May 30, 2008
ANDREZEJ JAWOROWSKI, PLAINTIFF,
DENIS CHRISTOPHER GUERIN, DEFENDANT.
DENIS CHRISTOPHER GUERIN, THIRD-PARTY PLAINTIFF/ APPELLANT,
LIBERTY INSURANCE UNDERWRITERS, INC., THIRD-PARTY DEFENDANT/RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-5289-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued April 16, 2008
Before Judges Axelrad, Sapp-Peterson and Messano.
Defendant, third-party plaintiff, Denis Christopher Guerin, an attorney-at-law admitted to practice in New York, appeals from two orders entered April 27, 2007, that 1) denied his motion for summary judgment; and 2) entered summary judgment in favor of third-party defendant Liberty Insurance Underwriters, Inc. (Liberty) and dismissed defendant's complaint for declaratory relief. Defendant argues that the motion judge erred by concluding that the professional malpractice insurance policy Liberty issued to him should be construed in accordance with New York law; that a proper application of choice-of-law principles required the policy to be construed in accordance with New Jersey's law; and, therefore defendant is entitled to defense and indemnification from Liberty. We have considered these contentions in light of the record and applicable legal standards. We affirm.
The case has its genesis in a construction accident that occurred on July 21, 2001. Plaintiff Andrezej Jaworowski sustained serious injuries when a scaffold he was working on collapsed at a construction site in Jersey City, on property owned by Bob Ciasulli Honda, Inc., a New Jersey corporation, or by its principal, Robert Ciasulli, a resident of Kinnelon (collectively, Ciasulli). Plaintiff resided in Brooklyn, New York, and was employed by Semar, Inc. (Semar), a New Jersey corporation located in Wallington. Semar, a subcontractor to general contractor R.P. Richards & Son (Richards), a New Jersey corporation with its principal place of business in Verona, performed masonry work at the Ciasulli construction site.
Plaintiff retained defendant to represent him after his accident. Defendant is admitted to practice law in the state of New York and maintains offices in Manhattan at 19 West 44th Street. On January 31, 2003, defendant filed suit against Ciasulli and Richards in the Supreme Court of New York, Kings County. On September 26, 2003, defendant filed a similar complaint in federal District Court for the Eastern District of New York alleging diversity jurisdiction. On January 26, 2004, the District Court transferred its case to the federal District Court for the District of New Jersey, and on May 4, 2004, the New York Supreme Court action was "discontinued" without prejudice by stipulation of the parties. Upon transfer of plaintiff's case to New Jersey, Dennis S. Brotman, an attorney admitted to practice in New Jersey, substituted for defendant as counsel for plaintiff.
On May 28, 2004, Ciasulli moved in the District Court to dismiss plaintiff's complaint asserting it was first filed in federal court after the expiration of New Jersey's applicable two-year statute of limitations for personal injury claims. On January 10, 2005, Judge Harold A. Ackerman dismissed the complaint finding that plaintiff's claim was time-barred.*fn1
Brotman, concluding that defendant may have committed legal malpractice by failing to timely file suit in New Jersey, filed this action on October 20, 2005. Defendant in turn filed his answer on December 21, 2005, and asserted a third-party claim for defense and indemnification under his professional liability insurance policy issued by Liberty.
Meanwhile, Brotman appealed the dismissal of plaintiff's personal injury lawsuit to the Third Circuit Court of Appeals, and on June 18, 2007, that court reversed Judge Ackerman's order, finding that the running of the statute of limitations might be equitably tolled under the facts presented. That Court remanded the matter to Judge Ackerman for further proceedings. Jaworowski v. Ciasulli, 490 F.3d 331 (3d Cir. 2007).*fn2
The facts adduced during discovery in the declaratory judgment aspect of the case are essentially undisputed. Defendant's "New York Lawyers Professional Liability Policy" was effective from January 25, 2005, to January 25, 2006 (the policy).*fn3 Pursuant to the face sheet of the policy, Liberty's home address is listed as New York City, and JLT Services Corporation, the producer of the policy, lists an office address in Latham, New York. In his application for coverage, defendant indicated that he was admitted to practice law only in New York.
The policy required defendant to notify Liberty of any "claim or potential claim" defined as "a demand received by you for money or services, including the service of suit or institution of arbitration proceedings against you or a disciplinary proceeding." The policy further provided:
Notice of Claims. You must give us written notice of any claim(s) or potential claim(s) made against you as soon as practicable. In the event suit is brought against you, you must immediately forward to us every demand, notice, summons, complaint or other process received directly or by your representatives. Written notice of any claim against you, as well as of each demand on or again against us, must be delivered to us.
By letter dated June 16, 2005, defendant put Liberty on notice of the possibility of a legal malpractice claim stemming from his representation of plaintiff. Reserving Liberty's rights under the policy, and noting no litigation had as of yet been filed, on July 11, 2005, Dorothy M. Cowan, Liberty's Senior Claims Specialist, accepted defendant's notification under the policy's "Discovery Clause" that provided coverage for claims actually made after the policy period if "written notice" of "a wrongful act" was provided by defendant during the policy period. Cowan's letter specifically referenced defendant's reporting requirements under the "Notice of Claims" provision.
After investigation of the claim by its coverage counsel, in a letter dated October 18, 2005, Liberty notified defendant that the policy would not "provide either defense or indemnity coverage for th[e] matter." Noting defendant was "aware no later than late January or early February 2005 of a potential claim but did not report the same . . . until June 16, 2005," Liberty concluded defendant failed to provide timely notice under the policy.
In March 2007, Liberty filed a motion for summary judgment seeking a declaration that defendant was not entitled to coverage under the policy and dismissal of defendant's third-party declaratory judgment complaint. Liberty argued that under the terms of the policy, which it urged should be construed in accordance with New York law, defendant failed to provide timely notice, and therefore Liberty properly denied coverage for plaintiff's malpractice claim. Defendant cross-moved for summary judgment and argued that New Jersey law should apply because the underlying personal injury suit involved numerous parties with contacts to New Jersey, the accident occurred in New Jersey, and he was essentially practicing law in New Jersey via his representation of plaintiff with regard to the accident. Defendant argued that application of New Jersey's more liberal precedent regarding construction of the policy's notification requirements should result in judgment in his favor obligating Liberty to provide coverage under the terms of the policy.
On April 27, 2007, the motion judge heard argument on the motion and cross-motion. He appropriately applied the two-step governmental-interests analysis discussed in Rowe v. Hoffman-LaRoche, Inc., 189 N.J. 615 (2007), and considered New York's and New Jersey's public policies and interests as well as the contacts each state had to the litigation. He found that the nature of plaintiff's claim was that defendant failed to file a timely complaint, that any legal malpractice committed by defendant therefore occurred in New York, not New Jersey, and that the personal injury claim itself was not determinative of the choice-of-law issue. While agreeing with defendant that New Jersey had a "significant interest in protecting victims of torts committed in New Jersey, and insuring that attorneys do not commit malpractice," the judge noted that those interests were also protected by the laws of New York, even if the tortious conduct in the underlying suit occurred in New Jersey. In granting Liberty summary judgment, he concluded:
[A]fter having reviewed all of the facts in this case, I'm satisfied that there are no disputed issues of fact that need to be resolved by a trier of fact applying New York law to the malpractice policy. There is no coverage defense, or indemnification for the underlying legal malpractice claim because . . . the defendant  failed to provide Liberty with the appropriate notice.
The judge entered two orders, one denying defendant's motion for summary judgment as to the declaratory relief sought by the third-party complaint, a second granting Liberty's motion for summary judgment and dismissing defendant's complaint with prejudice. This appeal followed.
When reviewing a grant of summary judgment, we employ the same standards used by the motion judge. Atlantic Mut. Ins. Co. v. Hillside Bottling Co., Inc., 387 N.J. Super. 224, 230 (App. Div.), certif. denied, 189 N.J. 104 (2006). We first determine whether the moving party has demonstrated there were no genuine disputes as to material facts; we then decide whether the motion judge's application of the law was correct. Id. at 230-31. In this case, the issues presented were solely legal ones, and therefore we owe no deference to the conclusions reached by the judge. Id. at 231 (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
We begin by observing that in his brief, defendant notes that "[w]hether [he] should have given notice when he learned that [plaintiff's] claim was dismissed by the Federal Court or in June when notice was actually rendered is of no moment if New Jersey law applies to construction of the policy." He contends that by application of New Jersey law, Liberty "must prove appreciable prejudice" before the denial of coverage can be sustained. In short, he contends we "simply must decide whether New York or New Jersey law applies to the construction" of the policy. Defendant does not contest that the denial of coverage was appropriate if indeed New York law applies to our interpretation of the policy.*fn4
Both defendant and Liberty agree that New Jersey's choice of law rules must be applied since it is the forum state for the malpractice suit; and, since a conflict exists between New York and New Jersey law, a choice-of-law analysis is required. Rowe, supra, 189 N.J. at 621. Therefore, as the motion judge noted, the second step of New Jersey's "flexible governmental-interests analysis" was implicated, i.e., it was necessary "'to determine the interest that each state ha[d] in resolving the specific issue in dispute.'" Id. at 621-22 (quoting Gantes v. Kason Corp., 145 N.J. 478, 485 (1996)).
We recently noted that "[c]hoice-of-law principles, generally applicable to the interpretation of liability insurance contracts, were set forth by the New Jersey Supreme Court in State Farm Mut. Auto. Ins. Co. v. Estate of Simmons, 84 N.J. 28 (1980)." Century Indem. Co. v. Mine Safety Appliances Co., 398 N.J. Super. 422, 435 (App. Div. 2008). In Estate of Simmons, the Court instructed that the proper choice of law analysis [C]alls for recognition of the rule that the law of the place of the contract ordinarily governs the choice of law because this rule will generally comport with the reasonable expectations of the parties concerning the principal situs of the insured risk during the term of the policy and will furnish needed certainty and consistency in the selection of applicable law. At the same time, this choice-of-law rule should not be given controlling or dispositive effect. It should not be applied without a full comparison of the significant relationship of each state with the parties and the transaction. That assessment should encompass an evaluation of important state contacts as well as a consideration of the state policies affected by, and governmental interest in, the outcome of the controversy.
[84 N.J. at 37 (citations omitted).]
Although defendant argues that Simmons's principles have since been modified by more recent decisions, such as Pfizer, Inc. v. Employers Ins. of Wausau, 154 N.J. 187 (1998), we have noted the limited application of that case and its progeny to environmental insurance coverage disputes. See Century Indem. Co., supra, 398 N.J. Super. at 437 (noting Pfizer's express limitation to environmental coverage questions).
We conclude that application of Simmons's principles compels the same result as that reached by the motion judge--New York's interests predominate over those of New Jersey and therefore the policy's notice provisions must be interpreted under New York law. The parties involved with the contract--defendant, Liberty, and the producer of the policy--are all domiciled in New York. There can be no dispute that the "place of the contract" was New York. Although defendant contends that the policy contains no express geographical limitation, it was a reasonable expectation of all involved that the "principle situs of the insured risk" was New York, because defendant, in his application, indicated that he and others in his office were solely licensed to practice law in New York.
Defendant argues, however, that despite the fact that New York had an exclusive relationship to both the parties to the contract and its formation, New Jersey had "important state contacts" as well. In this regard, defendant first argues that because plaintiff's accident occurred in New Jersey and involved New Jersey tortfeasors, thus necessitating the filing of the action in New Jersey, our state's strong interest in compensating victims of negligence should be a significant factor in applying New Jersey law to the issue. Fu v. Fu, 160 N.J. 108, 125-26 (1999). However, this overlooks the fact that plaintiff was not a resident of New Jersey, and the choice of law analysis is not being applied to resolve a conflict of laws as to the underlying tort action. Thus, under these circumstances, applying New Jersey law to this insurance contract dispute does not further "an obvious [state] interest in regulating the conduct of persons within its territory," because providing coverage to defendant has no effect upon the conduct of Ciasulli or Richards. Id. at 126 (quoting Restatement (Second) of Conflict of Laws, § 145 comment e (1971)). Nor will the application of New Jersey law "provid[e] redress for injuries that occurred here," because providing coverage to defendant will not lead to any greater likelihood that plaintiff will recover his damages. Ibid. In fact, an argument can be made to the contrary, since we assume that if Liberty were required to defend defendant in the malpractice suit, it would attempt to minimize any recovery that plaintiff might secure.
Even though we are convinced that consideration of the respective contacts with the policy as between New York and New Jersey militate in favor of New York's predominance, "[i]f the contacts of a state do not 'align with the policies' relating to the disputed issue, then that state generally will not be found to have the greatest interest in governing the issue." Rowe, supra, 189 N.J. at 623 (quoting Erny v. Estate of Merola, 171 N.J. 86, 101 (2002)). However, in this case, the distinctions between the laws of New Jersey and New York reflect the focus of each state's policy differences and align perfectly with those policies.
It has been held that New York's prompt notification requirement serves many purposes, most of which further the interests of the insurer over the insured. See Unigard Sec. Ins. Co. v. N. River Ins. Co., 584 N.Y.S.2d 290, 292 (1992)(noting various purposes served by requiring strict adherence to notice provisions include that "the insurer [must have] an opportunity to protect itself"; that without timely notice, "an insurer may be deprived of the opportunity to investigate a claim and is rendered vulnerable to fraud"; and that late "notification may . . . prevent the insurer from providing a sufficient reserve fund")(citations omitted). Thus, a determination that New York's contacts predominate align perfectly with the policy considerations underlying that state's rule of law.
To the contrary, the policy behind New Jersey's requirement that the insurer show prejudice from any late notice of claim is based upon protection of policyholders' interests "because insurance contracts are contracts of adhesion and policyholders should not lose the benefits of coverage unless the delay has prejudiced the insurance company." Pfizer, supra, 154 N.J. at 206. New Jersey has no significant interest is upholding the rights of the policyholder in this case since defendant is neither a resident nor a practicing attorney in this state, and, therefore, the policy behind the rule of law and the contacts with New Jersey do not align.
Defendant argues, however, that he was essentially practicing law in New Jersey because he investigated the underlying tort claim, plaintiff's workers' compensation claim, and had contact with the alleged tortfeasors' insurer. Citing In re Opinion 33, 160 N.J. 63 (1999), defendant argues that the "practice of law is an intellectual exercise and does not require physical presence" in New Jersey to implicate significant, and he argues dominant, governmental interests.
Liberty counters by arguing, as it did below, that it is the insurance contract, not the substance of the malpractice claim, which provokes the choice-of-law analysis. It further contends that any reliance on In re Opinion 33 is misplaced because that case dealt with the unauthorized practice of law in New Jersey, and defendant, who only filed an action on plaintiff's behalf in New York, transferred the case to a New Jersey-admitted attorney when the litigation itself was transferred to New Jersey.
We agree with the motion judge that the choice-of-law analysis is required because of the insurance contract, not the allegation of legal malpractice because in that regard, both states have an interest in protecting their citizens from attorney negligence. Whether defendant committed malpractice solely in New York, or in both states, might be of theoretical interest, but it matters little to the proper resolution of the question presented.
Defendant's reliance on Boyson, Inc. v. Archer & Greiner, P.C., 308 N.J. Super. 287 (App. Div. 1998) is therefore misplaced. In Boyson, we determined Pennsylvania law applied to a legal malpractice suit brought by a New Jersey corporation against its New Jersey attorneys. While noting that in other circumstances New Jersey law might apply, we concluded that because the underlying malpractice was alleged to have occurred in "a Pennsylvania action involving an accident in Pennsylvania causing injury to a Pennsylvania resident . . . New Jersey choice-of-law principles require[d] application of Pennsylvania law in deciding whether counsel proceeded competently in defending the action." Id. at 298.
However, we further specifically noted that the litigation was not "an action questioning the issue of [insurance] coverage nor a proceeding designed to interpret a [policy] exclusion[,]" but rather "a legal malpractice case based upon the conduct of an attorney with respect to the handling of litigation in Pennsylvania." Ibid. We are therefore not persuaded by defendant's reliance on Boyson for at least two reasons. First, this case is about the interpretation of an insurance policy; and second, it does not involve defendant's "handling of litigation" in New Jersey.
Recognizing this latter distinction, defendant seeks to argue that In re Opinion 33 allows for the conclusion that even though he was licensed solely to practice law in New York and not New Jersey, and never filed suit in New Jersey, he nonetheless was practicing law in New Jersey because he engaged in preliminary investigation, involved himself in plaintiff's workers' compensation claim, and conducted negotiations with the tortfeasor's insurers.
However, as we noted above, the place of the contract and party expectations are significant factors to be considered in conducting the choice of law analysis. "[T]he law of the place of contract" usually governs because that law "generally comports with the reasonable expectations of the parties concerning the principal situs of the insured risk." Boyson, supra, 308 N.J. Super. at 297 (internal citations and quotations omitted). The reasonable expectation of Liberty was that it was agreeing to insure defendant against claims of legal malpractice arising out of his practice of law in New York, not his unauthorized practice of law in New Jersey.
In sum, we conclude, as did the motion judge, that "this is indeed a 'contract dispute over insurance coverage,' as to which New Jersey has no significant interest." Century Indem. Co., supra, 398 N.J. at 437 (quoting Sensient Colors, Inc. v. Allstate Ins. Co., 193 N.J. 373, 382 (2008)).