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Preserver Group v. Bragin


September 11, 2007


On appeal from the Superior Court of New Jersey, Law Division, Hudson County, L-3611-05.

Per curiam.


Argued July 10, 2007

Before Judges R. B. Coleman and Sapp-Peterson.

Plaintiff Preserver Group (Preserver) appeals from that portion of the May 19, 2006 order entered by the Law Division granting summary judgment to defendants Al Bragin and RAM Holding Corp. (RAM) that awarded RAM $4,054 in direct damages and $9,047 in counsel fees. We affirm.

This matter arises out of property damage caused to plaintiff's insured, Blimpie, a tenant in a building owned by RAM. A pipe located above the area leased to Blimpie that was connected and appurtenant to the building's sprinkler system froze and ruptured, causing water to flow down into the area leased by Blimpie. RAM paid $4,054 to a contractor hired to repair the pipe. As a result of the water damage to its area, Blimpie filed a claim with Preserver, which paid more than $21,000 to repair and restore the Blimpie space.

On July 5, 2005, Preserver, exercising its subrogation rights under the policy it issued to Blimpie, filed a complaint in the Law Division against defendants and Stevens Institute of Technology (Stevens), the tenant in control of the area where the pipe ruptured. Preserver settled its claim with Stevens.

Defendants, in addition to answering the complaint, filed a counterclaim against Preserver seeking to recover their direct repair costs for the pipe and counsel fees. According to the counterclaim, RAM was named as an additional insured on the Preserver policy issued to Blimpie. RAM claimed that the damage caused by the sprinkler system was expressly covered under the policy.

More than a year prior to Preserver filing the complaint, defendants, through their then counsel, notified Preserver that they disagreed with Preserver's contention that they were liable for the damages Preserver incurred as a result of the incident. In letters dated March 2, May 7, September 7, 2004, and January 18, 2005, defendants' attorney referred to RAM's lease with Blimpie and their position that Blimpie bore responsibility "for the sprinkler system located in Blimpie's property." In a letter dated June 22, 2005, defendants' attorney stated, "I believe your client's lease with the Landlord has a no subrogation clause in it. You might also want to consider that." Preserver filed its complaint against defendants less than one month later.

In a letter dated September 7, 2005, defendants' new counsel placed Blimpie on notice of their position that the action against them lacked merit:

This office represents defendants, Al Bragin and Ram Holding Corp. in the above referenced matter. Pursuant to R. 1:4-8, the within letter is to serve as defendants' notice and demand requesting that your client, Preserver Group, withdraw its Complaint as to defendants, Al Bragin and Ram Holding Corp., as the claims in the Complaint are in violation of R. 1:4-8(a).

The Complaint is specifically in violation of R. 1:4-8(1) through (3), as the claims asserted in the Complaint only serve to increase the cost of litigation, are frivolous in nature and have no factual support. As you are aware, as the subrogee of Blimpie, your client, Preserver Group, stands in the shoes of Blimpie and has no rights beyond those which Blimpie would possess as against the defendants. The lease entered between Blimpie and Ram Holding Corp. specifically waives the right of subrogation on behalf of Blimpie and on behalf of all its insurance carriers. Additionally, the lease requires Blimpie to name Ram Holding Corp. as an additional insured on all its insurance policies, including those policies for which payment was already made by your client.

Additionally, there is no basis to sue Al Bragin personally in this matter, as he is not the owner of the building and has no contractual relationship with Blimpie. For these reasons, as well as the additional obligations and waivers of liability set forth in the lease, the claims asserted by Preserve[r] Group are clearly frivolous and should be withdrawn at this juncture.

Pursuant to N.J.S.A. 2A:15-59.1, we also place your client on notice that the Complaint is frivolous for the same reasons set forth above.

We therefore request that your client withdraw its Complaint as to defendants, Al Bragin and Ram Holding Corp. If the Complaint is not withdrawn within 28 days of service of the within demand, we will be filing an application with the Court for sanctions and for costs and attorneys' fees against you, your law firm and your client.

In response to that letter, Preserver's attorney requested a copy of the waiver provision and disputed its applicability because the "damage [was] caused to Blimpie's by a reason of a defective condition of the building or from a casualty happening outside of Blimpie's leasehold." Additionally, the letter explained that Bragin, "as a principal of the landlord corporation, [may] retain[] individual liability."

Despite the numerous letters, the complaint was not withdrawn. On or about February 17, 2006, defendants filed their motion seeking summary judgment dismissing the complaint, direct damages and counsel fees and costs. In a letter dated March 6, 2006, Preserver indicated that based upon "newly discovered information, i.e. a complete copy of the lease between Ram and Blimpie, Plaintiff has discovered the existence of a "Subrogation Waiver" which would preclude Plaintiff from bringing such action against Ram. Therefore, Plaintiff will voluntarily dismiss its complaint against Defendants Ram and Bragin."

On the return date of the motion, March 17, 2006, Preserver's attorney represented to the court that despite efforts to secure the waiver provision of the lease, he had been unable to do so, but that the entire lease was attached as an exhibit in defendants' summary judgment motion. Counsel indicated to the court that "as soon as [he] saw the entire lease and as soon as [he] saw the subrogation waiver[,]" he concluded that the claim against RAM should not be pursued. Defendants' attorney responded that the lease had been previously provided and plaintiff's counsel "could have given [him] a call and [he] would have sent him another copy of it."

The court considered the arguments but reasoned,

I know that plaintiff's attorney says, well, we filed this complaint because we had no other recourse but to do this in order to get the discovery and things of that nature.

I consider that -- these issues could have been discovered without the lawsuit because we know that notice was given regarding that clause -- that waiver clause.

The court granted RAM's motion for summary judgment in its entirety. The court denied Preserver's motion for reconsideration. The present appeal followed.

Preserver contends that defendants were not entitled to an award of direct damages because (1) such damages were not contemplated under the lease agreement for the benefit of RAM as an additional insured, and (2) to the extent defendants are entitled to fees under the frivolous litigation rule, those fees are limited to the fees incurred in defending the frivolous claim aspect of the case.

Preliminarily, we note that the issues related to the terms of the lease agreement between Blimpie and RAM and the waiver provisions of the insurance policy issued to Blimpie under which RAM is an additional insured, are issues involving contract interpretation. Thus, 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).

That said, as with any contract, including insurance policies, the words of the agreement are to be given their plain, ordinary meaning. Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001). 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).

It is well settled that the rights of a subgrogee are circumscribed by the rights of the insured. Standard Accident Ins. Co. v. Pellecchia, 15 N.J. 163, 172-73 (1954); Benevenga v. Digregorio, 325 N.J. Super. 27, 32 (App. Div. 1999), certif. denied, 163 N.J. 79 (2000); Foster Estates, Inc. v. Wolek, 105 N.J. Super. 339, 343 (App. Div. 1969).

Hence, the starting point in determining Preserver's subrogation rights as to Blimpie are defined by the lease agreement between Blimpie and RAM. Paragraph 42 of the lease required Blimpie, during the term of the lease, to [K]eep the leased premises insured continuously by the kinds, coverage and amounts of insurance hereinafter mentioned in this Paragraph . . . The insurance referred to in this is as follows:


Fire insurance and such other hazard and risk customarily covered by the standard form extended coverage endorsement and risk of vandalism, malicious mischief and sprinkler leakage on all buildings and improvement and equipment thereon, or to the premises[.]

Additionally, the lease required that Blimpie name RAM as an additional insured for "any and all liability or claims of liability arising out of, occasioned by or resulting from any accident or otherwise in or about the leased premises . . . for property damage[.]" Finally, the lease agreement contained a waiver of subrogation clause:

32. Waiver of Subrogation Rights. The Tenant waives all rights of recovery against the Landlord or Landlord's agents, employees or other representatives, for any loss, damages or injury of any nature whatsoever to property or persons for which the Tenant is insured. The Tenant shall obtain from Tenant's insurance carriers and will deliver to the Landlord, waivers of the subrogation rights under the respective policies.

Principles of contract construction require that we first determine whether the relevant contractual terms at issue here are clear or ambiguous. Nester v. O'Donnell, 301 N.J. Super. 198, 210 (App. Div. 1997). "An ambiguity in a contract exists if the terms of the contract are susceptible to at least two reasonable alternative interpretations[.] To determine the meaning of the terms of an agreement by the objective manifestations of the parties' intent, the terms of the contract must be given their 'plain and ordinary meaning.'" Ibid. (quoting Kaufman v. Provident Life & Cas. Ins. Co., 828 F. Supp. 275, 283 (D.N.J. 1992), aff'd, 993 F.2d 877 (3d Cir. 1993)).

Plaintiff argues that the damage was not caused by Blimpie and did not occur within the area it leased. Here, there is no ambiguity in Paragraph 11 of the agreement that required Blimpie to secure public liability insurance insuring RAM against any and all property claims resulting from accidents "in" or "about" the leased premises. Because the lease agreement does not contain a definition of "in" or "about," we look to the ordinary definition of those terms. Zacarias, supra, 168 N.J. at 595.

The American Heritage Dictionary defines "in" as "within limits, bounds or area of." The Am. Heritage Dictionary of the English Language, (4th ed. 2004). The definition of "about" includes: (1) approximately; (2) all around, on every side; and (3) in the area or vicinity. Ibid. When the liability insurance provision of the lease agreement is interpreted giving ordinary meaning to the words "in" or "about," we are satisfied that the language is sufficiently clear to reflect the parties' express and unambiguous intent that Blimpie provide indemnification for "any" resulting accidents "in" or "about" the area of the leased premises, even if the condition was not caused by Blimpie. See Pennsville Shopping Ctr. Corp. v. Am. Motorists Ins. Co., 315 N.J. Super. 519, 523 (App. Div. 1998) (holding that "[a]bsent an express and unambiguous contractual undertaking to do so, a tenant cannot logically be seen to be providing insurance to a landlord in respect of a liability for which the landlord has assumed sole responsibility"), certif. denied, 157 N.J. 647 (1999). Moreover, as defendants note, nothing in the record before the court established that the sprinkler system that was damaged was not part of Blimpie's tenancy or not for the benefit of all tenants, including Blimpie. Therefore, the motion judge properly found that under the terms of the policy, Preserver was liable for RAM's direct damages.

Plaintiff next claims that defendants are not entitled to counsel fees based upon the pursuit of their affirmative claim for direct damages. In addition, Preserver contends that beyond the calculations, the motion judge gave no reasons for the amount of the award.

The decision to award or deny attorney's fees rests within the sound discretion of the trial court. Maudsley v. State, 357 N.J. Super. 560, 590 (App. Div. 2003) (citing Rendine v. Pantzer, 141 N.J. 292 (1995)). Thus, the trial court's decision on this issue must be reviewed under the abuse of discretion standard. Id. (citing Coleman v. Kaye, 87 F.3d 1491, 1509 (3d Cir. 1996), cert. denied, 519 U.S. 1084, 117 S.Ct. 754, 136 L.Ed. 2d 691 (1997) (standard of review of an attorney's fee award is an abuse of discretion if no reasonable person would adopt district court's view); Packard - Bamberger & Co., Inc. v. Collier, 167 N.J. 427, 443-44 (2001) (attorney's fee determinations by trial courts are only disturbed upon a clear abuse of discretion)). Further, "[f]ee determinations by trial courts will be disturbed only in the rarest occasions[.]" Rendine, supra, 141 N.J. at 317.

We are satisfied that there was sufficient, credible evidence in the record to support the exercise of the motion judge's discretion to award counsel fees pursuant to Rule 1:4-8 (Frivolous Litigation) and N.J.S.A. 2A:15-59 (Frivolous Complaint) and that the award was reasonable. The record was replete with letters to Preserver, beginning more than a year before Preserver filed its complaint, advising that there was a waiver of subrogation clause contained in the lease agreement from which the court could conclude that the litigation and its prolonged course could have been avoided. Moreover, that the ultimate award was reduced to forty-seven percent of the total counsel fees defendants sought persuades us that the court apparently agreed that defendants were not entitled to an award of counsel fees reflective of their entire litigation costs.

Finally, Preserver's contentions that defendants should have sought coverage from their co-defendant's insurer and should only be awarded fees comparable to that of a defense counsel employed by an insurer are arguments that were not raised before the motion judge at the time the summary judgment motion was heard on March 17, 2006. As such, these were not matters that the court overlooked or to which it [had] erred.

R. 4:49-2. Fusco v. Board of Education City of Newark, 349 N.J. Super. 455, 461 (App. Div.), certif. denied, 174 N.J. 544 (2002), upon which Preserver relies to suggest that raising the issues during reconsideration preserves the right to raise the issues on appeal, does not apply here.

In Fusco, supra, we noted that there may be circumstances in some cases where "a motion for reconsideration may implicate the substantive issues in the case and the basis for the motion judge's ruling on the summary judgment and reconsideration motions may be the same." Ibid. We reasoned that "[i]n such cases, an appeal solely from the grant of summary judgment or from the denial of reconsideration may be sufficient for an appellate review of the merits of the case[.]" Ibid. We concluded, however, that such an approach was not appropriate in the matter before us because the plaintiff had made "his position crystal clear." Ibid. Consequently, we found that the trial court did not abuse its discretion in declining to consider what the plaintiff characterized as newly discovered evidence. Id. at 461-62.

In our view, such an approach is equally inappropriate here. Reconsideration should be used only for those cases which fall into that narrow corridor in which either (l) the court has expressed its decision based upon a palpably incorrect or irrational basis, or (2) it is obvious that the court either did not consider or failed to appreciate the significance of probative, competent evidence. D'Atria v. D'Atria, 242 N.J. Super. 392, 401 (Ch. Div. 1990); accord Cummings v. Bahr, 295 N.J. Super. 374, 384 (App. Div. 1996); see also R. 4:49-2.

In the present matter, Preserver's brief submitted in opposition to the summary judgment motion and its counsel's oral argument focused exclusively on the issue of coverage. The only reference to counsel fees was raised at the conclusion of the oral argument when Preserver's attorney asked the court whether its decision granting summary judgment also applied to "the remaining elements of the defendants' summary judgment motion and attorney's fees[]" and the court responded "Yes." Thus, Preserver was not entitled, through reconsideration, to gain a second bite of the apple by raising arguments that it was certainly poised to raise in opposition to the initial motion. See D'Atria, supra, 242 N.J. Super. at 401; Cummings, supra, 295 N.J. Super. at 384.


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