the settlement on behalf of the Hudson parties. The Hudson parties moved for a pretrial determination of the legal issues. On April 12, 2004, the judge found that there were allegations in the underlying complaints that fell outside the ambit of professional services and, thus, Penn National owed the Hudson parties a defense under its CGL policy. The order memorializing the judge's decision required Penn National to pay the Hudson parties' defense costs associated with the property damage claims under the policies issued for the terms beginning January 1, 1994, and ending December 31, 2000. The defense costs associated with the personal injury claims were payable under the policy issued for the term beginning January 1, 2000.

A year later, the Hudson parties sought reimbursement for outstanding counsel fees and costs and a declaration that they were successful claimants under R. 4:42-9(a)(6). While the Hudson parties' application was pending, they reached an agreement with Penn National on the amount of the fees, costs, and interest allocated to the underlying litigation and the declaratory judgment action. On May 19, 2005, the judge found in favor of the Hudson parties and ordered Penn National to pay the agreed-upon amount. Separate judgments were entered that same date for counsel fees, costs, and interest incurred in the prosecution of the declaratory judgment action and those incurred in the defense of the underlying litigation.*fn2 Penn National appeals and we affirm.

We restate only those facts relevant to the disposition of this appeal. Pier 34 was originally built as an earth-filled timber crib structure, approximately 225 feet long by 70 feet wide. The pier was widened and extended to 550 feet long by 100 feet wide in 1909. Portside Investors, L.P. (Portside), the owner of Pier 34, commissioned an engineering study of the pier for development purposes in 1986. In 1991, Portside hired Site Engineers, Inc. to design a foundation for a restaurant building to be placed on the pier. From November 1991 through December 29, 1995, Portside leased the pier and building to Pier 34 Restaurant, L.P. (Pier 34 Restaurant), which operated a restaurant/nightclub. On November 3, 1994, a section of the inshore upriver side of Pier 34 collapsed into the Delaware River. Pier 34 Restaurant retained Hudson Engineers to investigate the collapse, report any findings resulting from that investigation, and make recommendations for repairs. Hudson Engineers issued a report on January 17, 1995, recommending that "a comprehensive condition survey [be conducted] in order to fully detail the exact nature of required repairs" to the pier.

On May 24, 1995, Pier 34 Restaurant entered into a contract with J.E. Brenneman Co. Contracting Engineers (Brenneman), a construction company, to stabilize and repair the inshore upriver collapsed section of the pier. Brenneman's president, Robert Hudson, also an officer of Hudson Engineers, contractually arranged to have Hudson Engineers designated as engineer for that project.

In August 1995, while the repair work of the upriver section of the pier was ongoing, Pier 34 Restaurant "identified a crack in the seawall at the downriver/outshore end of the pier." As a result, Eli Karetny, an employee of the restaurant, met with Robert Hudson and Jesse Tyson, Brenneman's vice president. At Karetny's request, Brenneman retained Waterfront Constructors, a division of Brenneman, to conduct an underwater diving inspection of the pier. The inspection verified that there were cracks in the seawall and defects in the pier.

In October 1995, Brenneman contracted with Hudson Engineers to perform an underwater diving survey of the outshore end of the pier and to set up mechanisms to monitor the pier to detect any movement. Following the survey, Hudson Engineers advised that the pier "was moving away from the Pennsylvania shore toward New Jersey." Hudson Engineers discussed a method to stabilize the pier with representatives of Portside, Pier 34 Restaurant, and Brenneman. The method was rejected, however, as not practical because it was too costly and would disrupt operations on the pier. Hudson Engineers devised an alternate method using "A-frame" braces on the pilings on the outshore downriver section of the pier. Between November 4 and 6, 1995, six A-frames were installed by Brenneman. Nevertheless, subsequent measurements revealed that the pier had not been stabilized and was still moving away from the shore.

Hudson Engineers monitored the movement of the pier until December 28, 1995. Hudson Engineers claimed that Portside and HMS Ventures Inc. (HMS), a company that eventually purchased the restaurant, terminated the monitoring process because the "readings indicated that movement [of the pier had] slowed down." Portside and HMS denied that they terminated the monitoring.

On January 19, 1996, Portside and Brenneman entered into a contract for the "Reinforcement of Pier 34." Hudson Engineers was designated as the "Engineer" for the project, which entailed the installation of eleven more A-frames. The contract also called for Hudson Engineers to "[p]erform site surveying of pier movement, including recorded data with drawings and notes." There is a significant question, however, whether Hudson Engineers continued to monitor the movement of the pier.

Brenneman stopped operations in 1998, and many of its personnel, including Tyson, began working for or with Commerce Construction Corporation (Commerce). Robert Hudson became an employee of Hudson Construction. He also ...


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