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Feszchak v. Pawtucket Mutual Insurance Co.

April 8, 2008


The opinion of the court was delivered by: Hillman, District Judge


This matter has come before the Court on the parties' cross-motions for summary judgment in this insurance coverage dispute. For the reasons expressed on the record at oral argument and below, Plaintiffs' motion will be granted, and Defendant's motion will be denied.


Plaintiff, Marcia Feszchak, was injured when the handle bars of a stationary exercise bike she was riding at a physical rehabilitation center, Optimum Medical Center ("Optimum"), suddenly fell forward. Plaintiff filed suit against Optimum in state court, and Optimum tendered its defense to its business owner's liability insurer, Defendant Pawtucket Mutual Insurance Company. Pawtucket refused to defend, citing the exclusion in their general business owner's liability policy for injuries resulting from professional liability. Optimum defended itself, went to arbitration, and Plaintiff was awarded $350,000. Instead of pursuing a trial de novo, Optimum settled with Plaintiff, and assigned its rights under its insurance policy to Plaintiff.

Plaintiff and her husband, Richard Feszchak, as assignees of Optimum, filed the instant action against Pawtucket, claiming that Pawtucket had a duty to defend because the professional liability exclusion does not apply. Plaintiffs are also asking the Court to compel Pawtucket to pay the $350,000 settlement. The parties cross-moved for summary judgment. Oral argument was held on the parties' motions.


A. Summary Judgment Standard

Summary judgment is appropriate where the Court is satisfied that "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986); Fed. R. Civ. P. 56(c). If review of cross-motions for summary judgment reveals no genuine issue of material fact, then judgment may be entered in favor of the party deserving of judgment in light of the law and undisputed facts. See Iberia Foods Corp. v. Romeo Jr., 150 F.3d 298, 302 (3d Cir. 1998) (citation omitted).

B. Analysis

There are two main issues before the Court: 1) Whether the professional services exclusion in the Pawtucket insurance policy applies to Plaintiff's injuries she sustained when she fell off the exercise bike, and, if so, 2) whether Defendant must pay the settlement amount.

1) Whether the Professional Services Exclusion in the Pawtucket Insurance Policy Applies to Plaintiff's Injuries

In New Jersey, insurance contracts are subject to special rules of interpretation because they are contracts of adhesion. Zacarias v. Allstate Ins. Co., 775 A.2d 1262, 1264 (N.J. 2001) (citations omitted). When there is ambiguity, the insurance policy should be interpreted to "comport with the reasonable expectations of the insured, even if a close reading of the written text reveals a contrary meaning." Id. (citations omitted). Even in the absence of ambiguity, however, "[u]nder certain circumstances, . . . the plain meaning of policy language may be overcome if it conflicts with the reasonable expectations of the insured." Am. Motorists Ins. Co. v. L-C-A Sales Co., 713 A.2d 1007, 1013 (N.J. 1998) (citation omitted).

With regard to insurance policy exclusions, the New Jersey courts have held that they must be narrowly construed and that the burden is on the insurer to bring the case within the exclusion. Id. (citation omitted). "Nevertheless, [New Jersey courts] adhere to the principle that an insurance policy should generally be interpreted 'according to its plain and ordinary meaning,' so as not to disregard the 'clear import and intent' of a policy exclusion." Id. (citations omitted). If an insurance policy's terms are capable of supporting two distinct outcomes as to whether there is coverage, however, "the subject language must be interpreted in favor of the insured." Mazzilli v. Accident & Cas. Ins. Co. of Winterthur, Switzerland, 170 A.2d 800, 803 (N.J. 1961). "Courts are bound to protect the insured to the full extent that any fair interpretation will allow." Id.

Here, the Pawtucket business owner's liability policy provided coverage to Optimum for "bodily injury," "property damage," "personal injury," "advertising injury," and "medical expenses" arising out of "[t]he ownership, maintenance or use of the premises . . . and operations necessary or incidental to those premises." (Pl.'s Ex. B.) The Pawtucket insurance policy did not apply to certain professional services, however. The exclusion provided, in relevant part,

This insurance does not apply to: . . .

j. Professional Services

"Bodily injury," "property damage," "personal injury" or "advertising injury" due to rendering or failure to render any professional service. This includes but is not limited to: . . .

(4) Medical, surgical, dental, x-ray or nursing services treatment, advice or instruction;

(5) Any health or therapeutic service treatment, advice or ...

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