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Lucky v. Liberty Mutual Fire Insurance Co.

February 13, 2008

MORRIS LUCKY & LILLIE LUCKY, H/W, PLAINTIFFS-APPELLANTS,
v.
LIBERTY MUTUAL FIRE INSURANCE COMPANY; FRITZ LANDER, INDIVIDUALLY, RECONSTRUCTION BUILDERS, LLC, JOSEPH GIAMBATTISTA, INDIVIDUALLY; SARASOHN, PESTCOE & GALANTE, LLC; KEVIN MULLIGAN, INDIVIDUALLY; COMMERCIAL DRYING TECHNOLOGIES, INC.; PREFERRED CLEANING SOLUTIONS, INC., DEFENDANTS-RESPONDENTS, AND RK OCCUPATIONAL & ENVIRONMENTAL ANALYSIS, INC.; MICHAEL MCGUINNESS, INDIVIDUALLY, DEFENDANTS.



On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, L-7036-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted January 8, 2008

Before Judges Winkelstein and LeWinn.

Plaintiffs Morris and Lillie Lucky own a home in Piscataway that sustained extensive damage following a fire in July 2003. The home was insured by Liberty Mutual. In an effort to repair the damage to the home, plaintiffs retained a public adjuster, a general contractor, and a number of subcontractors. Liberty Mutual paid over $200,000 towards the damage to the home, but refused to pay for additional mold remediation in the basement.

Plaintiffs subsequently filed suit against Liberty Mutual, the public adjuster, the general contractor and the subcontractors. On appeal, plaintiffs challenge various summary judgment orders dismissing their complaint as to all defendants, as well as orders denying their motions to extend discovery. We affirm, except as to the order dismissing plaintiff's complaint against Reconstruction Builders, the general contractor. We reinstate the complaint against Reconstruction Builders and remand for further proceedings.

On July 27, 2003, a fire occurred in the basement of plaintiffs' home. The home became "smoke filled" and the basement "flooded." Liberty Mutual's policy included standard liability and loss provisions covering repairs to the home, as well as a "Concealment or Fraud" provision. Under the latter provision, if an insured intentionally misrepresents a material fact or circumstance, or otherwise engages in fraudulent conduct, then Liberty Mutual is under no obligation to provide coverage for any related property loss.

Following the fire, Liberty Mutual's claims adjuster, Fritz Lander, offered to have the flooded basement cleaned by a company retained by Liberty Mutual. Plaintiffs declined Lander's offer. Instead, they retained a public adjuster, John Carino, who was to arrange for the cleanup. Carino contacted Snowy White Cleaners who cleaned plaintiffs' soot-covered clothes to Lillie Lucky's "complete satisfaction." Plaintiffs canceled their contract with Carino three days later. On August 1, 2003, plaintiffs hired defendant Sarasohn, Pestcoe, and Galante (Sarasohn) to act as their insurance adjuster.

At the behest of Liberty Mutual, most of the standing water in the basement of the home was pumped out by July 31, 2003. The items stored in the basement, however, continued to seep water onto the floor. According to plaintiffs, it took about three months for Sarasohn, working in conjunction with Liberty Mutual, to arrange for the removal of the water-soaked items from the basement.

On September 28, 2003, at the recommendation of Sarasohn, plaintiffs hired Reconstruction Builders as their general contractor to repair their home. Sarasohn and Reconstruction Builders are owned by the same principals. Liberty Mutual played no role in plaintiffs' selection.

At some point during the early stages of Reconstruction Builders' work at plaintiffs' home, a minor flood occurred that resulted in two or three inches of water in the basement. On May 28, 2004, plaintiffs discovered mold in their basement.

As a result, the following month, plaintiffs hired RK Occupational and Environmental Analysis, an environmental testing and evaluation firm, to assess and remediate the mold problem. Liberty Mutual played no role in plaintiffs' selection. After RK determined that a combination of drying and mold abatement was needed to combat the mold problem in the basement, it engaged Commercial Drying Technologies to dry the basement and Preferred Cleaning Solutions to remediate the mold problem. Drying the basement and remediating the mold were accomplished by July 26, 2004. On that date, RK issued its post-remedial report, indicating that Commercial and Preferred "did a good job," and recommending that that their invoices be paid.

In late June 2004, plaintiffs discharged Reconstruction Builders, which at the time was almost finished making repairs. After Reconstruction Builders had been discharged, and while Preferred and Commercial were still working in the basement, another flood occurred when an unidentified person disconnected the sump pump.

RK's involvement with plaintiffs' home evidently ended with its issuance of its post-remedial report. In that report, RK noted the continued presence of "[u]nusual fungal populations" on the first floor of the home and recommended that an inspection and possible further remediation be done before plaintiffs moved in. The report also stated that continuing mold contamination appeared to emanate from the ventilation system where a "flex duct" had not been replaced. The report also indicated that "painting the basement floors, walls and structural members [by Reconstruction Builders] was ill advised." The report concluded that "[u]ntil such time as permanent dehumidification can be installed in the basement to control vapor pressure issues related to moisture in the air and since painted surfaces remain in the basement, mold growth can be expected."

In August 2004, plaintiffs retained The Windsor Consulting Group to conduct a post-remediation evaluation of the mold problem. Windsor investigated and discovered contamination.

Plaintiffs' home has remained unoccupied since the fire. They have not had any construction work done at the home since Reconstruction Builders was discharged in June 2004. Nor have they had any mold-abatement procedures done since Preferred completed its work.

During the litigation, evidence showed that plaintiffs submitted fraudulent bills to Liberty Mutual for payment for their living expenses. Morris Lucky admitted "falsifying the receipts." Among those falsified invoices were a rent receipt from his mother for $4800 - plaintiffs had only paid her $800; a receipt for $15,397 for the construction of a fence, reflecting a labor charge of $9,500 - plaintiffs had only paid between $1500 and $2000 for that labor; and five receipts totaling $2000 for rent covering Lillie Lucky's stay with a friend - plaintiffs did not pay the friend any rent, but did make payments of ...


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