July 9, 2009
TERMINAL VENTURES, INC., PLAINTIFF-APPELLANT,
FIREMAN'S FUND INSURANCE COMPANY AND THE HAYS INSURANCE BROKERAGE, A/K/A THE HAYS GROUP, DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-957-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
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 business interruption coverage arising from flood perils and TVI's alleged loss.
On September 14, 2007, Fireman's Fund also filed a motion for summary judgment. Fireman's Fund argued that Alterman's report established that TVI's dock had not collapsed due to "hidden decay." Fireman's Fund further maintained that its policy did not cover losses arising from the collapse of the dock because the dock had not been damaged as a "direct result" of the collapse of a covered building or structure. Fireman's Fund additionally argued that the policy's flood endorsement did not provide coverage for business interruption losses.
The trial court considered the motions on October 19, 2007, and placed its decisions on the record on that date. The court did not address Hays' contention that Berhau's opinion was a net opinion. The court determined, however, that a rational fact-finder could not find that the damages allegedly sustained by TVI were causally related to any action or inaction on the part of Hays. The court therefore found that there was no genuine issue of material fact and Hays was entitled to judgment as a matter of law. The court also determined that Fireman's Fund was not entitled to summary judgment. The court found that the relevant provisions of the Fireman's Fund policy were ambiguous and presented an issue of fact for a jury to decide. The court entered orders dated October 19, 2007, granting Hays' motion and denying the motion by Fireman's Fund.
On October 30, 2007, TVI filed a motion for reconsideration of the order granting Hays' motion for summary judgment. TVI argued that the trial court erred because it had advanced two alternative theories for the dock's collapse: flood and hidden decay. On October 31, 2007, Fireman's Fund filed a motion for reconsideration of the order denying its summary judgment motion. Fireman's Fund argued that the court erred in its interpretation of the relevant provisions of the policy.
The court considered TVI's motion on November 16, 2007, and placed its decision on the record on that date. The court noted that Berhau had opined that TVI's dock did not collapse due to a flood and, therefore, Berhau's report did not support the assertion by TVI of alternative theories for the dock's collapse. The court reaffirmed its determination that TVI had not shown that its damages were due to Hays' alleged failure to obtain coverage for business interruption losses due to a flood. The court entered an order dated November 16, 2007, denying TVI's motion for reconsideration.
The court considered Fireman's Fund's motion for reconsideration on December 7, 2007, and placed its decision on the record on March 7, 2007. Contrary to its earlier determination, the court found that the interpretation of the Fireman's Fund policy was an issue of law for the court rather than an issue of fact.
The court additionally found that the relevant provisions of the Fireman's Fund policy were clear and unambiguous. The court determined that the policy did not provide coverage for the business interruption losses TVI had allegedly sustained as a result of the collapse of its dock.
The court thus reconsidered its previous decision and determined that there were no genuine issues of material fact and Fireman's Fund was entitled to judgment as a matter of law. The court accordingly entered an order dated March 7, 2008, granting Fireman's Fund's motion for summary judgment. This appeal followed.
TVI argues that the trial court erred by granting summary judgment in favor of Fireman's Fund.
When reviewing an order granting summary judgment, we apply the same standards that are applied by the trial court when ruling on a motion seeking that relief. Liberty Surplus Ins. Corp., Inc. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007); Stoffels v. Harmony Hill Farm, 389 N.J. Super. 207, 209 (App. Div. 2006). Summary judgment may be granted when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
TVI argues that it is entitled to coverage under the Fireman's Fund policy on several grounds. TVI asserts that it is entitled to coverage for business interruption losses because those losses were sustained when its dock collapsed due to "hidden decay." TVI also claims that the policy provides coverage for the business interruption losses it sustained as a result of the collapse of the dock because the dock collapsed due to a "flood." In addition, TVI contends that the policy clearly covers losses arising from the collapse of the dock because it was a covered building or structure.
To address TVI's contentions, we turn to the relevant provisions of the policy. The property coverage section of the policy provides insurance against "external risks of direct physical loss unless the loss is limited or caused by a peril that is excluded."
The policy excludes, however, coverage for a loss caused by "water," which is defined to mean "flood, surface water, waves, tidal water, or the overflow of a body of water, all whether driven by wind or not. This includes spray that results from these whether driven by wind or not[.]"
The policy also states that there is no coverage for any loss caused by "contamination or deterioration," which is defined to include "corrosion, decay, fungus, mildew, mold, rot, rust, or any quality, fault, or weakness in covered property that causes it to damage or destroy itself."
The policy additionally states that there is no coverage for any loss caused by "collapse," except as otherwise provided under the section of the policy called, "Other Coverages." That section of the policy states that coverage will be provided for losses "caused by direct physical loss involving collapse of a covered building or structure" or any part thereof when the collapse is caused by, among other things, "hidden decay."
The policy also limits coverage to certain types of property. The policy states:
"We" do not pay for loss to the following types of property, if otherwise covered under [the policy] . . . unless the loss is a direct result of the collapse of a building or structure: outdoor awnings or canopies or their supports; fences; gutters and downspouts; yard fixtures; outdoor swimming pools; piers, wharves, and docks; beach or diving platforms or appurtenances; retaining walls; foundations; walks, roadways, and all other paved surfaces.
In addition, the income coverage section of the policy states that coverage will be provided for business interruption losses when the insured's "business" is "necessarily interrupted by loss to building property or business personal property as a result of a covered peril." The policy provides that business interruption losses will be covered only if such losses are incurred within twelve consecutive months after the loss of "covered property," up to a specified monetary limit.
The policy also includes a "flood endorsement" that restores coverage otherwise excluded for losses arising from damage to property caused by "water." The policy states:
When a location is shown on the Scheduled Flood Endorsement, covered perils for that location include:
1. Flood -- This means flood, surface water, waves, tidal water or the overflow of a body of water all whether driven by wind or not. This includes spray that results from any of these whether driven by wind or not.
Coverage for "flood" is also subject to the following monetary limitations:
HOW MUCH WE PAY
The following are added to How Much We Pay:
1. Deductible -- "We" pay only that part of "your" loss over the deductible shown on the Scheduled Flood Endorsement in any one occurrence. . . .
2. Limits That Apply to Covered Property -- Subject to the Loss Settlement Terms provision, the following "limits" apply to loss to covered property caused by flood, water that backs up, and water below the surface of the ground:
a. the most "we" pay for loss caused by flood, water that backs up, and water below the surface of the ground in any one occurrence at a location described on the Scheduled Flood Endorsement is the "occurrence limit" shown on the schedule.
The schedule limits the amount of coverage to $1 million with a $25,000 deductible. The schedule states the monetary limitation applies to "Building and Business Personal Property Combined."
Here, the trial court determined that the Fireman's Fund policy did not provide TVI coverage for the business interruption losses arising from the collapse of its dock. In our judgment, the trial court's determination is supported by the clear and unambiguous terms of the policy.
As stated previously, the policy provides coverage for business interruption losses only if such loses arise from a "covered peril." The collapse of TVI's dock was not the result of a "covered peril." The policy clearly and unambiguously states that coverage is not provided for any loss resulting from damage to a building or structure resulting from a "collapse" or "contamination or deterioration." Limited coverage is, however, provided when a "building or structure" collapses due to, among other things, "hidden decay." In this case, the record established that TVI's dock collapsed due to advanced corrosion and deterioration that was not "hidden."
The policy also expressly limits coverage to losses resulting from damage to piers, wharves and docks. The policy clearly and unambiguously states that such losses are not covered unless the pier, wharf or dock is damaged as a "direct result" of the collapse of a covered building or structure. The record before the trial court established that the damage to TVI's dock was not the "direct result" of the collapse of some other "building or structure." The dock collapsed because of its own advanced corrosion and deterioration. Because the "self-collapse" of the dock was not a "covered peril," the policy provides no coverage for business interruption losses resulting therefrom.
TVI argues, however, that the provision of the policy pertaining to damage to "piers, wharves, and docks" is ambiguous and must be interpreted in favor of coverage because Fireman's Fund drafted the policy. We disagree. As we have explained, the relevant provisions of the policy are clear and unambiguous. We must enforce the policy as written and "'avoid writing a better insurance policy than the one purchased.'" Pizzullo v. N.J. Mfrs. Ins. Co., 196 N.J. 251, 270 (2008) (quoting President v. Jenkins, 180 N.J. 550, 562 (2004)).
TVI further argues that it is entitled to coverage for its business interruption losses because its dock collapsed due to "hidden decay." Again, we disagree. As we stated previously, the record before the trial court established that TVI's dock collapsed as a result of advanced corrosion and deterioration that was not "hidden." Although Berhau opined that TVI's dock collapsed due to "hidden decay," Berhau was not qualified to render an opinion on that issue. Berhau is not an engineer. He teaches insurance courses at a college and has experience in the licensing of insurance professionals.
Moreover, Alterman stated in his reports that the deterioration of the dock was visible, particularly at low tides. Based on his inspection of the dock and his review of pertinent documents, Alterman concluded that TVI was aware of the corrosion as early as 1998. TVI did not retain an engineering expert to present competent evidence to counter Alterman's opinion on this issue.
TVI also contends that there was a genuine issue of material fact as to whether the dock collapsed as a result of a "flood." TVI says that the flood endorsement in the policy covers business interruption losses under these circumstances. Although the parties disagree as to whether the policy's "flood endorsement" provides coverage for business interruption losses, we need not reach that issue. The record before the trial court established that TVI's dock did not collapse as a result of a "flood."
Indeed, Berhau conceded that a "flood" was not a cause for the collapse of the dock. No expert opined that the dock failed because of a "flood." Although Alterman stated in his preliminary report that the dock collapsed after an intense rainfall that saturated the soil behind the bulkhead, his final report and deposition testimony made clear that the dock collapsed as a result of advanced corrosion and deterioration.
We therefore conclude that the trial court correctly determined that there were no genuine issues of material fact and Fireman's Fund was entitled to summary judgment.
Next, TVI argues that the trial court erred by granting summary judgment in favor of Hays.
Here, TVI alleged that Hays was negligent and breached its contract to act as TVI's broker when it failed to obtain insurance coverage for business interruption losses resulting from a "flood." In his report, Berhau opined that the "flood endorsement" of the Fireman's Fund policy was ambiguous and should be interpreted to provide coverage for business interruption losses resulting from a flood.
Berhau additionally opined that Hays breached its duty to provide an unambiguous policy which ensured that TVI would be covered for business interruption losses resulting from flood perils. Berhau stated that:
Hays ha[d] a duty to follow [TVI's] instructions or requests when arranging for coverage. [Hays had an obligation to] advise [its] client if [it was] unable to do so.
Hays did not replace the Fulcrum policy as written with the same coverage. . . .
Hays did not follow [TVI's] instruction nor did [it] advise [TVI that b]usiness [i]nterruption was not covered for flood.
Hays also has a duty to review policies provided from insurers for its clients to determine if the policy provides the proper coverage. It failed to identify any absence of business interruption/business loss coverage in the policy for flood perils.
As we stated previously, Berhau conceded that TVI's dock did not collapse due to a "flood," and no expert opined that a "flood" caused the dock's collapse. Consequently, even if there was any merit to TVI's assertion that Hays erroneously failed to obtain insurance coverage for business interruption losses due to flood perils, TVI suffered no damages as a result of Hays' alleged failure to obtain such coverage. TVI argues, however, that the trial court erred by precluding it from asserting alternative theories of liability against Hays. In our judgment, this contention is without merit. As the trial court correctly recognized, TVI's evidence did not support alternative theories for the collapse of the dock. Indeed, TVI did not present any competent expert opinion to support its assertion that the dock collapsed due to a "flood."
We have considered all of the other contentions raised by TVI in this appeal and find those contentions to be without sufficient merit to warrant discussion in this opinion. R. 2:11-3(e)(1)(E).