October 31, 2007
GUIDEONE MUTUAL INSURANCE CO., AS SUBROGEE OF THE ROCK CHURCH, PLAINTIFF-APPELLANT,
ANTHONY COMITO AND SANDY COMITO, H/W AND DANIEL MUNYON AND MARY ANNE MUNYON,*FN1 H/W DEFENDANTS-RESPONDENTS, AND CUMBERLAND MUTUAL FIRE INSURANCE CO., DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-691-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Telephonically Argued October 11, 2007
Before Judges Lisa and Lihotz.
In this consolidated fire subrogation and declaratory judgment action, plaintiff, GuideOne Mutual Insurance Co., appeals from three summary judgment orders in favor of defendants, Anthony Comito, Sandy Comito, Daniel Munyon and Mary Anne Munyon.
GuideOne issued an insurance policy to The Rock Church. The policy provided property damage coverage for the Church building and contents in Pitman. As a result of a fire in the Church that occurred during the policy period, GuideOne paid the Church $809,185.25 for the property loss.
GuideOne then commenced a subrogation action against the Comitos and Munyons, alleging they were negligent in causing the fire. The Comitos and Munyons who were members of The Rock Church, which is a non-profit corporation, asserted they were covered under the Church's policy. GuideOne then began a separate declaratory judgment action against the Comitos and Munyons contending they were not insureds under the policy issued to the Church.
On cross-motions for summary judgment in the declaratory judgment action, Judge Morgan concluded that the Comitos and Munyons were insureds within the provisions of the policy and that GuideOne's subrogation action against them was therefore precluded. After entering summary judgment in favor of the Comitos and Munyons in the declaratory judgment action, the judge entered a further order consolidating the two actions and dismissing the subrogation action. The judge also awarded attorneys' fees to the respective counsel representing the Comitos and Munyons pursuant to Rule 4:42-9(a)(6).
GuideOne appeals from these orders. It contends the Comitos and Munyons were not insureds under the terms of the policy, and, even if they met the requirements to be insureds, coverage was barred under an exclusion provision in the policy. GuideOne also argues that there is no prohibition in New Jersey against an insurer subrogating against its own insureds. Finally, GuideOne argues that if we reverse on the substantive issues, the Comitos and Munyons will no longer be successful claimants and would not be entitled to counsel fees. We reject GuideOne's arguments and affirm.
On the afternoon of September 24, 2000, Daniel and Mary Anne Munyon renewed their wedding vows during a ceremony officiated by Pastor Donald Leslie at the Rock Church. Anthony and Sandy Comito were among the guests. Two candelabras were used during the ceremony. When not in use, these candelabras, which stand about five feet tall and hold about six candles each, are kept against a wall behind the altar. For a ceremony such as this one, they are moved from that position into a freestanding area where the ceremony is conducted, and they are lit for the ceremony.
At the conclusion of the ceremony, as guests were leaving the church to go to a reception at a different location, Pastor Leslie blew out the candles. Sandy Comito had been taking pictures of the event. The Munyons expressed their wish to stay behind briefly for some additional photographs. For that purpose, they wished to relight the candles in the candelabras. Pastor Leslie gave his permission and instructed the Comitos and Munyons to blow out the candles and lock the building when they left. According to Sandy Comito, Pastor Leslie also told them to put the candelabras in their "proper place." Daniel Munyon recalled Pastor Leslie telling Sandy Comito (apparently in his presence) that "she could light the candles as long as she made sure to take responsibility to make sure they were out and placed back next to the table where they should be put."
All of the guests left, as did Pastor Leslie. Only the Munyons and Comitos were left behind. They remained in the church for ten to fifteen minutes taking additional photographs. When they finished, Anthony Comito and Daniel Munyon took responsibility for extinguishing the candles and moving the candelabras back against the wall where they believed the candelabras belonged and where they understood Pastor Leslie to have directed that the candelabras be placed. They locked up and left.
That evening, a fire occurred in the church. Investigation revealed that the likely cause of the fire was that one or more of the candles accidentally remained lit and ignited a tapestry hanging on the wall against which the candelabras were placed. GuideOne made payment to the Church for damage to the building and contents pursuant to the property coverage part of the policy.
The commercial general liability coverage portion of the policy provided that GuideOne "will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies." This portion of the policy further provided:
Throughout this policy the words "you" and "your" refer to the Named Insured shown in the Declarations, and other person or organization qualifying as a Named Insured under this policy. The words "we," "us" and "our" refer to the Company providing this insurance.
The word "insured" means any person or organization qualifying as such under SECTION II - WHO IS AN INSURED.
The named insured was the Church. As to other insureds, Section II provided in relevant part:
5. a. The following persons or organizations are also Insured:
(1) Any of your members, but only with respect to their liability for your activities or activities they perform on your behalf, at your direction and within the scope of their duties.
There is no dispute that the Munyons and Comitos were members of the Church. Judge Morgan concluded that, reading the applicable definition of "insureds" liberally, in accordance with the general rules of construction for insurance agreements, the Munyons and Comitos were performing activities on behalf of the Church, at its direction, and within the scope of their duties. He reasoned this way:
It seems to me that what the people were doing by following the direction to turn -- get the candles out and to put them back is cleaning up, and that cleaning up, in my mind, is part and parcel of what you do as a member, whether it be you are at a baptismal or a Communion or any other service where you need to put things back. It could be as simple as putting chairs back. But those things are part and parcel of the event. Taking photographs at a wedding or a renewal of your wedding vows, it seems to me, are part and parcel of that event.
I don't know that -- I have been to a lot of weddings where there aren't photos because I marry people, and sometimes there is no photos, but they're here. And -- but I have also been to many, many weddings, of course, where there are photos, and sometimes the photo session takes much longer than the wedding. It's part of the proceeding.
It seems to me that the fact that the pastor is not there for it doesn't take it out of the proceeding. The fact that this event coupled -- relighting candles, putting those extinguished candles but still hot candles against the wall in an effort to clean up seems to me to be in the pursuit of the activity for the church.
As a result, I'm satisfied that these people would be considered members in the course of activities for the church and, therefore, insureds under the definition of the policy.
GuideOne alternatively argued in the trial court that, even if the Comitos and Munyons were insureds, their coverage was excluded by a provision in the policy, which provided that the insurance did not apply to property damage to "Property you own, rent, or occupy." Judge Morgan found the exclusion inapplicable. Because the policy defined "you" and "your" to refer only to the named insured, namely the Church itself, and not its members (who are additional "insureds"), he concluded that the exclusion pertained only to the Church because it referred to property you own, rent, or occupy.
Finally, having concluded that the Comitos and Munyons were insureds under the policy, Judge Morgan found that, although he could point to no specific New Jersey authority on the subject, the law has to be that an insurance company who provides coverage for its insured should not be able to go against its insured for recovery of the money that it pays out on the insurance policy. It's just antithetical to the whole principle of why you have insurance. You have insurance because you are going to have a claim against you, you want somebody to cover that so you can protect your own assets. If it turns out that the insurance company gets to come after you for those same assets, then why are you paying your premiums?
Because the issues were decided by summary judgment, we review the trial court's determination de novo, applying the same standard as the trial court in determinating whether summary judgment was properly granted. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). No material facts are in dispute concerning the events leading up to the fire. Rather, this case involves the interpretation of the Church's insurance policy with GuideOne, which is a matter of law to be determined by the court. Nat'l Union Fire Ins. Co. v. Transp. Ins. Co., 336 N.J. Super. 437, 443 (App. Div. 2001). We agree with Judge Morgan's analysis and conclusions and affirm substantially for the reasons set forth in his oral decision of October 6, 2006. We add the following commentary.
Courts should interpret insurance policies according to their plain and ordinary meaning. Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001). In the absence of an ambiguity, courts should not write for the insured a better policy of insurance than the one purchased. Gibson v. Callaghan, 158 N.J. 662, 670 (1999). In other words, courts should not engage in a strained construction to support the imposition of liability. Progressive Cas. Ins. Co. v. Hurley, 166 N.J. 260, 273 (2001).
However, courts do give special scrutiny to insurance contracts because they are generally considered contracts of adhesion. Gibson, supra, 158 N.J. at 669. Therefore, ambiguities are usually resolved in favor of the insured where a policy is unclear. Progressive, supra, 166 N.J. at 273. For example, if the policy supports two meanings, one favorable to the insurer and the other to the insured, the interpretation favoring coverage should be applied. Ibid. The purpose of this rule of construction is to ensure that the reasonable expectations of the insured are protected. Zacarias, supra, 168 N.J. at 595.
The policy provision defining insureds in the context of this organization refers to "activities" of the Church or performed by Church members on behalf of and at the direction of the Church and within the scope of the members' duties. Nowhere in the policy is the term "activities" defined. In general parlance, this is a very broad term, and a policyholder would view it as such. Applying the canons of construction we have mentioned, an expansive interpretation is appropriate and would include any activities sanctioned and authorized by Church officials.
GuideOne's effort to restrict the meaning of "activities" to the formal religious vow renewal service itself is untenable. By that construction, the moment the officiant announced the conclusion of the ceremony, the activity would be at an end. However, at that moment, the church was still full of people and, in our view, the activity was still taking place.
Further, we agree with Judge Morgan that the taking of photographs and, in modern times, videos, of wedding and vow renewal ceremonies, and other services performed in places of worship, are commonplace. These aspects of the activity typically begin before the formal ceremony and continue after it. That is what happened here. The extended photo session was all part and parcel of this sanctioned Church activity.
GuideOne places great emphasis on the fact that there was some discrepancy between the Munyons, Comitos, and Pastor Leslie as to exactly what direction Pastor Leslie gave for placement of the candelabras after they finished the photo session. These discrepancies are insignificant and not controlling. What matters is that the import of Pastor Leslie's direction was that his permission to the Munyons and Comitos to remain for an extended photo session was conditioned upon their securing the premises upon leaving. Even if Pastor Leslie did not expressly direct them to put things that were moved just for the photo session back where they belonged, that was implicit in the directions he gave. The Munyons and Comitos moved the candelabras to the location where they believed the candelabras belonged and were normally kept other than for ceremonies such as this, thus acting at Pastor Leslie's direction and within the scope of the duty imposed upon them by Pastor Leslie. This action was done on behalf of the Church. Thus, the Comitos and Munyons were insureds under the policy.
In interpreting an exclusion in an insurance contract, the burden is on the insurer to bring the case within the exclusion. American Motorists Ins. Co. v. L-C-A Sales Co., 155 N.J. 29, 41 (1998). Generally, exclusionary clauses are narrowly construed against the insurer, ibid., and any ambiguity will usually be resolved in favor of the insured. Progressive, supra, 166 N.J. at 273. However, an exclusion is presumptively valid and will be given effect if it is specific, plain, clear, prominent, and not contrary to public policy. Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997).
Applying these principles, we agree with Judge Morgan's conclusion that the exclusion relied upon by GuideOne applied only to the Church, not the additional insureds, including the Comitos and Munyons.
GuideOne argues that even if the Comitos and Munyons are considered "insureds" under the policy, and even if the exclusion does not bar coverage, it nevertheless maintains a right of subrogation against them. We do not agree.
Subrogation is an equitable doctrine that is used when an insurer has indemnified an insured for damages. Fidelity & Cas. Co. of N.Y. v. First Nat'l Bank, 397 F. Supp. 587, 589 (D.N.J. 1975). Upon payment, the insurer becomes subrogated to any rights that the insured may have had against a third-party who is liable for the damages. Ibid. The purpose of the doctrine of subrogation is two-fold. First, it is only equitable that an insurer be reimbursed by a third-party tortfeasor because otherwise an insured would be unjustly enriched by virtue of a recovery from both an insurer and a third-party. Ibid. Second, even if there is no double recovery, a third-party at fault should not be able to escape liability. Ibid.
Although equitable principles give an insurer a right of subrogation against third-parties, those same principles do not give an insurer a right of subrogation against its own insured.
22 Holmes' Appleman on Insurance, § 141.2(B)(2) (2d ed. 2003). The anti-subrogation rule "prevents an insurer from asserting a right of subrogation against its own insured if the defendant is either the insured, a co-insured, or an additional insured under the subrogating insurer's policy." Ibid. "Allowing subrogation in these cases would compromise the special relationship between the insured and the insurer." Ibid.
New Jersey courts have generally followed the anti-subrogation rule with one limited exception in cases involving an insureds' criminal wrongdoing. See Ambassador Ins. Co. v. Montes, 76 N.J. 477, 482-86 (1978) (holding that in the case of an insurer, who pays an innocent party monetary damages due to liability of the insured ascribable to a criminal event, it is usually equitable that the insurer be indemnified by the insured).
The anti-subrogation rule was applied in a case remarkably similar in its facts to the case before us in Tower Insurance Co. v. Chang, 601 N.W.2d 848, 850-53 (WiS.Ct. App. 1991). The court held that an insurer of a church could not proceed in a subrogation action against two church members who accidentally caused the fire because the members were additional "insureds" under the Church's policy. Ibid. We endorse a like application of the rule in this case, which precludes subrogation by GuideOne against its insured.
Finally, GuideOne does not take exception with the reasonableness of the attorneys' fees awarded. Its argument is that if we reverse on the substantive claim, the Munyons and Comitos would no longer be successful claimants and would no longer be entitled to attorney's fees under Rule 4:42-9(a)(6). Because we affirm on the substantive issues, GuideOne's argument on this point is negated, and there is no basis to disturb the counsel fee awards.