July 11, 2008
ALBERT WELCOME, PLAINTIFF,
JUST APARTMENTS, LLC, RICHARD MILLER, COINMACH LAUNDRY, ZIGURDS JACKOVICS, SCOTT JOHNSON, ROBERT BARRY, R.C. DOLNER CONSTRUCTION, TIM FLANAGAN, CENTURY TOWERS, BRIAN TREMETORE PLUMBING AND HEATING, INC., POWER ELECTRIC, PUBLIC SERVICE ELECTRIC & GAS CO., STRAIGHT EDGE CONTRACTORS, INC., DAVID RIVERA, DEFENDANTS.
JUST APARTMENTS, L.L.C, RICHARD MILLER AND TIM FLANAGAN, THIRD-PARTY PLAINTIFFS,
COINMACH CORP., ROYAL INSURANCE COMPANY OF AMERICA, R.C. DOLNER, INC., HARTFORD CASUALTY & INSURANCE COMPANY, THIRD-PARTY DEFENDANTS.
HARTFORD CASUALTY & INSURANCE COMPANY, FOURTH-PARTY PLAINTIFF-RESPONDENT,
GREATER NEW YORK MUTUAL INSURANCE COMPANY, ROYAL & SUNALLIANCE, ONEBEACON AMERICA INSURANCE COMPANY, ROBERT BARRY AND TIG INSURANCE COMPANY, FOURTH-PARTY DEFENDANTS-RESPONDENTS, AND UNITED STATES FIRE INSURANCE COMPANY, FOURTH-PARTY DEFENDANT-APPELLANT, AND NATIONAL UNION FIRE INSURANCE COMPANY, FOURTH-PARTY DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, L-9821-01.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 20, 2008
Before Judges Coburn, Grall and Chambers.
This appeal concerns an insurance coverage dispute between defendant United States Fire Insurance Company ("U.S. Fire") and defendant Hartford Casualty & Insurance Company ("Hartford"). The dispute involves coverage to defendant R.C. Dolner Construction ("Dolner") for a personal injury claim arising out of a construction accident. On cross-motions for summary judgment, the trial court found that U.S. Fire was obligated to provide coverage to Dolner for the claim. U.S. Fire appeals. We reverse.
The personal injury claim arose out of an accident that took place on June 16, 2000, at the Century Tower Project ("the Project") owned by Just Apartments, L.L.C. ("Just Apartments"). Dolner was hired by Just Apartments to provide construction management services for the Project. Plaintiff Albert Welcome was injured while installing laundry machines in the common laundry room for the Project. He brought this lawsuit against Just Apartments and Dolner as well as other defendants. The issue in this appeal is whether Dolner's general liability carrier, U.S. Fire, provides coverage to Dolner on this claim.
The contract between Just Apartments and Dolner required Just Apartments to maintain liability coverage during the construction of the Project and to designate Dolner as a "named insured" on the policy. In accordance with this contractual obligation, Just Apartments obtained a liability policy from Hartford, and Dolner and Just Apartments were listed as named insureds on the policy.
Dolner also had a general liability policy with U.S. Fire. Hartford contends that Dolner's general liability policy with U.S. Fire is primary on the claim. Hartford filed an amended fourth-party complaint against U.S. Fire seeking a declaration that U.S. Fire's policy is primary, that U.S. Fire must defend and indemnify Dolner for Welcome's claim, and that U.S. Fire must reimburse Hartford for its costs in defending Dolner. In opposition, U.S. Fire maintained that coverage for the Project was excluded from its policy and that, accordingly, its policy does not cover plaintiff's claim.
On cross-motions for summary judgment, the trial court determined that the U.S. Fire policy covered plaintiff's claim.
U.S. Fire's motion for summary judgment was denied, and Hartford's cross-motion for summary judgment was granted. The trial court ordered U.S. Fire to pay fifty percent of Dolner's defense costs. U.S. Fire's motion for reconsideration was also denied. U.S. Fire appeals from the order of May 15, 2006, denying its motion for summary judgment and also from the order of September 22, 2006, denying its motion for reconsideration.
U.S. Fire contends on appeal that coverage under its policy is barred by certain exclusions in the policy, including the wrap-up exclusion, and that the trial court should have considered extrinsic evidence when determining whether the U.S. Fire policy was intended to cover a claim arising from Dolner's work on the Project.*fn1
The U.S. Fire policy excludes from coverage "all wrap-up insurance programs."*fn2 Relying on this exclusion, U.S. Fire contends that its policy does not cover Dolner for its activities at the Project, since the Hartford policy provides "wrap-up coverage" to Dolner. Hartford maintains that its policy does not provide "wrap-up coverage" as that term is understood in the insurance industry and hence this exclusion in the U.S. Fire policy does not apply to Dolner's activities at the project.
The parties present somewhat conflicting definitions of a wrap-up policy. They do agree that it is insurance provided for a construction project that covers the owner and the general contractor. However, Hartford contends that the definition is more precise and argues that its policy is not a wrap-up because it does not provide workers' compensation coverage, it does not cover any of the subcontractors, and it does not provide builder's risk coverage for the premises. The broker who procured the Hartford policy for Just Apartments testified that his understanding was that a wrap-up policy is "insurance coverage procured specifically for a project covering all the owners, GC's and all subcontractors for insurance." He did not believe that the Hartford policy was a wrap-up because it did not provide coverage to the subcontractors. U.S. Fire maintains that all of these features are not necessary in a wrap-up policy.
When determining the meaning of an insurance policy, we must seek to ascertain the probable intent of the parties "in an effort to find a reasonable meaning in keeping with the express general purposes of the policy." Sinopoli v. N. River Ins. Co., 244 N.J. Super. 245, 250 (App. Div. 1990), certif. denied, 127 N.J. 325 (1991). Generally, "[w]hen interpreting an insurance policy, courts should give the policy's words 'their plain, ordinary meaning.'" President v. Jenkins, 180 N.J. 550, 562 (2004) (quoting Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001)).
Liability policies are "construed liberally in favor of the insured." Sinopoli v. N. River Ins. Co., supra, 244 N.J. Super. at 250. The court will resolve any ambiguities in the policy in favor of the insured. Martusus v. Tartamosa, 150 N.J. 148, 159 (1997). Insureds "are entitled to 'the broad measure of protection necessary to fulfill their reasonable expectations.' The insured's reasonable expectations should govern 'to the extent the policy's language allows.'" Ibid. (citations omitted). Nonetheless, these liberal rules of construction "cannot operate to authorize a perversion of the language and the intention of the contracting parties." Sinopoli v. N. River Ins. Co., supra, 244 N.J. Super. at 250.
Exclusions in insurance policies are narrowly construed, and the insurer has the burden of proving their applicability. Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997). However, where the exclusion is "specific, plain, clear, prominent, and not contrary to public policy," it will be enforced as written. Ibid.
Here the U.S. Fire policy uses the term "wrap-up" insurance without providing a definition. The conflicting definitions presented by Hartford and U.S. Fire indicate that authorities are not in agreement on the precise parameters of what is covered by wrap-up insurance. For example, we note that the New Jersey Educational Facilities Construction and Financing Act provides yet another way of defining wrap-ups, providing that wrap-up insurance includes coverage for subcontractors, but not specifying the type of coverage included. N.J.S.A. 18A:7G-44(c).*fn3 As one authority has explained: "Wrap ups can, and often do, vary materially from project to project." Jacqueline P. Sirany & James Duffy O'Connor, Controlled Construction Insurance Programs: Putting a Ribbon on Wrap-Ups, The Construction Lawyer, Summer 2002, 30. Whether a party is covered by the wrap-up "will depend on the language of the policy." Ibid.
Thus, based on these conflicting definitions, the use of the word "wrap-up" in the U.S. Fire policy may be viewed as ambiguous. We must therefore look to the intent of the parties, U.S. Fire and Dolner, to determine what they meant when they inserted the exclusion for wrap-ups in the policy, since the intent of the parties controls the interpretation of an insurance contract. Sinopoli v. N. River Ins. Co., supra, 244 N.J. Super. at 250.
Both Dolner and U.S. Fire agree that the policy exclusion for wrap-up policies was intended to refer to the Project covered by the Hartford policy, and that, thus, the U.S. Fire policy excluded coverage for the Project. The negotiations on the U.S. Fire insurance policy between Crum & Foster, acting for U.S. Fire, and Dolner's insurance broker, Island Risk Management, reflect the understanding that the Just Apartments project was subject to the wrap-up exclusion and would not be covered by U.S. Fire. In a memorandum from Island Risk to Crum & Foster, dated December 17, 1999, Dolner's broker writes: "List of wrap ups that need to be specifically excluded on R.C. Dolner's Package are as follows: (a) Just Apartments a/k/a Century Towers, Hoboken, NJ Project." Thus Dolner's broker listed the Project as a location to be excluded from the U.S. Fire policy. A further letter dated December 22, 1999, from Island Risk to Crum & Foster also states: "[e]xclude the following Wrap Up Projects: 1) Just Apartments a/k/a Century Towers, Hoboken, NJ." When Island Risk proposed that the policy exclusion for wrap-ups specifically list the wrap-ups that are excluded, Crum & Foster responded that "we couldn't do that. ALL WRAP UP INSURANCE PROGRAMS must be excluded." The policy contained that language. These negotiations reflect the intent that the Project be excluded from coverage.
That intent is buttressed by the fact that when Dolner forwarded plaintiff's personal injury claim to Island Risk, Island Risk referred plaintiff's claim to Hartford, not to U.S. Fire. The record also contains the certification of the contract administrator for Dolner, who stated "[u]pon information and belief, the Hartford policy was a wrap-up policy obtained by Just Apts. in accordance with the contract between R.C. Dolner and Just Apts., for the purpose of insuring any covered claims relating to the Century Tower project." U.S. Fire concurs that the Project is excluded from coverage under its policy.
Since the parties to the U.S. Fire policy agree that the "wrap-up" exclusion applied to the Project, their intent controls. The "wrap-up" exclusion was intended to exclude the Project from coverage under the U.S. Fire policy. As a result, the U.S. Fire policy provides no coverage for plaintiff's claims.