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WHP 9, Inc. v. Centennial Insurance Co.

October 23, 2007

WHP 9, INC., AND THE EL-AD GROUP, PLAINTIFFS-APPELLANTS,
v.
CENTENNIAL INSURANCE COMPANY, DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Hudson County, L-4508-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued telephonically October 3, 2007

Before Judges Coburn, Fuentes and Chambers.

Plaintiffs, WHP 9, Inc., and the El-Ad Group ("WHP"), sued defendant Centennial Insurance Company in the Law Division. WHP claimed that it was entitled to coverage for losses suffered while building a residential housing project. The claim was based on a Builder's Risk Policy issued to WHP by defendant. On defendant's initial motion for summary judgment, the judge ruled for WHP. On defendant's motion for reconsideration, the judge reversed his ruling, holding that there was no coverage under the insurance policy. WHP appeals, and we affirm the denial of coverage.

The material facts are undisputed. WHP, a real estate developer, was involved in a $6 million, multi-building residential construction project in North Bergen. Before beginning construction, WHP used a commercial insurance broker to obtain from defendant a Builder's Risk insurance policy, which provided first party property insurance coverage but not liability insurance, and a liability policy from Zurich Insurance Company. The application for the Builder's Risk Policy indicated that the replacement value of the completed project was $6 million, and the value of the sewer pipe was neither reported to defendant nor included in the new construction cost. Around November 2001, one of WHP contractors, while driving piles for footings, punctured a 36 inch, cast iron storm sewer pipe that ran under the property. Ultimately, WHP was going to connect its waste system to the sewer pipe, which, however, had never served the WHP property before. The damage was discovered in 2002, and about eight months later, in March 2003, the sewer pipe's owner, Township of North Bergen, issued a stop construction order. At that point, the project was nearly complete.

As a result of North Bergen's action, WHP suffered a loss of rental income and incurred other "soft costs," in excess of $3 million. WHP filed a claim with defendant, which was denied on the ground that the sewer pipe was not covered property as that term is defined by the policy. North Bergen filed suit against WHP for the damages to the sewer pipe, which appear to have been $50,000, and Zurich defended WHP, ultimately settling the case with North Bergen.

Defendant's insurance policy provides for payment for loss to "Covered Property," and defines that term, in pertinent part, in the following manner:

1. COVERED PROPERTY

Covered property means your property or the property of others for which you are liable, consisting of,

a. Buildings or structures as described in this Coverage Form Declarations while under construction, erection, or fabrication, including the costs of foundations and underground property such as pipes, flues, drains, electrical wires, piers, and pilings; and excavation, grading, and filling; if such costs are included in the completed value of the project.

But this does not include existing buildings or structures to which improvements, alterations, repairs or additions are being made.

On appeal, WHP offers the following arguments:

A. THE BUILDER'S RISK POLICY COVERS THE DAMAGES SUFFERED BY WHP AS A RESULT OF ...


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