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Alpine Home Inspections, LLC v. Underwriters at Lloyd's London

November 24, 2008

ALPINE HOME INSPECTIONS, LLC, AND GLEN WOERTZ, PLAINTIFFS-APPELLANTS,
v.
UNDERWRITERS AT LLOYD'S LONDON, DEFENDANT-RESPONDENT. AND UNDERWRITERS AT LLOYD'S LONDON, THIRD-PARTY PLAINTIFF-RESPONDENT,
v.
JEFFREY ROTENBERG, THIRD-PARTY DEFENDANT-APPELLANT.



On appeal from Superior Court of New Jersey, Law Division, Bergen County, No. L-3353-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued October 21, 2008

Before Judges Wefing and Yannotti.

Jeffrey Rotenberg filed suit against Alpine Home Inspections, LLC, and its principal, Glen Woertz, alleging Woertz had negligently conducted a home inspection for Rotenberg and failed to discover the presence of termites.*fn1 Woertz had liability coverage through Underwriters at Lloyd's London ("Underwriters"); coverage was declined, but Underwriters agreed to defend Woertz under a reservation of rights. Woertz then filed a declaratory judgment suit against Underwriters, and the two actions were consolidated. Underwriters moved for summary judgment and its motion was granted. Woertz and Rotenberg moved for reconsideration, which was denied. Woertz and Rotenberg have appealed. Having reviewed the record in light of the contentions advanced on appeal, we affirm.

Woertz performed the home inspection on December 6, 2004, and he reported to Rotenberg that wood-destroying insects were not present on the premises. Rotenberg had a second test performed after he closed on the premises, and that inspection revealed the presence of termites. On June 2, 2005, Rotenberg's attorney wrote to Woertz in connection with this claim and advised that Rotenberg had received a preliminary estimate of $3,300 to repair the damage. The attorney asked that Woertz advise him of the name, address and policy number for his liability insurance policy.

At the time Woertz received this letter, he had a claims made liability policy issued through Underwriters; the policy period was August 1, 2004, through August 1, 2005. This policy had the following provision:

[T]he Insured shall report such Claim in writing to the Insurers, as soon as practicable, but in no event later than 60 days after expiration or termination of this Policy, or during the Extended Reporting Period, if applicable, and that prior to the inception date of this Policy Period no Insured knew or could have reasonably foreseen that any Wrongful Act might give rise to a Claim.

The policy defined a claim as "any civil action, suit, proceeding, or written demand received by any Insured seeking to hold the Insured responsible for Loss as a result of an alleged Wrongful Act committed by any Insured."

Woertz responded to this letter by simply telling Rotenberg's attorney to direct all of his correspondence with respect to this matter to Woertz's attorney. Woertz, however, did not advise Underwriters of the receipt of this letter. This, Woertz later contended, was because the amount of the claim was less than his deductible under the policy.

Woertz obtained a second claims made policy through Underwriters for the policy period August 1, 2005, through August 1, 2006. He obtained a ten percent discount on his premium because he had been "claim free" for a year.

On November 11, 2005, Rotenberg filed suit in the Special Civil Part of the Law Division, alleging negligence, breach of contract and consumer fraud. On November 22, 2005, Woertz informed Underwriters of the pending litigation, and Underwriters' counsel responded with a reservation of rights letter.

In the course of preparing his case, Rotenberg's attorney received an opinion from a real estate expert that there had been a ten percent reduction in the fair market value of Rotenberg's home, which he had purchased for more than $3,000,000. In March 2006, Rotenberg's complaint was transferred out of the Special Civil Part to avoid the limitation on damages. R. 6:1-2(a)(1).

Woertz then filed a declaratory judgment action against Underwriters. The trial court ruled that Woertz was not entitled to coverage because of his failure to notify Underwriters in a timely manner ...


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