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Campbell v. Surgicenter

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


February 18, 2009

ALFRED P. CAMPBELL AND ADRIENNE CAMPBELL, PLAINTIFFS,
v.
SHREWSBURY SURGICENTER, UNITED SURGICAL PARTNERS INTERNATIONAL, 655 SHREWSBURY PARTNERS LLC, DEFENDANTS, AND 655 SHREWSBURY PARTNERS LLC, THIRD-PARTY PLAINTIFF/ APPELLANT,
v.
LEXINGTON INSURANCE COMPANY, THIRD-PARTY DEFENDANT/ RESPONDENT.
RONALD RIOS AND MICHELINA RIOS, PLAINTIFFS,
v.
TINTON REALTY ASSOCIATES, 655 SHREWSBURY PARTNERS, LLC, IVY EQUITIES MANAGEMENT CO., SPECIALIZED LANDSCAPING AND/OR HOLMDEL NURSERIES, LLC, AND SHREWSBURY SURGERY CENTER, DEFENDANTS, AND 655 SHREWSBURY PARTNERS LLC, THIRD-PARTY PLAINTIFF/ APPELLANT,
v.
SHREWSBURY SURGERY CENTER, LEXINGTON INSURANCE COMPANY, AND HOLMDEL NURSERIES, LLC, THIRD-PARTY DEFENDANTS/ RESPONDENTS.

On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket Nos. L-4932-04 and L-2764-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 16, 2008

Before Judges Winkelstein, Fuentes and Chambers.

These back-to-back appeals concern insurance coverage disputes between the insurer of a commercial tenant, Lexington Insurance Company ("Lexington"), and the landlord, Shrewsbury Partners, L.L.C., ("Shrewsbury Partners"). The latter is named as an additional insured on the tenant's policy for liability "arising out of" the use of the leased premises. The trial court found that the Lexington policy did not provide coverage to Shrewsbury Partners for the two "slip and fall" accidents at issue here because these accidents occurred outside of the premises leased to the tenant. The court also found that, even if the Lexington policy provided coverage for these accidents, the coverage would only be excess coverage over Shrewsbury Partners's own insurance policy.

Shrewsbury Partners now appeals, arguing that the trial court erred in failing to construe the Lexington policy as affording coverage in these circumstances. Shrewsbury Partners also argues that the coverage available under the Lexington policy should be construed as primary, and not excess to the coverage available under its own policy issued by Maryland Casualty Insurance Company.

After reviewing the record, and in light of prevailing legal standards, we reverse the trial court's order denying Shrewsbury Partners coverage under the Lexington policy. We affirm, however, the court's determination that the Lexington policy only provides Shrewsbury Partners coverage in excess to the primary coverage available under the policy issued by Maryland Casualty.

I.

In the interest of clarity, we will first describe the procedural history of the two underlying cases that gave rise to this coverage dispute.

The Campbell Case

On December 13, 2002, Alfred Campbell allegedly sustained injuries when he slipped and fell on ice in the parking lot adjacent to an office building owned by Shrewsbury Partners. Campbell was headed to the Surgery Center, a business entity that leased*fn1 the first floor of the office building. At the time of the accident, Campbell was employed by the Surgery Center as a physician. The accident thus occurred while he was en route to work.

Campbell*fn2 filed suit against several defendants, including Shrewsbury Partners and the Surgery Center. With respect to Shrewsbury partners, Campbell alleged it negligently failed to remove ice that had accumulated in the parking lot of the property. By leave of the court, Shrewsbury Partners cross claimed against the Surgery Center and filed a third party complaint against Lexington seeking defense and indemnity for the claims asserted against it by Campbell.

The Rios Case

On February 24, 2003, Ronald Rios allegedly slipped and fell on ice in the same parking lot adjacent to the office building owned by Shrewsbury Partners. As was the case with Campbell, Rios's presence on the parking lot property was related to the Surgery Center; he was scheduled to undergo surgery that day. Rios's suit named several defendants, including Shrewsbury Partners. Specifically, he alleged that Shrewsbury Partners was negligent by allowing ice to accumulate in the parking lot of the property it owns.

In addition to filing a responsive pleading to Rios's complaint, Shrewsbury Partners also filed a third party complaint against Lexington seeking coverage as a named additional insured under the policy issued by Lexington to the Surgery Center. Lexington filed a motion for summary judgment against Shrewsbury Partners.

Under the terms of the lease, the Surgery Center's "occupancy of the Demised Premises shall include the use of one hundred ten (110) parking spaces." The lease specifies that "[l]essor shall make all necessary repairs and maintenance to the Common Facilities to include the parking areas, including but not limited to snow removal services and exterior maintenance and repair." In addition to the cost of leasing the premises, the Surgery Center is responsible to pay as "additional rent" its "Proportionate Share of all Building and Office Building Area Costs." These costs include Shrewsbury Partners's expenditures for snow removal, fire and "other insurance."

Toward that end, the lease requires both parties to obtain certain insurance coverage. The Surgery Center is required to secure a commercial general liability policy, including coverage for personal and bodily injuries. The Surgery Center policy must name Shrewsbury Partners "as [an] additional named insured[ on that policy] in limits of not less than Five Million and 00/100 ($5,000,000.00) Dollars." Shrewsbury Partners is obligated to insure the building "against damage by fire and standard extended coverage perils and public liability insurance."

To meet its obligations under the lease, the Surgery Center secured a Healthcare Professional Liability and a Healthcare General Liability policy issued by Lexington, naming Shrewsbury Partners as an additional insured. An endorsement of the policy amends the "WHO IS AN INSURED of the HEALTHCARE GENERAL LIABILITY COVERAGE PART" and adds "[a]ll lessors of premises leased to you but only with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to you . . . ."

This Lexington policy also contains an "other insurance" provision which states:

If there is other insurance which applies to the loss resulting from an occurrence, offenses or medical incident, the other insurance must pay first. This policy applies to the amount of the loss which is more than:

1. The Limits of Insurance of the other insurance; and

2. The total of all deductibles and self-insured amounts under all such other insurance.

Shrewsbury Partners's policy from Maryland Casualty Company (Maryland Casualty) contains an "other insurance" provision, which states:

5. Other Insurance

If other valid and collectible insurance is available to the insured for a loss we cover under Coverages A or B of this Coverage Part, our obligations are limited as follows:

a. Primary Insurance

This insurance is primary except when

b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then we will share with all that other insurance by the method described in c. below.

b. Excess Insurance

This insurance is excess over:

(2) Any other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured by attachment of an endorsement.

c. If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this approach each insurer contributes equal amounts until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first.

In response to the suits filed by Campbell and Rios, Shrewsbury Partners filed a third party complaint against Lexington seeking defense and indemnity as an additional insured on the policy issued to the Surgery Center. The issue came before the trial court by way of cross-motions for summary judgment.

At oral argument on the motions, Shrewsbury Partners conceded that its own insurance policy from Maryland Casualty provided it with coverage. It nevertheless argued that the Lexington policy also provided coverage. In response, Lexington argued that its policy did not provide coverage in these cases because the accidents did not arise out of the ownership maintenance or use of the demised premises.

After considering the arguments of counsel, the trial court granted Lexington's motion, dismissing Shrewsbury Partners's coverage claims. Relying on Pennsville Shopping Center Corp. v. American Motorists Ins. Co., 315 N.J. Super. 519 (App. Div. 1998) certif. denied, 157 N.J. 647 (1999), the court reasoned that it would be illogical for the landlord to demand coverage from Lexington for an incident covered under its own liability policy.

Although the issue of whether the Lexington policy provides primary or excess coverage was rendered moot under its ruling, anticipating an appeal by Shrewsbury Partners, the court offered its opinion on the question. Comparing the language in the two polices, the court concluded that the Shrewsbury Partners's Maryland Casualty policy provided primary coverage, and the Lexington policy only provided excess coverage.

Thereafter, Campbell and Rios settled their respective cases. Shrewsbury Partners filed timely appeals seeking review of the trial court's ruing denying it coverage under the Lexington policies.

II.

We start our analysis by reaffirming our standard of review. A matter is ripe for summary judgment, and thus capable of disposition as a matter of law "if 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 challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). To determine whether there exists a "genuine issue as to any material fact" the court must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Coyne v. State Dep't of Transp., 182 N.J. 481, 490 (2005) (quoting Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)).

We review a grant of summary judgment using the same standard used by the trial court. EMC Mortg. Corp. v. Chaudhri, 400 N.J. Super. 126, 136 (App. Div. 2008) (citing Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007)). If there is no genuine issue of fact, then this court must decide whether the trial court's legal ruling was correct. Ibid. (citing Liberty Surplus, supra, 189 N.J. at 446). "[T]he interpretation of an insurance contract is a question of law which [this court] decide[s] independent of the trial court's conclusions." Simonetti v. Selective Ins. Co., 372 N.J. Super. 421, 428 (App. Div. 2004).

Shrewsbury Partners argues the trial court erred in not following three "well-established, controlling, Appellate Division holdings" all of which found coverage existed for landlords under analogous circumstances. Lexington argues that the trial court was correct in determining that the Pennsville case is controlling. We agree with the legal position advanced by Shrewsbury Partners.

The three cases referred to by Shrewsbury Partners are Liberty Village Associates v. West American Ins. Co., 308 N.J. Super. 393 (App. Div.), certif. denied, 154 N.J. 609 (1998), Harrah's Atlantic City, Inc. v. Harleysville Ins. Co., 288 N.J. Super. 152 (App. Div. 1996), and Franklin Mut. Ins. Co. v. Security Indem. Ins. Co., 275 N.J. Super. 335 (App. Div.), certif. denied, 139 N.J. 185 (1994). Taken together, these cases have created an analytical foundation for reviewing the issues presented here. Confronted with facts similar to those we address here, all three appellate panels consistently held that a landlord was entitled to coverage under its tenant's liability policy.

In Franklin Mutual, a tenant operating a luncheonette named its landlord as an additional insured under its general liability policy. Id. at 339. Coverage was available, however, "only with respect to liability arising out of the ownership, maintenance or use of that part of the premises designated below leased to the named insured." Id. at 338-39. A customer slipped and fell on exterior steps, while exiting the luncheonette. Id. at 337. Although the exterior steps led to the luncheonette, they were not part of the leased premises, and the landlord was responsible for the maintenance and repair of the steps. Id. at 337-38.

The customer sued naming both the landlord and the tenant as defendants. Id. at 338. The landlord claimed he was entitled to coverage as an additional insured under the tenant's policy. Ibid. The tenant claimed coverage did not exist because the accident occurred on the exterior steps. Id. at 339. We disagreed, holding that the policy did not limit coverage to accidents occurring "within the leased premises;" coverage was available under the policy's "arising out of" the use of the premises language. Id. at 341.

In so doing, we directed future courts to construe the phrase "arising out of the . . . use [of the premises] . . . in a broad and comprehensive sense to mean originating from the use of or 'growing out of the use of' the premises leased to [the tenant]." Id. at 340. Thus coverage exists if the occurrence which caused the injury, although not foreseen or expected, was in the contemplation of the parties to the insurance contract a natural and reasonable incident or consequence of the use of the leased premises and, thus, a risk against which they may reasonably expect those insured under the policy would be protected."

[Id. at 341 (citations omitted).]

Stated differently, coverage to a landlord is triggered under this type of provision if there exists a "substantial nexus between the occurrence and the use of the leased premises." Ibid. The landlord in Franklin was covered as an additional insured because there was a sufficient relationship between the slip and fall accident and the use of the leased premises; "the accident arose out of the use of premises leased to [the tenant] in the broadest and most comprehensive sense." Ibid.

Two years later, we applied the principles articulated in Franklin in Harrah's Atlantic. City, Inc. v. Harleysville Ins. Co., supra, 288 N.J. Super. 152. In Harrah's, the landlord, Harrah's Marina Hotel & Casino (Harrah's), leased space to a tenant store, Talk of the Walk, Inc. (TOW). Id. at 154. A principal and employee of TOW and her friend parked in a Harrah's garage located across the street from the hotel. Ibid. The couple then proceeded to eat lunch at a restaurant located within Harrah's, followed by shopping at TOW. Id. at 155. After shopping, they walked back through Harrah's, out onto the sidewalk in front of the casino, and began to cross the road to return to the garage. Ibid. As they stepped out onto the road, they were struck by a vehicle operated by one of Harrah's parking valets. Ibid. They subsequently filed a personal injury suit against Harrah's and Harrah's sought coverage from TOW's insurer. Ibid.

TOW's lease required it to obtain comprehensive general liability insurance and to name Harrah's as an additional insured. Ibid. Like the tenant's policy in Franklin, TOW's policy provided coverage to Harrah's "only with respect to liability arising out of the . . . use of" the leased premises.

Id. at 156. Against these facts, we reaffirmed our holding in Franklin, and concluded that this language provides coverage for accidents that occur outside of the leased premises where there is "'a substantial nexus between the occurrence and the use of the leased premises.'" Id. at 158 (quoting Franklin, supra, 275 N.J. Super. at 341).

Under these circumstances, physical proximity between the leased premises and the accident is not relevant, as long as a "causal link or connection" exists and coverage is not "contingent on whether the tenant had any liability for the accident." Id. at 157-58. Thus, "where the landlord can trace the risk creating its liability directly to the tenant's business presence, it is not unreasonable for the landlord to expect coverage, inasmuch as it can be truly said that the accident originated from or grew out of the use of the leased premises." Id. at 158-59. (Emphasis added.)

As was the case with Franklin, two years after our decision in Harrah's we were again confronted with this type of coverage issue. In Liberty Village Associates v. West Americn Ins. Co., supra, 308 N.J. Super. at 397, the tenant's policy named the landlord as an additional insured and limited coverage to "liability arising out of the ownership, maintenance or use" of the premises leased to the tenant. The landlord, Liberty Village Associates, owned a shopping center with several stores, including Gourmet Basket (Gourmet). Id. at 396. A shopper slipped on ice, fell and injured herself as she was approaching Gourmet; the area where she fell was not part of the property leased to Gourmet. Ibid.

In the resulting lawsuit, Liberty sought coverage under Gourmet's policy. Ibid. The record showed that Gourmet employees usually provided snow and ice removal in this area; they did not do so on the day of the accident. Ibid. After discussing the facts and holdings from Franklin and Harrah's, the Liberty court concluded that the facts before it, although similar to those in Franklin, differed in that the customer in Franklin was leaving the leased premises, while the party in Liberty was arriving. Id. at 401. Despite this difference, there were critical, core similarities in both cases. Id. at 401-02. We explained the significance of these similarities as follows:

In both [cases], the critical policy language provides coverage for an incident "arising out of the use of" the leased premises. In both a fall occurred outside of, but very close to, the leased premises. In both, the injured party was where she was precisely because of the tenants' [sic] use of the premises: it was the tenant's business that had brought her to the area. And in both, to use the language of Franklin Mutual, the incident was something "originating from," or "growing out of," the "use of" the leased premises. Thus, if one concludes (as the court did in Franklin Mutual) that the occurrence there was "in the contemplation of the parties to the insurance contract a natural and reasonable incident or consequence of the use of the leased premises and, thus, a risk against which they may reasonably expect those insured under the policy would be protected," that same conclusion must follow in this case. Just as there was a "substantial nexus" between the occurrence and the use of the leased premises in Franklin Mutual, so there is such a "substantial nexus" here.

In short, the holding and reasoning of Franklin Mutual, with which we are in full accord, lead inexorably to the conclusion that the injury here falls within the scope of protection afforded Liberty as an "additional insured" under the policy obtained by Gourmet. Questions of precisely where the fall took place--whether within or slightly outside of the extended sidelines of the Gourmet property, or completely or only partially under the overhang in front of the Gourmet store, and lease provisions dealing with maintenance and snow or ice removal, are not dispositive. As noted in Harrah's, insurance coverage for the landlord is not contingent upon a finding of the tenant's liability. 288 N.J. Super. at 159. Indeed, the very premise of the need for the policy is the actual or potential liability of the landlord-not the tenant. [Ibid.]

With this analytical framework in mind, we now turn to the facts on this case. Like the policies in Franklin, Harrah's, and Liberty, Lexington's insurance policy provides coverage to Shrewsbury Partners for liability "arising out of the ownership, maintenance or use of that part of the premises leased to [the Surgery Center]." An insurer must anticipate providing coverage to a landlord under this type of provision, where there exists a "substantial nexus between the occurrence and the use of the leased premises." Franklin, supra, 275 N.J. Super. at 341.

The slip and fall accident that occurred here is strikingly similar to those in Franklin, Harrah's and Liberty. In each of these cases there existed "substantial nexuses." Like the plaintiffs in those cases, both Rios and Campbell fell outside the business location, but within the parking lot; their presence in the parking lot was directly related to the tenant's use of the leased premises. Campbell was in the parking lot because of his employment at the Surgery Center; Rios was in the parking lot because he was scheduled to undergo surgery at the Surgery Center.

Shrewsbury Partners's obligation to maintain and remove snow from the premises is not determinative. We made this point clear in Franklin, where the landlord was responsible for maintaining the exterior stairs. Simply stated, coverage is not "contingent on whether the tenant had any liability for the accident." Liberty Village, supra, 308 N.J. Super. at 401 (quoting Harrah's, supra, 288 N.J. Super. at 157).

The only significant distinction between this case and these three precedents is that the Surgery Center paid "additional rent" to cover its proportionate share of Shrewsbury Partners's cost for its own insurance policy. This distinction, however, does not negate the nexus between these accidents and the use of the premises. As this case shows, it is not unusual for an insured business to have coverage under more than one insurance policy.

We disagree with the trial court's conclusion that the three precedents discussed are distinguishable, and that Pennsville, supra, 315 N.J. Super. 519 is thus controlling. In Pennsville, both the tenant and the landlord were sued by a customer of the tenant who fell in the parking lot when her shopping cart fell into a pothole. Id. at 521. The landlord's insurance carrier sought defense and indemnification or contribution from the tenant's insurance carrier. Ibid. The tenant's policy named the landlord as an additional insured. Ibid.

The lease agreement provided that "tenant would indemnify landlord from loss or liability for damages 'occurring on the demised premises except [for those] due to Landlord's negligence.'" Ibid. The landlord was obligated to indemnify the tenant "from loss or liability for damages 'resulting from Landlord's failure to carry out repairs or maintenance of the common areas required of it by this Lease.'" Id. at 521-22. The lease also specified that the landlord's indemnification obligation to the tenant "shall be absolute" and not dependent on "notice by Landlord of the existence of defects or failure to make such repairs." Id. at 522. Under these circumstances, the trial court found, and we agreed, that the landlord was not entitled to coverage under the tenant's policy. Id. at 522-23.

The Pennsville court considered the coverage question in the context of the terms of the lease agreement between the parties. Pursuant to this contract,

[the] tenant could not be seen to be providing any indemnification to [the] landlord for damages sustained because of a condition for which tenant bore no responsibility at all and which, to the contrary, the parties had expressly agreed in their lease was the sole responsibility of landlord. [Id. at 523.]

The Pennsville Court thus held that "[a]bsent an express and unambiguous contractual undertaking to do so, a tenant cannot logically be seen to be providing insurance to a landlord in respect of a liability for which the landlord has assumed sole responsibility and has agreed to indemnify the tenant." Ibid. The terms of the lease "clarifie[d] the intendments of the parties in apportioning responsibility and providing for insurance coverage." Ibid. Under the contract, the "tenant bore responsibility only for damages incurred on the demised premises" and the landlord's coverage had to be "coextensive with the scope of tenant's own liability"; therefore, the landlord was not covered under the tenant's policy. Ibid.

Thus, as noted by our colleague Judge Kestin, the critical distinction in Pennsville was that the parties never intended for the landlord to have coverage under the tenant's policy because: (1) the landlord assumed sole responsibility for the common areas; and (2) the landlord expressly agreed to indemnify the tenant for any losses or liability from the common areas. Ibid. By contrast here, although it was the landlord's responsibility to remove snow from the common areas, the lease did not specify that the tenant's responsibility was limited to the demised premises, nor did it provide that the landlord would indemnify the plaintiff for any accident which occurred in the parking lot or other common area. Here, there is nothing in the lease agreement that indicates that the parties intended the landlord's policy to supersede and nullify the additional coverage provided in the tenant's policy.

III.

A.

Having decided that Shrewsbury Partners is entitled to coverage under the tenant's policy issued by Lexington, we must next determine whether the coverage afforded is primary or excess. Shrewsbury Partners argues that the trial court erred in determining that the Lexington policy provides only excess coverage. It thus urges us to find that both its Maryland Casualty policy and the Lexington policy provide co-primary coverage. Lexington argues that the trial court correctly determined that its policy only provides excess coverage, and that the Maryland Casualty policy provides primary coverage.

We are satisfied that the trial court correctly determined that the Lexington policy provides only excess coverage. We start our analysis by defining the relevant differences between the types of coverage at issue here.

"Primary insurance 'attaches immediately upon the happening of the occurrence that gives rise to liability.'" CNA Ins. Co. v. Selective Ins. Co., 354 N.J. Super. 369, 378 (App. Div. 2002) (quoting Empire Fire & Marine Ins. Co. v. Liberty Mut. Ins. Co., 699 A.2d 482, 504 (Md. Ct. Spec. App. 1996)). "[A]n excess policy provides protection to an insured for liability for an amount above, or in excess of, the maximum coverage supplied by the primary policy." Id. at 379 (quoting Arico v. Twp. of Brick, 281 N.J. Super. 471, 474-75 (App. Div.), certif. denied, 142 N.J. 515 (1995)). While a primary policy starts at "'the first dollar loss'" (in excess of a deductible or self retention), an excess policy's coverage does not begin until the primary policy is exhausted. Id. at 379-80 (citing 1 Holme's Appleman on Insurance 2D § 2.16 (1996)).

There is a difference between "a primary insurance policy containing an excess 'other insurance' clause, and a true excess policy." Id. at 379. "A true excess policy provides coverage conditioned upon the existence of a primary policy; the coverage does not begin until a loss exceeds a specific level; and the insured is usually committed to maintaining the primary insurance." Ibid. (citing 15 Couch on Insurance § 219:24 (3d ed. 1999)).

In contrast, a primary insurance policy with an excess insurance clause is not a "true excess policy." Id. at 380. "[A] primary policy with an 'excess other insurance clause' is a device which allows the 'primary insurer [to] attempt[] to limit or eliminate its liability where another primary policy covers the risk.'" Id. at 380 (quoting 15 Couch on Insurance, supra, § 220:32).

Here, Lexington's policy contains the following "other insurance" provision:

If there is other insurance which applies to the loss resulting from an occurrence, offenses or medical incident, the other insurance must pay first. This policy applies to the amount of the loss which is more than:

1. The Limits of Insurance of the other insurance; and

2. The total of all deductibles and self-insured amounts under all such other insurance.

The inclusion of this provision does not transform the Lexington policy into a "true excess policy." CNA Ins. Co., supra, 354 N.J. Super. at 380. Unlike a "true excess policy," the Lexington policy does not condition its coverage for either the Surgery Center or Shrewsbury Partners upon the existence of a primary policy. Id. at 379 (citing 15 Couch on Insurance § 219:24 (3d ed. 1999)).

The Lexington policy does not mandate that these parties maintain any primary insurance coverage at all. Rather, its coverage is only excess if there is other applicable insurance. If there is not other applicable insurance, then, just like any other primary policy, its coverage starts at the "first dollar loss." See id. at 379-80 (citing 1 Holme's Appleman on Insurance 2D § 2.16 (1996)).

B.

Having concluded that that the Lexington policy is merely a primary insurance policy with an excess insurance clause, we next consider whether, under the facts presented, the Lexington policy provides excess or primary coverage to Shrewsbury Partners. "[I]n the absence of a statutory prohibition to the contrary, an insurance company has a right to impose whatever conditions it desires prior to assuming its obligations, including providing whether its policy shall be primary to or excess over other collectible insurance, and how it will contribute with such other insurance." Royal Ins. Co. v. Rutgers Cas. Ins. Co., 271 N.J. Super. 409, 419 (App. Div. 1994) (citing Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 43 (1960)); Schneider v. New Amsterdam Cas. Co., 22 N.J. Super. 238, 243 (App. Div. 1952)). These conditions should be "construed in a common sense and logical fashion in accordance with the language used." Id. at 419-20 (citing Wilkinson & Son, Inc. v. Providence Washington Ins. Co., 124 N.J. Super. 466, 469 (Law Div. 1973)).

In Englert v. The Home Depot, 389 N.J. Super. 44, 48 (App. Div. 2006), certif. denied, 192 N.J. 71 (2007), two separate policies provided insurance to C. Raimondo & Sons. The first, issued by Liberty Mutual, included an "other insurance" provision which stated: "This insurance is excess over . . .

[a]ny other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured . . . ." Id. at 58. The second policy, a Travelers policy purchased by Weir Welding Company, named Raimondo as an additional insured and it provided: "With respect to the insurance afforded to Additional Insureds . . . [t]his insurance is excess over any valid and collectible insurance unless you [Weir] have agreed in a written contract for this insurance to apply on a primary or contributory basis." Ibid. In this light, we held that the Travelers policy was excess coverage for Raimondo because "the express condition required by the Travelers policy endorsement in order to modify its coverage for Raimondo (from excess to primary) [was] not [ ] met." Id. at 59.

Here, the Lexington policy "other insurance" provision provides that: "If there is other insurance which applies to the loss resulting from an occurrence, offenses or medical incident, the other insurance must pay first." This condition is met here because the Maryland Casualty policy is "other insurance which applies to [Shrewsbury Partner's] loss." Therefore, according to its terms, the Lexington policy only provides excess coverage.

Shrewsbury Partner's Maryland Casualty policy clarifies that it is "excess over . . . . [a]ny other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured by attachment of an endorsement." The parties' disagreement crystallizes over the question of whether there is other "primary insurance" available to Shrewsbury Partners.

Shrewsbury Partners argues that the Lexington policy is a primary policy because there is "other primary insurance available." Lexington takes the position that its policy only provides excess coverage therefore it is not "other primary insurance available" to Shrewsbury Partners.

The question answers itself when we examine the coverage provided to Shrewsbury Partners. Because the Lexington policy only provides excess coverage, there is no "other primary insurance available" to Shrewsbury Partners. Therefore, the condition limiting the coverage of the Maryland Casualty policy is not met and it must provide primary coverage. For the foregoing reasons, we affirm the ruling of the trial court finding that Maryland Casualty must provide Shrewsbury Partners with primary coverage, and Lexington is only required to provide excess coverage.

IV.

In light of our decision in favor of Lexington, we reject Shrewsbury Partners's application for counsel fees and costs incurred in the prosecution of the declaratory judgment action. Under Rule 4:42-9(a)(6), such an award is only available to a prevailing party. Moper Transp., Inc. v. Norbet Trucking Corp., 399 N.J. Super. 146, 158 (App. Div. 2008).

V.

The judgment of the trial court determining that the Lexington policy only provides excess coverage is affirmed. The judgment of the trial court finding that Shrewsbury Partners is not entitled to coverage under the Surgery Center's Lexington policy is reversed.

Affirmed in part and reversed in part.


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