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Commercial Door & Hardware v. Hanover Insurance Co.


February 5, 2008


On appeal from the Superior Court of New Jersey, Law Division, Cumberland County, L-0887-03.

Per curiam.


Argued January 15, 2008

Before Judges Skillman, Winkelstein and Yannotti.

Plaintiff, Commercial Door & Hardware, was the named insured in a policy issued by Hanover Insurance Company, insuring a building located at 16 Northwest Boulevard in Vineland, when a heavy snow caused the building's roof to collapse on February 19, 2003. After the parties were unable to agree upon the amount of plaintiff's damages, plaintiff filed suit against Hanover and its adjuster, Contemporary Adjustments.

Plaintiff appeals from an order of partial summary judgment dated July 14, 2006, in which the court dismissed plaintiff's claims for bad faith consequential damages, punitive damages, and counsel fees; and from a January 19, 2007 order barring plaintiff from introducing evidence of loss of business income at trial, and consequently granting Hanover summary judgment on plaintiff's business income loss claim.

On appeal, plaintiff raises the following legal arguments:

I. The trial court erred in granting defendant's motion for partial summary judgment entered on July 14, 2006.

A. The trial court erred by not finding defendant's conduct egregious enough to permit a grant of punitive damages.

B. The trial court erred by not finding defendant's continual delay and bad faith in this matter sufficient to grant plaintiff consequential damages.

C. The trial court erred by not allowing plaintiff to recover attorney fees.

II. The trial court erred in granting defendant's motion for summary judgment entered on January 19, 2007.

A. The trial court erred in finding a failure of evidence to sustain the business income loss claim, since any additional proof was out of time.

We have carefully considered plaintiff's arguments in light of the record and applicable law. We conclude that the arguments are without merit. Accordingly, we affirm.

Briefly stated, the facts and procedural history of plaintiff's claim is as follows. Plaintiff is in the business of manufacturing doors and door hardware. The insurance policy issued by Hanover covered plaintiff for loss of business income for up to one year following the event of the loss. The policy further provided that at the conclusion of the one-year period, the insured had sixty days to submit a sworn statement as to the amount of business income loss.

The policy also contained an appraisal provision. If the parties disagreed as to the amount of loss, either party could make a written demand for an appraisal and, if that occurred, each party would select "a competent and impartial appraiser."

The two appraisers would then select an umpire. An agreement by any two of the three would become binding.

In pursuing its claim, plaintiff hired a public adjuster, Arthur Montana, who, as compensation for his services, plaintiff agreed to pay nine percent of its total recovery. Hanover hired David Sorace of Contemporary Adjustment as its adjuster. When Montana and Sorace did not agree on the value of the loss, plaintiff nominated Montana as its appraiser. Because, however, Montana had a direct financial interest as plaintiff's paid adjuster, Hanover objected, and the appraisal process did not proceed.

In the meantime, Hanover hired a builder, Bill Good Builders, which estimated the damages for the building loss at $51,601.24. Hanover paid plaintiff $51,101.24, representing the estimate with a deduction of $500, apparently representing a policy deductible. Hanover also paid plaintiff an additional $25,000 against the contents loss, estimated by Sorace to be $25,817.88.

Plaintiff filed suit on August 28, 2003. Along with its answer, Hanover moved to disqualify Montana as an appraiser due to his lack of impartiality. The court granted the motion. After plaintiff then nominated Montana's son, the court also disqualified him as not being impartial.

After plaintiff appointed an impartial appraiser, the court appointed an umpire. Ultimately, one appraiser and the umpire arrived at an award of $209,921.10, which did not include a business income loss. Following the award, on February 2, 2006, Hanover paid plaintiff $100,987.90, in addition to the $51,101.24 and $25,000 Hanover had previously paid to plaintiff.*fn2

Plaintiff continued to litigate its claim for damages, however, based on what it claimed to be Hanover's bad faith, and for lost business income.

On several occasions during the litigation, defendant requested proof from plaintiff of its lost business income. In response, in October 2006, plaintiff submitted a one-page, unsigned document entitled "Accountant's Work Sheet," which contained a table showing gross receipts, taxable income and cost of goods. The document did not include the amount of plaintiff's lost business income. Plaintiff has never submitted the requested documentation or the sworn statement required by the policy to substantiate a loss of business income claim.

We turn first to plaintiff's claim for punitive damages. Absent egregious conduct, an insured has no right to recover punitive damages against an insurer. Pickett v. Lloyd's, 131 N.J. 457, 476 (1993). Plaintiff's primary allegation of egregious conduct against Hanover is that when Hanover hired Bill Good Builders to provide an estimate, it should have known that Bill Good Builders would refuse to perform the necessary repairs. Yet, neither the insurance policy, nor any rule or regulation requires that the insurer provide a damages estimate from the same builder who will perform the repairs. In other words, plaintiff has not described any egregious conduct by Hanover that would warrant punitive damages.

Plaintiff's bad faith claim is similarly unsustainable. To establish bad faith, the insured must demonstrate more than simple negligence; "bad faith is established by showing that no debatable reasons existed for denial of the benefits." Id. at 481. Here, plaintiff has not identified any such conduct on the part of Hanover. Though plaintiff claims Hanover is responsible for delays in plaintiff receiving its damages award, it was plaintiff's actions, by the nomination of Arthur Montana, and subsequently Montana's son, which caused the delay in the appraisal process.

Plaintiff points to no action by Hanover that equates to bad faith. And, absent a showing of bad faith, plaintiff is not entitled to counsel fees in this first party action against its insurer. See Eagle Fire Prot. Corp. v. First Indem. of Am. Ins. Co., 145 N.J. 345, 363-65 (1996) (Rule 4:42-9(a)(6), which authorizes a counsel fee award to a successful claimant in "'an action upon a liability or indemnity policy of insurance,'" does not permit a counsel fee award to an insured who brings a direct suit against his insurer to "'enforce casualty or other direct coverage'" (quoting Pressler, Current N.J. Court Rules, comment on R. 4:42-9)).

Finally, we turn to plaintiff's claim for lost business income. That claim also is without merit.

The insurance policy required that a sworn statement from the insured to support a proof of loss claim be submitted within sixty days after the expiration of one year from the loss. The loss occurred in February 2003. Hanover requested that sworn statement in March 2004, January 2006, and May 2006, but never received it. On October 30, 2006, plaintiff simply submitted an "Accountant Work Sheet," which did not satisfy the policy requirements. Plaintiff has never submitted the appropriate proof of loss required by the insurance policy to support a lost business income claim. Plaintiff has provided no reasonable explanation as to why it failed to so comply. Put simply, plaintiff did not submit sufficient proof of loss of business income to survive Hanover's summary judgment motion.


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