On appeal from the Superior Court of New Jersey, Law Division, Cumberland County, Docket Nos. L-159-05, L-304-05, and L-171-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Fisher, Baxter and King.
Two primary insurance providers appeal decisions estopping them from denying coverage and requiring them to exhaust their policy limits before the insured's umbrella policy is triggered. Because the "reservation of rights" letters were inadequate, and failed to inform the insured that the offers to defend could be "accepted or rejected," and the plain language of the contracts establishes that each primary provider is responsible for $1 million per occurrence, we affirm the trial courts' decisions.
This is the complex procedural history. The underlying tort action was filed against defendants The Lobster House and its parent company Cold Spring Fish & Supply Company (Cold Spring) resulting from an accident sustained by Jose Nazario (Nazario), a Perrone Door Company employee, while he was installing overhead garage doors at Cold Spring's warehouse facility in Cape May, New Jersey. Cold Spring timely notified its primary insurers Essex Insurance Company (Essex) and Sirius America Insurance Company (Sirius) of the incident.
On November 3, 2004 and February 25, 2005 Essex sent Cold Spring letters disclaiming coverage for The Lobster House but advising Cold Spring that Essex would investigate and defend the matter on Cold Spring's behalf while retaining its rights to disclaim coverage. Essex then filed a complaint against Cold Spring on March 24, 2005, seeking a declaration that Cold Spring and its subsidiary co-defendant The Lobster House were not entitled to coverage or defense under the Essex insurance policy.
On March 2, 2005 and July 8, 2005 Sirius sent Cold Spring letters advising that the Lobster House should not be a party to the action, assigning counsel, and informing Cold Spring that Sirius would handle the case with "full and complete reservation of any and all rights." Sirius also recommended that Cold Spring retain separate counsel. On April 1, 2005 Essex filed an answer on Cold Spring's behalf asserting separate defenses and cross-claims for contribution against all co-defendants.
On April 11, 2005 Essex moved to consolidate the declaratory judgment action with the underlying action and the court granted the motion on May 13, 2005. On or about October 6, 2005 Essex filed a motion for summary judgment seeking a determination that the Essex policy provided no coverage in the underlying action; the motion was denied as premature.
On February 16, 2006 Sirius sought a judicial declaration that it was not obligated to indemnify or defend Cold Spring in the underlying action because the Sirius policy did not cover the warehouse or the warehouse operations where the incident occurred. Cold Spring hired Barker, Douglass & Scott, P.C. as personal counsel, and the firm filed an answer and counterclaim on or about April 12, 2006. Sirius moved to consolidate all three pending cases, and Judge G. Thomas Bowen, J.S.C., granted the motion on July 21, 2006.
Essex again moved for summary judgment seeking a coverage determination on July 13, 2006. Cold Spring filed a motion for summary judgment on or about July 20, 2006 seeking a ruling that it was owed a defense and indemnification from both Essex and Sirius. Sirius filed a cross-motion for summary judgment dated August 9, 2006. A hearing addressing all three motions for summary judgment was held on November 17, 2006.
On January 25, 2007 Judge Bowen issued a written opinion granting Cold Spring's motion for summary judgment and denying the motions of Essex and Sirius. The judge ruled that while neither Essex nor Sirius actually provided coverage for the underlying tort claim, the reservation of rights letters issued by the insurers were not effective to prevent estoppel of the insurers from withdrawing coverage because these letters failed "to inform [Cold Spring] that the offer[s] (to defend) may be accepted or rejected."
Both Sirius and Essex filed motions for reconsideration. The insurers sought clarification of Judge Bowen's order and opinion as to the amount of coverage to be provided by Sirius and Essex in light of a commercial umbrella policy issued by United National Insurance Company (United National). Judge Bowen did not rule on the amount for which each carrier was responsible, and denied both motions for reconsideration.
Thereafter, Sirius and Essex each tendered the full $1 million primary policy limits to assist in the resolution of the underlying claim. Cold Spring assigned the insurers its rights under the United National umbrella policy so that "in the event either or both Sirius and Essex are successful in avoiding coverage on appeal, both agree to seek indemnification from United National . . . ." On June 8, 2007 United National was joined as a direct defendant.
On or about October 30, 2007 United National filed a motion for summary judgment. The umbrella insurer sought an order declaring that the $1 million policy limits of both Sirius and Essex must be paid before the United National policy was triggered because Judge Bowen's decision estopped the providers from withdrawing coverage.
Both Sirius and Essex filed cross-motions. Sirius sought an order declaring that the umbrella coverage was triggered after payment of $1 million total of underlying insurance, and that United National shall reimburse Sirius $500,000 of its policy limits paid toward resolution of the underlying action. Essex's motion was similar.
A hearing was held before Judge Michael Brooke Fisher, J.S.C., on December 7, 2007 and United National's motion for summary judgment was granted on the same date. The primary insurers' cross-motions for summary judgment were denied.
Both Sirius and Essex filed notices of appeal on February 29, 2008. The insurers appeal 1) Judge Bowen's January 25, 2007 order in favor of Cold Spring, 2) Judge Bowen's May 8, 2007 denial of the insurers' motions for reconsideration, and 3) Judge Fisher's December 7, 2007 judgment in favor of United National.
Here is the further factual context to aid understanding. Cold Spring is a Cape May, New Jersey company engaged in the business of wholesale seafood, restaurant operations, ice sales and boat fuel sales; The Lobster House is the company's trade name and the name of an insured premises. Cold Spring hired Perrone Door Company, an independent contractor, to install an overhead warehouse door. During ...