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Terminal Ventures, Inc. v. Fireman's Fund Insurance Co.

July 9, 2009


On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-957-05.

Per curiam.


Argued May 5, 2009

Before Judges Parker, Yannotti and LeWinn.

Plaintiff Terminal Ventures, Inc. (TVI) appeals from an order entered by the trial court on October 19, 2007, granting summary judgment in favor of defendant Hays Insurance Brokerage a/k/a The Hays Group (Hays); an order entered on November 16, 2007, denying its motion for reconsideration of the October 19, 2007 order; and an order entered on March 7, 2008, granting summary judgment in favor of defendant Fireman's Fund Insurance Company (Fireman's Fund). For the reasons that follow, we affirm.


The following facts are pertinent to our decision. In January 1998, TVI purchased an oil storage facility located on the Hackensack River in Jersey City, New Jersey. In 2001, Hays became TVI's insurance broker. Previously, TVI had certain comprehensive liability and/or inland marine insurance coverage under a policy issued by Fulcrum Insurance Co. (Fulcrum).

Hays procured insurance for TVI through a policy issued by Fireman's Fund. The policy provided, among other things, business interruption coverage in the amount of $450,000, which was the same amount as the business interruption coverage under the Fulcrum policy. In December 2002, TVI renewed the Fireman's Fund policy and increased the business interruption coverage to $900,000. The Fireman's Fund policy provided, among other things, business interruption coverage for all "perils" covered under the policy.

On October 28, 2003, a portion of TVI's dock fronting on the river collapsed during a heavy rainfall. Fireman's Fund paid TVI $250,000 for the property loss; however, the insurer refused to pay TVI for any claimed business interruption losses.

TVI thereafter filed an action in the trial court against Fireman's Fund and Hays.*fn1 TVI alleged that as a result of the collapse of the dock, it had sustained significant business interruption losses, including lost income, rents and other expenses. TVI asserted that Fireman's Fund was obligated to provide coverage for the business interruption losses it had incurred and would incur as a result of the dock's collapse.

TVI also asserted claims of breach of duty, professional malpractice and breach of contract against Hays. TVI alleged that as its insurance broker, Hays was required to ensure that TVI was provided with insurance coverage for its facilities and business interruption losses and that such coverage was clearly and unambiguously set forth in the policy. TVI sought, among other things, the amount that the insurer would have paid if Hays had obtained the insurance coverage that TVI had allegedly requested.

In discovery, TVI named Zachary Berhau (Berhau) as its liability expert. Berhau provided a report dated April 30, 2007, in which he opined that the Fireman's Fund policy covered business interruption losses resulting from a flood. Berhau opined, however, that TVI's dock had not collapsed due to a flood. Berhau noted that he had contacted the National Flood Program and learned that there was no record of any flood in Jersey City at the time TVI's dock collapsed.

Berhau further opined that TVI's dock collapsed due to "advanced corrosion" or "hidden decay." He said that, under the circumstances, the Fireman's Fund policy provided coverage for business interruption losses arising from the collapse of the dock. Berhau further opined that Hays had a duty to follow TVI's instructions when obtaining insurance and should have obtained a policy with the same coverage as had been provided under the policy previously issued by Fulcrum to TVI. Berhau stated that Hays failed to review the Fireman's Fund policy to ensure that it provided business interruption loss coverage arising from flood perils, as requested by TVI. He asserted that Fireman's Fund would have provided such coverage if it had been requested to do so.

Berhau was deposed. He testified that TVI's dock did not collapse due to a flood but rather due to "hidden decay." Berhau acknowledged that he was not an engineer and he had reached this conclusion based, in part, on a report furnished by Philip J. Alterman (Alterman), a professional engineer who had been hired by Fireman's Fund's adjuster.

Alterman had inspected the site on November 10, 2003, and provided a preliminary report based on that inspection. Alterman referred to the area that collapsed as a bulkhead. He wrote that the bulkhead had been constructed of interlocking steel sheet piling (SSP), which was "restrained" by two rows of tie rods that were connected to a "buried dead man system." Alterman stated that:

[e]xposed SSP was observed to be delaminated from advanced corrosion, an indication that other steel elements are similarly corroded. This condition places the bulkhead in jeopardy of complete collapse. The cause of the present collapse was an intense rainfall that created an additional surface load or surcharge on the ground behind the bulkhead. This additional surface load augmented the increased hydrostatic load caused by ground saturation. These forces exceeded the resisting force of the corroded bulkhead and the resisting force of the Hackensack River. The event more than likely occurred at low tide when the river level was at its lowest elevation.

In his subsequent final report, dated May 23, 2007, Alterman stated that the bulkhead consisted of various components: a vertical steel wall of interlocking steel panels or piles, a "buried deadman anchorage," and steel rods with plates plus horizontal beams or "wales." Alterman wrote that the steel sheet piles, tie rods that extend beyond the face of the sheet piles and the entire wale system were exposed to view. Alterman said that "[t]he corrosion [of] the steel sheet piling was clearly visible for many years prior to the collapse of 2003."

Alterman added that TVI was aware that the bulkhead was failing, as early as September 1998. Alterman noted that, in March 2000, about one hundred sixteen feet of soil behind the bulkheads were lost in a washout. He also noted that in November 2000, TVI had requested design data and cost estimates from an engineering firm to "remedy this problem[.]"

Alterman stated that it was his opinion, to a reasonable degree of engineering certainty, that: the damage to the south dock was anticipated by [TVI] based upon events in 1998 and 2000. Advanced corrosion, loss of competent steel material on the exposed portion of the tie rods and the steel sheet piles was an indication or portent of eventual failure.

A rainstorm that allowed water to accumulate behind the corroded and weakened bulkhead created an increase in weight of the soil and as a result the bulkhead collapsed.

On September 12, 2007, Hays filed a motion for summary judgment. Hays argued that Berhau's opinion as to the reason the dock collapsed should be disregarded because it was a net opinion. Hays also argued that TVI failed to establish a causal connection between Hays' alleged wrongful failure to obtain ...

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