IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY CAMDEN VICINAGE
November 26, 2008
INTERSTATE AERIALS, LLC, PLAINTIFF,
GREAT AMERICAN INSURANCE COMPANY OF NEW YORK, AL HORGAN GENERAL CONTRACTOR, INC., ERIE INSURANCE GROUP, AND FICTITIOUS INSURANCE COMPANIES 1-10, DEFENDANTS.
The opinion of the court was delivered by: Donio, Magistrate Judge
Presently pending before the Court are the cross-motions for summary judgment filed by Plaintiff, Interstate Aerials, LLC (hereinafter, "Interstate Aerials") [Doc. No. 40], and by Defendant Great American Insurance Company of New York (hereinafter, "Great American")[Doc. No. 36] regarding an insurance policy issued by Great American.*fn1 For the reasons set forth below, the Court grants Great American's motion [Doc. No. 36] for summary judgment with respect to the claims by Interstate Aerials and denies Interstate Aerials' cross-motion [Doc. No. 40].
This declaratory judgment action relates to a policy of property insurance issued by Great American to Interstate Aerials for "Commercial Inland Marine" coverage for the period March 10, 2005 to March 10, 2006. (See Br. in Supp. of Cross Mot. for Summ. J. (hereinafter, "Pl. Br.") Ex. E.) Subject matter jurisdiction is premised upon 28 U.S.C. § 1332 and is based upon diversity of citizenship of the parties and the amount in controversy allegedly exceeding $75,000.
The insurance issue in this action relates to an insurance claim filed by Interstate Aerials on December 7, 2005 with Great American seeking reimbursement for damages sustained to an aerial lift*fn2 owned by Interstate Aerials and leased by Al Horgan General Contractor (hereinafter, "Horgan") on November 16, 2005. (See Great American's Statement of Material Facts (hereinafter, "Great American SMF") ¶¶ 3, 4, Exs. B, D.) The parties do not dispute that the lift was damaged in an accident on November 17, 2005 while being operated by an employee of Horgan's subcontractor.*fn3 (Id. at ¶¶ 3, 4; Statement of Material Facts in Supp. of Partial Opp'n of Def., Al Horgan Gen. Contractor, to Pl.'s Cross Mot. for Summ. J. ¶¶ 2, 3.) By letter dated December 29, 2005, Great American advised Interstate Aerials that it was disclaiming coverage for the damage to the lift on the ground that Interstate Aerials failed to comply with two conditions precedent set forth in the insurance policy. (Great American SMF, Ex. D.) Interstate Aerials, however, maintains that it "complied with all terms and conditions of coverage" and that Great American "has issued an invalid disclaimer of coverage." (Am. Compl. 4, ¶ 16.) Interstate Aerials thus instituted the present litigation seeking, inter alia, a "finding of first party property coverage under the policy issued by Great American . . . to the Plaintiff." (Id. at 5, ¶ 1.)
Great American and Interstate Aerials now cross-move for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. The Court heard oral argument on the motions on July 24, 2008 and reserved decision at that time.*fn4 Thereafter, the parties advised the Court that all claims in this action have been settled other than the declaratory judgment action and, therefore, the Court shall address the cross-motions for summary judgment on the coverage issue only. A court may grant summary judgment when the "pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c); see Lang v. New York Life Ins. Co., 721 F.2d 118, 119 (3d Cir. 1983). A dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed. 2d 202 (1986). A fact is "material" if it "might affect the outcome of the suit under the governing law." See id. Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment. Id.
The moving party bears the initial burden of "identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed. 2d 265 (1986). Once a moving party satisfies its burden, the party opposing summary judgment must then "'set forth specific facts showing that there is a genuine issue for trial.'" Liberty Lobby, 477 U.S. at 248, 106 S.Ct. 2505, 91 L.Ed. 2d 202 (quoting FED. R. CIV. P. 56(e)). A non-moving party must do more than rely only "'upon bare assertions, conclusory allegations or suspicions.'" Gans v. Mundy, 762 F.2d 338, 341 (3d Cir. 1985), cert. denied, 474 U.S. 1010, 106 S.Ct. 537, 88 L.Ed. 2d 467 (1985) (quotation omitted); see Liberty Lobby, 477 U.S. at 249-50, 106 S.Ct. 2505, 91 L.Ed. 2d 202. Thus, if the non-moving party's evidence is a mere "scintilla" or is "not significantly probative," the court may grant summary judgment in favor of the moving party. Liberty Lobby, 477 U.S. at 249, 251, 106 S.Ct. 2505, 91 L.Ed. 2d 202.
The standard for granting summary judgment is the same when cross-motions for summary judgment are filed. See Appelmans v. City of Philadelphia, 826 F.2d 214, 216 (3d Cir. 1987). Cross-motions for summary judgment "'are no more than a claim by each side that it alone is entitled to summary judgment[.]'" Transportes Ferreos de Venezuela II CA v. NKK Corp., 239 F.3d 555, 560 (3d Cir. 2001) (quoting Rains v. Cascade Indus., Inc., 402 F.2d 241, 245 (3d Cir. 1968)). As noted in F.A.R. Liquidating Corp. v. Brownell:
"The fact that both parties make motions for summary judgment, and each contends in support of his respective motion that no genuine issue of fact exists, does not require the Court to rule that no fact issue exists. Each, in support of his own motion, may be willing to concede certain contentions of his opponent, which concession, however, is only for the purpose of the pending motion. If the motion is overruled, the concession is no longer effective."
F.A.R. Liquidating Corp. v. Brownell, 209 F.2d 375, 380 n.4 (3d Cir. 1954) (quoting Begnaud v. White, 170 F.2d 323, 327 (6th Cir. 1948)). If upon review of cross-motions for summary judgment the Court finds no genuine issue of material fact, then judgment should be entered "in favor of the party deserving judgment in light of the law and undisputed facts." Iberia Foods Corp. v. Romeo, 150 F.3d 298, 302 (3d Cir. 1998)(citing Ciarlante v. Brown & Williamson Tobacco Corp., 143 F.3d 139, 145-46 (3d Cir. 1998)).
In the present case, the parties do not dispute that under the Great American insurance policy at issue, coverage for leased property is provided by way of an endorsement titled "LEASED PROPERTY - CONTINGENT INTEREST FORM," which is identified as Form F 930. (Pl. Br. 7, Ex. E; Great American Br. of Law in Supp. of Not. of Mot. for Summ. J. (hereinafter, "Great American Br.") 2.)
The Form F 930 expressly provides on Page 1 under the title "DESCRIPTION OF PROPERTY COVERED" the following language: "Personal property consisting principally of EQUIPMENT USUAL TO AREIAL [sic] LIFT OPERATION." (Id.; see also Great American May 22, 2008 Letter Reply Br. (hereinafter "Great American Reply Br.") Ex. 3.) Page 1 of the Form F 930 also sets forth the following in the "LIMITS OF LIABILITY" section:
LIMITS OF LIABILITY:
A. Property leased to others. $200,000. in the custody of any one lessee not specified below. . . .
(Great American Reply Br., Ex. 3 at 1.) Likewise, Page 2 of the Form F 930 states that leased property is covered under the insurance policy. Specifically, Page 2 of the Form 930 provides as follows:
A. PROPERTY COVERED
This policy insures personal property of the insured, as described in the Schedule, which is:
(a) leased or rented to others; and
(b) intended for lease or rental to others. Such property is covered wherever located within the continental limits of the United States (excluding Alaska) and Canada including while temporarily located on premises of the Insured for repairs, adjustment or redistribution. (Id. at 2.)
There is no dispute that the Form F 930 provides coverage for leased property. Rather, the dispute relates to whether Interstate Aerials was required to satisfy certain contingencies on Page 2 of the Form F 930, and, if so, whether those contingencies have been met. The contingencies are set forth in Section E on Page 2 of the Form F 930 under the heading "CONTINGENT COVERAGE." This provision states:
E. CONTINGENT COVERAGE
When property is in the custody of lessee(s), this insurance applies only if the Insured has obtained:
1. A signed lease/rental agreement which requires the lessee to: (a) be fully responsible for all loss or damage; (b) provide insurance, no less broad as respects perils than that provided by this policy, covering the property to be leased; and
2. Evidence of such physical damage insurance, which names the Insured (lessor) as loss payee, when the value of property leased to any one customer exceeds $50,000.
(Id.) It is this provision, Section E, upon which Great American disclaimed coverage for the lift. Specifically, Great American denied coverage based upon its finding that Interstate Aerials did not obtain a signed rental agreement from Horgan, the lessee of the lift, and did not provide evidence of physical damage insurance naming Interstate Aerials as a loss payee. (Great American SMF, Ex. D at 2.) Interstate Aerials asserts that this clause is not enforceable because it is a "technicality buried at the end of voluminous insuring documents in a manner that is inconsistent with the coverage indicated on the Declarations page," and, consequently, the conditions for coverage were not within the reasonable expectations of the insured, i.e., Interstate Aerials. (Pl. Br. 10.)
Under New Jersey law, it is well settled that insurance policies are contracts of adhesion and, as such, are to be afforded "special scrutiny." Zacarias v. Allstate Ins. Co., 168 N.J. 590, 594-95, 775 A.2d 1262 (2001) (citing Gibson v. Callaghan, 158 N.J. 662, 669, 730 A.2d 1278 (1999)).*fn5 When there is ambiguity in the policy of insurance, the 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. at 595, 775 A.2d 1262 (citing Gibson, 158 N.J. at 671, 730 A.2d 1278). An ambiguity exists when "the phrasing of the policy is so confusing that the average policyholder cannot make out the boundaries of coverage." Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 247, 405 A.2d 788 (1979). However, words of an insurance policy "are to be given their plain, ordinary meaning" and, in the absence of ambiguity, "'courts should not write for the insured a better policy of insurance than the one purchased.'" Zacarias, 168 N.J. at 595, 775 A.2d 1262 (quoting Gibson, 158 N.J. at 670, 730 A.2d 1278).
In Zacarias, the New Jersey Supreme Court held that in enforcing an insurance policy, a court should only "depart from the literal text" and apply the reasonable expectations doctrine "if the text appears overly technical or contains hidden pitfalls, cannot be understood without employing subtle or legalistic distinctions, is obscured by fine print, or requires strenuous study to comprehend." Zacarias, 168 N.J. at 601, 775 A.2d 1262 (citations omitted). Moreover, "the plain terms of the contract will be enforced if the 'entangled and professional interpretation of an insurance underwriter is [not] pitted against that of an average purchaser of insurance, or the provision is not so 'confusing that the average policyholder cannot make out the boundaries of coverage.'" Id. (citations omitted).
In this case, Interstate Aerials asserts that its "reasonable expectation" was to have unconditional coverage in the amount of $200,000 for property leased to others, notwithstanding the contingency language in the Form F 930, because such language is not contained on the first page of the form. (Pl. Br. 8-10.) In support of its argument, Interstate Aerials cites Lehrhoff v. Aetna Ca. Ins. Co., 271 N.J. Super. 340, 347, 638 A.2d 889 (App. Div. 1994), for the proposition that the Declarations Page of an insurance contract "'must be deemed to define coverage and the insured's reasonable expectation of coverage.'" (Pl. Br. 8) (quoting Lehrhoff, 271 N.J. Super. at 347, 638 A.2d 889). Interstate Aerials urges that the "Contingent Coverage" clause on Page 2 of the Form F 930 is merely "a technicality buried at the end of voluminous insuring documents in a manner that is inconsistent with the coverage indicated on the Declarations page." (Id. at 10.) In this regard, Interstate Aerials contends that "a review of the [Form F 930] would provide absolutely no indication to the insured of any . . . contingency." (Id. at 7.) Great American argues, however, that the doctrine of reasonable expectations does not apply in this case because the language of the policy is unambiguous. (Great American Reply Br. 7.) Moreover, Great American asserts that summary judgment is appropriate because the undisputed facts demonstrate that Interstate Aerials, under the plain and unambiguous terms of the insurance policy, failed to satisfy both of the conditions precedent set forth in the Form F 930. (Great American Br. 7-8.)
The Court finds that the terms of the Great American insurance policy are clear and unambiguous, and do not warrant "depart[ure] from the literal text." Zacarias, 168 N.J. at 601, 775 A.2d 1262. The Form F 930 contains plain, easily understandable language that specifically requires as conditions for coverage of property leased to others that the insured enter into a signed lease/rental agreement and provide evidence of physical damage insurance naming the insured as a loss payee. (Great American Reply Br., Ex. 3 at 2.) While Page 1 of the Form F 930 sets forth the general coverage under the policy, indicating that coverage up to $200,000 is available for property leased to others, it also expressly states that it is the first page of a three-page document. (Id. at 1.)
The language on Page 2 at Section E, entitled "CONTINGENT COVERAGE," expressly states that coverage for property leased to others is contingent upon the satisfaction of the conditions described therein. (Id. at 2.) This language, including the two contingency provisions, in the Court's view does not require an "entangled and professional interpretation to be understood." Zacarias, 168 N.J. at 601, 775 A.2d 1262. Nor is the phrasing of the policy "so confusing that the average policyholder cannot make out the boundaries of coverage." Weedo, 81 N.J. at 247, 405 A.2d 788. Moreover, the Form F 930 is not the type of "overly technical" policy referred to in Zacarias. The Form F 930 does not "contain hidden pitfalls," can be understood "without employing subtle or legalistic distinctions," is not "obscured by fine print," and does not require "strenuous study to comprehend." Zacarias, 168 N.J. at 601, 775 A.2d 1262 (citations omitted). Accordingly, the Court rejects Interstate Aerials' argument that the Form F 930 is ambiguous or contradictory.*fn6
Interstate Aerials urges a contrary conclusion, arguing that the policy's "Declarations Page" does not expressly state that coverage for property leased to others is contingent upon the satisfaction of certain conditions precedent. The Court notes that New Jersey courts have recognized the importance of a single declarations page in an insurance policy and its role in defining the reasonable expectations of an insured. In Lehrhoff, relied upon by Interstate Aerials, the wording of an insurance policy's declarations page was determinative. In that case, the Appellate Division concluded that the reasonable expectations of the insured, formed on the basis of the declarations page, could not be defeated by the boilerplate language contained elsewhere in the policy. Lehrhoff, 271 N.J. Super. at 347, 638 A.2d 889. However, in Zacarias, the New Jersey Supreme Court declined to interpret Lehrhoff as requiring an insurer to include exclusions on a declarations page in all cases. Zacarias, 168 N.J. at 602, 775 A.2d at 1269. The Court in Zacarias found that in the case before it, there was no ambiguity, inconsistency, or contradiction between the declarations page and the body of the insurance policy at issue. Zacarias, 168 N.J. at 602, 775 A.2d 1262. Rather, the declarations page "alert[ed] the insured that the coverages and limits of liability are subject to the provisions of the policy," and the exclusionary provision in the policy was "written in direct and ordinary terms." Id. at 602-03, 775 A.2d 1262. As noted in Zacarias, "an insurance contract is not per se ambiguous because its declarations sheet, definition section, and exclusion provisions are separately presented." Id. at 603, 775 A.2d 1262.
The Court does not find Lehrhoff controlling under the circumstances presented in this case. First, the document relied upon by Interstate Aerials for purposes of defining its reasonable expectations -- the Form F 930 -- is not the Declarations Page for the Great American policy at issue, but is rather an Endorsement.*fn7 (See Pl. Br. 8.) In addition, the Declarations Page, Form CM 76 04, in bold and capitalized font, clearly directs the policy holder to certain forms and endorsements made a part of the policy. (Pl. Br., Ex. E.) The specific language is as follows: "FORMS AND ENDORSEMENTS applicable to all Coverage Parts and made part of this policy at time of issue are listed on the attached Forms and Endorsements Schedule CM 88 01 (11 85)." (Id.) The attached Schedule CM 88 01 is a BusinessPro FORMS AND ENDORSEMENT SCHEDULE, which lists the Form F 930 -- the Endorsement titled "LEASED PROPERTY - CONTINGENT INTEREST FORM" -- as one of the forms and endorsements made part of the policy. The Court finds that the cross-reference from the Declarations Page to the Form F 930 does not create ambiguity, inconsistency or contradiction, or create reasonable expectations that conflict with the text of the policy sufficient to invalidate the terms of the policy. Cf. Zacarias, 168 N.J. at 603, 775 A.2d 1262 ("A rule of construction forcing insurers to avoid all cross-referencing in policies would require them to reprint the entire definition section on each page of the policy, or to define each term every time it is used. That proliferation of fine print would itself demand strenuous study and run the risk of making insurance policies more difficult for the average insured to understand."); Continental Cas. Co. v. Gamble, No. Civ. A. 05-5189, 2007 WL 1657107, at *5 (D.N.J. June 5, 2007) ("[T]he Court determines that the Declarations Page is unambiguous in its reference to the Endorsement and does not alter the validity of the Policy and Endorsement. . . . [T]he Declarations Page clearly directs the policyholder to certain forms and endorsements made a part of the Policy by the use of bold and capitalized font. . . . The Court finds that this is sufficient, especially given that the Endorsement itself is written in such direct and ordinary terms."). Consequently, the Court rejects Interstate Aerials' argument that as a result of the Declarations Page the Great American policy covers the loss at issue in this case, i.e., the lift leased to Horgan.
In addition, the Court rejects Interstate Aerials' argument that Page 1 of the Form F 930 should be construed as a Declarations Page that alone defines the reasonable expectations of the insured. Even if the Court considers Page 1 of the Form F 930 as a Declarations Page, the form is unambiguous and is clearly a three-page document in which Page 2 expressly provides for exclusions and contingent coverage. Interstate Aerials' argument disregards the property excluded, the perils excluded, and the contingent coverage provisions set forth on Page 2 of the form. The Court finds no basis to disregard these provisions, which are clear and unambiguous, solely because they are not contained on the first page of the form. Cf. Zacarias, 168 N.J. at 603, 775 A.2d 1262 (requiring insurer to place all terms on one page will result in the "proliferation of fine print" that will "demand strenuous study and run the risk of making insurance policies more difficult for the average insured to understand."). The Court thus concludes that the first page in the Form F 930 -- the "LEASED PROPERTY -CONTINGENT INTEREST FORM" -- whether deemed a Declarations Page or an Endorsement, does not alone define the reasonable expectations of the insured. Consequently, the Court finds that the "Contingent Coverage" clause is applicable in this case.
Having found that Interstate Aerials was required to comply with the "Contingent Coverage" clause in the Form F 930, the Court must now determine whether Interstate Aerials in fact complied with that provision. With respect to the requirement that Interstate Aerials obtain a lease/rental agreement from the lessee of the lift, Interstate Aerials "admits that it did not obtain such an agreement." (Pl. Br. 1.) Interstate Aerials takes the position that it nonetheless "is in substantial compliance" with the requirement in that it "had a binding agreement with [the lessee,] Al Horgan General Contractor notwithstanding the failure to obtain a signature on the rental agreement." (Id.) At oral argument, however, counsel for Interstate Aerials conceded that a genuine issue of material fact exists on the issue of contract formation with Horgan.*fn8 The Court need not address in the context of the present motions whether a binding contract was formed between Interstate Aerials and Horgan or whether such contract, if any, would satisfy the "Contingent Coverage" provision in the policy, because Interstate Aerials does not dispute that it failed to comply with a second requirement for coverage, that is, obtaining evidence of physical damage insurance held by Horgan naming Interstate Aerials as loss payee. (Pl. Br. Ex. E; Great American Reply Br. Ex. 3.) Great American asserts in its Statement of Material Facts that:
To effectuate property insurance coverage as to its property leased to others, Interstate was required to have obtained evidence of property insurance held by the lessee (Horgan) covering the leased property. (Great American SMF ¶ 2.) Interstate Aerials does not address, let alone dispute, Great American's assertion.*fn9 Nor does Interstate Aerials address, or dispute, Great American's assertion that "Plaintiff did not obtain a Certificate of Insurance listing itself as a loss payee, for the lift, under Horgan's insurance coverage, in effect on November 17, 2005[.]" (Id. at ¶ 6.)*fn10 Because it is undisputed that Interstate Aerials failed to obtain evidence of physical damage insurance by Horgan naming Interstate Aerials as loss payee on the date of the loss, the Court finds that Interstate Aerials did not comply with at least one of the two conditions set forth in Section E required to effectuate coverage for the lift. In light of Interstate Aerials' failure to comply with such condition, the Court concludes that under the policy issued by Great American, Interstate Aerials is not entitled to coverage for the value of the lift.
Consequently, the Court shall grant Great American's motion for summary judgment as to the claims asserted by Interstate Aerials, and deny Interstate Aerials' cross-motion for summary judgment.
An appropriate Order shall be entered.
ANN MARIE DONIO UNITED STATES MAGISTRATE JUDGE