September 11, 2007
ERIKA STEINBAUER, PLAINTIFF,
EAST COAST ACQUISITIONS, LLC, WILKIN MANAGEMENT GROUP, INC., RAMAPO RIDGE CONDOMINIUM ASSOCIATION PHASE II, INC., RESTO CORP., BEM SYSTEMS, INC., AMERICAN HOME CONSULTANTS, INC., RE/MAX REAL ESTATE ENTERPRISES, DEFENDANTS, AND RAMAPO RIDGE CONDOMINIUM ASSOCIATION PHASE II, INC., THIRD PARTY PLAINTIFF-RESPONDENT/CROSS-APPELLANT,
SIRIUS AMERICAN INSURANCE COMPANY, THIRD PARTY DEFENDANT-APPELLANT/CROSS-RESPONDENT, AND QBE INSURANCE CORPORATION, TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, AND ROBERT W. OBRINGER, THIRD PARTY DEFENDANTS.
On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, C-406-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued July 10, 2007
Before Judges R. B. Coleman and Sapp-Peterson.
This is an appeal and cross-appeal of the December 30, 2005 order entered by the Chancery judge ordering third-party defendant Sirius American Insurance Company (Sirius) to defend and indemnify its insured, defendant/third-party plaintiff Ramapo Ridge Condominium Association Phase II, Inc. (Ramapo), and denying Ramapo's motion for leave to amend its third-party complaint to assert a claim of negligent administration of its claim against Sirius. We affirm.
The salient facts are not disputed. Ramapo is a nonprofit corporation that manages a condominium community in Mahwah, New Jersey. On March 17, 2003, a water pipe burst in one of the condominium units whose owner had abandoned the unit prior to the incident. An adjacent unit owner notified Ramapo and township officials of the incident. The township declared the unit unsafe.
At the time of the incident, Ramapo was insured under a property damage and general liability policy by Sirius, effective July 26, 2002, through July 26, 2003. Sirius agreed to undertake repairs and remediation of the damaged property and retained contractors to analyze the nature and scope of the work to be performed. Sirius ultimately settled Ramapo's claim for $16,537. The unit was subsequently sold in a foreclosure sale to East Coast Acquisitions (East Coast), which made additional repairs and upgrades to the unit.
On May 20, 2004, plaintiff signed a contract to purchase the unit. Prior to closing, plaintiff learned that the unit had sustained prior water damage and mold. Plaintiff discussed the prior damage with East Coast, who retained a mold testing company to inspect the unit for mold and, in the event mold was detected, agreed, at its own expense, to remediate.
Plaintiff closed on the property on July 16, 2004. She subsequently retained a plumber to install a flexible vent line for her clothes dryer. To vent the dryer, the plumber opened a hole in the wall next to the dryer and discovered a crawl space that allegedly contained mold. It is undisputed that the crawl space is part of the common areas of the building.
On November 16, 2004, plaintiff filed a complaint against East Coast, as the unit's seller, various contractors, and Ramapo. Plaintiff alleged that Ramapo breached a duty of care it owed to plaintiff by "failing to ensure that the repairs [it] undertook to have made to the townhouse were made properly and completely."
Ramapo tendered the policy to Sirius, demanding defense and indemnification. Because plaintiff did not own the property during the policy period, Sirius denied coverage, citing to the policy language in Coverage E, "Liability to Others[,]" paragraph A, the language found under "Occurrence[,]" and the language found under "Property Damage" respectively.
COVERAGE E [-] LIABILITY TO OTHERS
A. We pay for the benefit of insureds, up to the applicable limit(s) of liability (See Part II D) shown in the Declarations, those sums that insureds become legally liable to pay as damages because of bodily injury or property damage insured here.
Such bodily injury or property damage must:
* Occur during the policy term, and
* Be caused by an occurrence that takes place within the applicable coverage territory: See General Conditions 6.
Occurrence means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
Property damage means the following, caused by a covered occurrence:
* Direct physical injury to tangible property, including loss of use of such property (the loss of use is deemed to occur at the time of such direct physical injury).
* Loss of use of tangible property that is not physically injured: all such loss of use is deemed to occur at the time of the occurrence causing the loss.
Ramapo filed a third-party complaint against Sirius and two other insurers, seeking a declaration that the insurers owed a duty to defend and indemnify it against plaintiff's allegations. Sirius moved for summary judgment dismissing the action against it, and Ramapo cross-moved for summary judgment.
Ramapo, relying in part upon Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437, 452 (1994), argued that for purposes of an indemnity policy, the time of occurrence of an accident is not the time the wrongful act occurred but the time when the complaining party has actually been injured. Since plaintiff did not contract to purchase the damaged unit until ten months after the Sirius policy expired, Sirius urged that any property damage plaintiff sustained could not have occurred until the date she closed on the property, July 16, 2004, one year after the Sirius policy expired. Ramapo, citing Molyneaux v. Molyneaux, 230 N.J. Super. 169, 176 (App. Div. 1989), argued that the policy issued to Ramapo was an "occurrence" policy that insured against the peril itself and, therefore, coverage may extend beyond the effective dates of the policy.
The court denied Sirius's motion and granted Ramapo's motion, ordering Sirius to defend and indemnify Ramapo. The court reasoned,
As to Sirius, the language of the Sirius policy says that it will extend liability coverage for "occurrences" that take place within the policy term. Here, it is not disputed that the property damage -the water damage and resultant mold condition - took place during that term. Sirius would have the court read the policy to mean that if property damage occurs during the policy term and if a third party sues the insured during that term, only then is Sirius['] indemnification triggered. The plain language of the policy does not lead to this interpretation.
On appeal Sirius argues:
I. AS PLAINTIFF INDISPUTABLY SUFFERED NO PROPERTY DAMAGE WITHIN THE 7/26/02 - 7/26/03 POLICY PERIOD, THE MOTION JUDGE ERRED IN COMPELLING SIRIUS TO DEFEND.
II. AS THE STEINBAUER COMPLAINT ALLEGES NEITHER PROPERTY DAMAGE NOR AN "OCCURRENCE", RAMAPO CANNOT MAKE A PRIMA FACIE CASE OF COVERAGE.
Preliminarily, we note that the issues involve contract interpretation. Therefore, our standard of review is de novo. Fastenberg v. Prudential Ins. Co. of Am., 309 N.J. Super. 415, 420 (App. Div. 1998); Young v. Prudential Ins. Co. of Am., 297 N.J. Super. 605, 621 (App. Div.), certif. denied, 149 N.J. 408 (1997).
"The duty to defend is not a product of statute or common law. It is solely a contractual undertaking of the insurer and it can be as limited or as broad as the insurer sees fit to provide through its policy." Hartford Acc. & Indem. Co. v. Aetna Life & Cas. Ins. Co., 98 N.J. 18, 28 (1984). In that regard, "[t]he starting point in evaluating any claim that an insurer has breached a duty to defend its insured in litigation must be the policy of insurance." Ibid. As with any contract, including insurance policies, their words are to be given their plain, ordinary meaning. Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001).
Thus, the function of the court is to enforce contracts in accordance with the objectively reasonable expectations of the insured for the purpose of rendering a fair interpretation of the extent of coverage contemplated under the policy. Ibid. To that end, when the express language of the policy is clear and unambiguous, courts will enforce it as written. Botti v. CNA Ins. Co., 361 N.J. Super. 217, 224 (App. Div. 2003); Christafano v. N.J. Mfrs. Ins. Co., 361 N.J. Super. 228, 235 (App. Div. 2003). On the other hand, "[w]hen an insurance policy's language fairly supports two meanings, one that favors the insurer, and the other that favors the insured, the policy should be construed to sustain coverage" and, where the language is clearly ambiguous, the language is often construed in favor of the insured. President v. Jenkins, 180 N.J. 550, 563 (2004). Ibid. Our ultimate task is to "search for the probable common intent of the parties which, along with the general purposes underlying the policy, must guide us in its interpretation." Kelly, Messick, Schoenleber & Miller Assocs. v. Atl. Mut. Ins. Co., 218 N.J. Super. 395, 404 (App. Div. 1987).
Here, there is no question that circumstances surrounding the damage to the unit was a covered event, as Sirius investigated and settled the claim that Ramapo initially submitted. Sirius argues, however, that because plaintiff's damage did not occur during the period of the policy's coverage, it breached no duty to Ramapo when it denied the claim.
We agree with the motion judge, who reasoned that the "event out of which the damage claim arises is the action or inaction of the condominium association in its intervention in the attempted ameliorization of the condition." That event was the bursting water pipe that resulted in water and mold damage to the unit and the common area crawlspace, which at the time was covered.
Unlike here, the "occurrences" in the cases relied upon by Sirius all took place after the policy period expired. In Hartford Accident & Indemnity Co., supra, 98 N.J. at 29, the Court concluded that there was no duty to defend and indemnify the insured against a claim that it negligently failed to warn of the dangers in the drug Atropisol, which the plaintiff ingested, because there was no evidence that the plaintiff "suffered any 'bodily injury' on or before February 10, 1971[,]" the date the policy expired. Likewise, in Middle Dep't Inspection Agency v. Home Insurance Co., 154 N.J. Super. 49 (App. Div. 1977), certif. denied, 76 N.J. 234 (1978), coverage was denied where the insured was accused of negligently inspecting wiring that ultimately caused a fire that occurred after the policy expired.
In Kelly, Messick, Schoenleber & Miller Assocs., supra, we held that there was no duty to defend and indemnify the insured who was aware of the corrosive condition of the heating system before the corrosion ultimately caused the heating system to fail. We found that the damage, the breakdown of the heating system allegedly rendering the condominium units uninhabitable, occurred when the insurance policy was no longer in effect.
Similarly, in Deodato v. Hartford Insurance Co., 154 N.J. Super. 263, (App. Div. 1977), we affirmed the trial court decision, Deodato v. Hartford Insurance Co., 143 N.J. Super. 396 (Law Div. 1976) (finding that the insurer owed no duty to defend and indemnify the insured). The plaintiff had claimed that the insured negligently constructed a roof. The roof eventually collapsed. We agreed with the trial court that the occurrence, for purposes of coverage, was the collapse of the roof, which occurred after the policy expired, not the time period when the roof was negligently constructed.
Finally, in Yarrington v. Camarota, 138 N.J. Super. 398, 402 (App. Div. 1971), aff'd, 60 N.J. 169 (1972), we upheld the trial court decision denying coverage to the insured for damages resulting from a fire that occurred. We agreed, as did the trial court, that there is no coverage where damage occurs for the first time after the policy period as a result of acts committed by the insured during the policy period.
The common theme throughout all of these cases adheres to the general principle the Court discussed in Hartford Accident & Indemnity Co., supra, that,
[a]s a general rule the time of the "occurrence" of an accident within the meaning of an indemnity policy is not the time the wrongful act was committed but the time when the complaining party was actually damaged. "The time of the accrual of the insured's liability is the determining factor, not the time of an event which ultimately results in liability."
[98 N.J. at 27 (quoting Miller Fuel Oil v. Ins. Co. of N. Am., 95 N.J. Super. 564 (App. Div. 1967)).]
Here, the insured's liability accrued during the policy period when the damage occurred. Therefore, the Chancery judge properly found that Sirius had a duty to defend and indemnify Ramapo.
In light of our decision, Ramapo's cross-motion appealing the denial of its motion for leave to amend the third-party complaint to allege negligent administration is moot.
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