On appeal from the Superior Court of New Jersey, Law Division, Burlington County, L-744-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Fisher, C.L. Miniman and King.
The opinion of the court was delivered by KING, P.J.A.D. (retired and temporarily assigned on recall)
In this declaratory judgment action, defendant Farm Family Casualty Insurance Company (Farm Family) appeals from a final order directing it to reimburse plaintiffs W9/PHC Real Estate LP and Grubb & Ellis Management Services, Inc., the owner and the property manager, respectively, of the Gateway Business Park in Mount Laurel, for the defense costs and indemnification of a slip-and-fall suit for damages brought against plaintiffs (the Danser action). Crabtree Landscaping & Turf Management, LLC (Crabtree), a company hired by plaintiffs to remove snow from their property, was also a defendant in that action. Plaintiffs sought coverage as additional insureds under Crabtree's liability insurance policy with defendant, Farm Family. The trial court held that defendant's coverage was coprimary with plaintiffs' coverage under their own policy with Zurich North American (Zurich).
This appeal presents the issue of the obligation to pay for a liability insurance claim and counsel fees where two insurers have conflicting "other insurance" clauses, one providing for "pro rata" payment, and the other for payment only when the other insurer's limit is exhausted. We reverse because defendant Farm Family's policy was excess coverage over plaintiffs' policy with Zurich. Since the amount plaintiffs paid in settlement of the injury claim, $115,000 plus costs and fees, did not exceed the limits of their policy with Zurich, the excess other-insurance clause in defendant's policy with Crabtree was never reached and defendant was not responsible for reimbursing plaintiffs. We also reverse the trial judge's counsel fee award to plaintiffs for the coverage and the declaratory judgment actions.
This is the procedural background. On March 13, 2006 plaintiffs filed a complaint for declaratory judgment seeking a ruling that they were additional insureds under defendant's policy with Crabtree, that defendant was required to provide them with a defense and indemnification, that defendant's coverage was primary and Zurich's excess, and that they were entitled to attorney's fees and costs incurred for plaintiffs' defense in the Danser action.
On September 7, 2006 plaintiffs filed a motion for summary judgment. On October 11, 2006 defendant filed a cross-motion for summary judgment. A hearing on the motions was held on October 20, 2006. On that date, the judge signed an order granting plaintiffs' motion and issued a written decision. A motion for reconsideration was denied.
After another hearing on July 27, 2007 the judge issued a written decision stating that defendant was required to reimburse plaintiffs for half the fees and costs they incurred in the Danser action, and all the fees and costs in the declaratory judgment action. Defendant was also directed to reimburse plaintiffs half the settlement in the Danser action, or $57,500. On October 25, 2007 the judge signed an order awarding plaintiffs $15,302.82 in fees and costs relating to the Danser action, $59,817.80 in fees and costs relating to the declaratory judgment action, and the $57,500 insurance reimbursement.
This is the factual background. Under the service contract between plaintiffs and Crabtree, dated September 6, 2002 Crabtree agreed to perform snow removal at the Gateway Business Park and to name plaintiffs as additional insureds on all policies required by the contract. Crabtree also was required to name plaintiffs on an additional-insured endorsement form known as ISO form GL2009. However, Crabtree never did so. Nonetheless, in letters between the attorneys, answers to interrogatories and response to plaintiffs' statement of undisputed facts, defendant did not dispute that plaintiffs were additional insureds under Crabtree's policy. A blank form of the endorsement contained in the record indicates that it covered an additional insured only with respect to liability "arising out of" Crabtree's "ongoing operations performed for the additional insured(s) at the location designated above" or "[a]cts or omissions of the additional insured in connection with their general supervision of such operations" (emphasis added). Excluded was bodily injury or property damage "arising out of any act or omission of the additional insured(s) or any of their 'employees,' other than the general supervision by the additional insured(s) of" Crabtree's ongoing operations performed for the additional insured.
In addition, the service contract contained an indemnity provision stating that Crabtree would indemnify plaintiffs against any "loss, costs, claims, damages" or suits asserted against them arising out of or in connection with Crabtree's performance, or failure to perform, but would not indemnify for "any claims finally determined by a court of competent jurisdiction to have arisen solely from the gross negligence or willful acts or omissions of the party seeking to be indemnified."
Under the insurance policy issued by defendant to Crabtree, effective December 12, 2002 to December 12, 2003, defendant agreed to pay legally obligated damages because of "personal injury" "[a]rising out of the conduct" of Crabtree's business. The "other insurance" section, section H, provided as follows:
1. If there is other insurance covering the same loss or damage, we will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance, whether you can collect it or not. But we will not pay more than the applicable Limit of Insurance.
2. Business Liability Coverage is excess over any other insurance that insures for direct physical loss or damage.
3. When this insurance is excess, we will have no duty under Business Liability Coverage to defend any claim or "suit" that any other insurer has a duty to defend. If no other insurer defends, we will undertake to do so; but we will be entitled to the insured's rights against all those other insurers.
The limitation for bodily injury on defendant's policy was $1 million per occurrence and $2 million total.
A certificate of insurance with respect to defendant's policy was transmitted by the Slonis Agency to Crabtree on the morning of December 13, 2002. The certificate listed both W9/PHC Real Estate LP and Grubb & Ellis as additional insureds.
Plaintiffs had their own general commercial liability policy through Zurich. The other insurance clause of the Zurich policy provided that where there was other insurance available to the insured for a covered loss:
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.
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.
When this insurance is excess, we will have no duty . . . to defend the insured against any "suit" if any other insurer has a duty to defend the insured against that "suit." If no other insurer defends, we will undertake to do so, but we will be entitled to the insured's rights against all those other insurers.
When this insurance is excess over other insurance, we will pay only our share of the amount of the loss, if any, that exceeds the sum of:
(1) The total amount that all such other insurance would pay for the loss in the absence ...