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Farm Family Casualty Insurance Co. v. Budd

March 7, 2008

FARM FAMILY CASUALTY INSURANCE COMPANY, PLAINTIFF-APPELLANT/CROSS-RESPONDENT,
v.
KENNARD G. BUDD, PAULA N. BUDD, DEFENDANTS-RESPONDENTS/CROSS-APPELLANT, AND HEIDI J. GROVATT, INDIVIDUALLY AND AS ADMINISTRATOR AS PROSEQUENDUM FOR THE ESTATE OF CHARLES B. GROVATT, DEFENDANT.



On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-3057-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 23, 2008

Before Judges Winkelstein, Yannotti and LeWinn.

Farm Family Casualty Insurance Company (Farm Family) appeals from orders entered on January 30, 2007, which denied Farm Family's motion for a declaratory judgment; granted a cross-motion for summary judgment by Kennard G. Budd and Paula N. Budd (the Budds); and ordered Farm Family to pay the legal expenses and litigation costs incurred by the Budds in defending certain claims asserted against them by Heidi J. Grovatt and the Estate of Charles B. Grovatt, as well as a portion of the amount paid by the Budds to settle certain of those claims. The Budds cross-appeal from the provisions of one of the January 30, 2007 orders awarding them monetary relief. For the reasons that follow, we affirm in part, reverse in part, and remand for further proceedings.

I.

This dispute arose from the following facts. Mr. Grovatt was the owner of certain residential properties located at 21 and 23 Ed Brown's Meadow in Lumberton, New Jersey. In 1978, Mr. Grovatt rented the property at 21 Ed Brown's Meadow to the Budds. In 1981, Mrs. Budd's mother purchased the property and, in turn, sold it to the Budds. In January 2001, the Budds learned that the artesian well on their property was providing water to the residence at 23 Ed Brown's Meadow, which Mr. Grovatt had rented to Mark Carter.

By letter dated September 13, 2001, Robert J. Incollingo, the Budds' attorney, notified Mr. Carter that the Budds intended to cut off the water supply to the Carter residence within ten days of the date of the letter. Mr. Grovatt complained to the Burlington County Health Department (BCHD), which advised Mr. Incollingo that terminating the water supply may be in violation of various ordinances. Thereafter, the Budds and the Grovatts agreed that Mr. Grovatt would have until November 13, 2001 to obtain an alternative water supply for the residence at 23 Ed Brown's Meadow.

On November 13, 2001, at approximately 8:53 a.m., the Grovatts filed a verified complaint against the Budds in the Chancery Division. They alleged that the well had been in existence since 1955 and thereafter continuously supplied water to both the Budd and Grovatt properties. The Grovatts alleged that, in light of these circumstances, it would be inequitable to permit the Budds to terminate the water supply to the Grovatts' property. The Grovatts further alleged that "the permissive use of water" over the years had "created an implied easement for [the Grovatts'] pipe and its access to the [w]ell."

The Grovatts sought a judgment enjoining the Budds from terminating the water supply to the property at 23 Ed Brown's Meadow Lane; ordering that the water supply continue in an uninterrupted fashion; and awarding reasonable attorney's fees and costs.

On November 13, 2001, the judge entered an order to show cause with temporary restraints, enjoining the Budds from "shutting off or otherwise preventing [the Grovatts] from utilizing the well in question existing on [the Budds'] property[.]" The Grovatts' attorney faxed the order to the Budds' attorney. However, Mr. Budd claimed that he had not been informed of the order, and sometime that day he cut off the water supply to the residence at 23 Ed Brown's Meadow.

On November 28, 2001, the Budds informed Farm Family of the Grovatts' Chancery Division action and made a claim for coverage under their insurance policy. Farm Family sent the Budds a reservation of rights letter dated December 4, 2001, and requested a copy of the Grovatts' complaint. Thereafter, the Budds' attorney furnished Farm Family with a copy of the complaint.

Because the water supply had been cut off, the Grovatts sought further relief from the court. On December 21, 2001, the judge conducted a hearing and directed the Budds to permit Mr. Grovatt and a licensed professional to enter upon their property so that they could reconnect the well to the Grovatt's property. It appears that when Mr. Grovatt and the professional entered the Budds' property, Mr. Budd called the police and had them removed. The judge entered an order on January 2, 2002, which directed the Budds to immediately make the well on their property available to the Grovatts. On February 27, 2002, Farm Family sent the Budds a letter denying coverage.

Carter and his family moved from the residence at 23 Ed Brown's Meadow in February 2002. On September 6, 2002, the dwelling was completely destroyed by fire. In addition, on November 21, 2002, Mr. Grovatt died of idiopathic pulmonary fibrosis. By order dated March 6, 2003, the Chancery Division transferred the matter to the Law Division for resolution.

On September 9, 2003, Mrs. Grovatt, individually and as administrator of Mr. Grovatt's estate, filed another action against the Budds in the Law Division. In this action, Mrs. Grovatt alleged that, when Mr. Grovatt sold the property to Mrs. Budd's mother, he retained a fifty-per-cent ownership of the well for his permanent use. Mrs. Grovatt claimed that this action gave rise to an implied easement for the pipe that provided the Grovatts access to the well. Mrs. Grovatt further alleged that Mr. Grovatt and Mrs. Budd's mother had an agreement that granted the Grovatts the right to use the well until Mr. Grovatt died but this agreement had not been attached to the deed. Mrs. Grovatt claimed that the Budds violated the agreement when they cut off the water supply to the Grovatts' property.

Mrs. Grovatt alleged that as a result of the Budds' cutting off the water supply to their property, the Grovatts lost rental income which in turn caused them "serious" financial problems. Mrs. Grovatt asserted that the Budds' "unlawful and intentional bad acts" caused the Grovatts to suffer emotional distress, physical and mental illness, and serious bodily injury. She further alleged that ...


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