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First Trenton Indemnity Co. v. River Imaging

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


August 11, 2009

FIRST TRENTON INDEMNITY COMPANY, RED OAK INSURANCE COMPANY, AND TRAVELERS CASUALTY AND SURETY CO., PLAINTIFFS,
v.
RIVER IMAGING, P.A., ET AL., DEFENDANTS, AND MICHAEL W. LICAMELE, MANMOHAN A. PATEL, HEALTHCARE INTEGRATED SERVICES, INC., ELLIOTT VERNON, MARK VERNON, GEORGE BRAFF, AND LYNN FOX, DEFENDANTS/THIRD-PARTY PLAINTIFFS,
v.
ZURICH AMERICAN INSURANCE COMPANY, THIRD-PARTY DEFENDANT.
LIBERTY MUTUAL INSURANCE COMPANY, PLAINTIFF,
v.
EDGEWATER DIAGNOSTIC IMAGING, ET AL., DEFENDANTS, AND MANMOHAN A. PATEL, DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT, AND HEALTHCARE INTEGRATED SERVICES, INC., ELLIOTT H. VERNON, MICHAEL LICAMELE, LYNN FOX, MARK VERNON, ROBERT MASKULYAK, AND GEORGE BRAFF, DEFENDANTS/THIRD-PARTY PLAINTIFFS,
v.
ZURICH AMERICAN INSURANCE COMPANY, THIRD-PARTY DEFENDANT-RESPONDENT.
PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY OF NEW JERSEY, PRUDENTIAL COMMERCIAL INSUTANCE COMPANY OF NEW JERSEY, AND PRUDENTIAL GENERAL INSURANCE COMPANY OF NEW JERSEY, PLAINTIFFS,
v.
BLOOMFIELD DIAGNOSTIC IMAGING, ET AL., DEFENDANTS.
STATE OF NEW JERSEY, PLAINTIFF/INTERVENOR,
v.
RIVER IMAGING, ET AL., DEFENDANTS, AND MANMOHAN A. PATEL, DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT, AND HEALTHCARE INTEGRATED SERVICES, INC., MARK R. VERNON, ELLIOTT H. VERNON, GEORGE BRAFF, LYNN FOX, MICHAEL LICAMELE, AND ROBERT MASKULYAK, DEFENDANTS/THIRD-PARTY PLAINTIFFS,
v.
ZURICH AMERICAN INSURANCE COMPANY, THIRD-PARTY DEFENDANT-RESPONDENT.

On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-149-01.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted February 24, 2009

Before Judges Skillman, Graves and Ashrafi.

Appellant Manmohan Patel appeals from an order entered on June 22, 2007, which denied his application to compel respondent Zurich American Insurance Company (Zurich) to reimburse him for counsel fees he incurred in pursuing an appeal on behalf of Healthcare Integrated Services, Inc. (HIS) from summary judgments entered against HIS in actions brought by Liberty Mutual Insurance Company and the State of New Jersey. After entry of those summary judgments, HIS filed a petition for bankruptcy. The bankruptcy court approved an assignment of HIS's rights to Patel, who was the Vice Chairman of HIS's Board of Directors, and to Elliott Vernon, who was the Chairman of HIS's Board of Directors and its Chief Executive Officer, to enable them to pursue appeals from the summary judgments that had been entered against HIS.*fn1 Those appeals resulted in an affirmance of the summary judgments by this court, which concluded that "[t]he claims of error raised by HIS on appeal lack sufficient merit to warrant discussion in a written opinion beyond . . . brief comments." Liberty Mut. Ins. Co. v. Healthcare Integrated Servs., Inc., A-5599-04T3, A-2174-05T3 (App. Div. July 2, 2008) (slip op. at 9).

Before this court rendered its decision on the appeals from the summary judgments entered against HIS, Patel and Vernon, who were also defendants in the underlying actions brought by Liberty Mutual and the State, applied to the trial court for an award of the counsel fees and costs they incurred in that appeal on the theory that the "Directors and Officers Liability and Reimbursement Policy" issued by Zurich provided coverage to them for those fees and costs. The court denied this application by a letter opinion, which stated in part:

LoMurro [the law firm that represented Patel and Vernon in their appeals on behalf of HIS] contends that it represents the rights of assignees Vernon and Patel and not HIS, and that reimbursement is proper since Vernon and Patel are insureds pursuant to the Court's holdings. However, LoMurro is counsel for appeals related to HIS's rights that were assigned to Vernon and Patel upon approval of the bankruptcy court. Assignee's rights can be no greater than the assignor's rights and all defenses available against the assignor are available against the assignees . . . . Since the Court has not determined that HIS has a right to reimbursement, Vernon and Patel as assignees have no right to reimbursement.

We affirm the denial of Patel's application for an award against Zurich of the counsel fees and costs he incurred in pursuing the appeals from the summary judgments entered against HIS substantially for the reasons set forth in the trial court's letter opinion. We add the following supplemental comments. Although the Zurich policy provided certain limited coverage to HIS, it is undisputed that this coverage did not extend to any counsel fees and costs HIS would have incurred in pursuing its own appeals from the summary judgments entered in favor of Liberty Mutual and the State. Moreover, although the Zurich policy provided more expansive coverage to Patel than to HIS, that coverage applied only to claims against Patel, not to claims against HIS that Patel voluntarily elected to pursue on HIS's behalf.

Patel was himself a defendant in the actions brought by Liberty Mutual and the State. The trial court concluded that Patel was entitled to reimbursement by Zurich for the counsel fees and costs he expended in his own defense, and we have affirmed the order awarding him those counsel fees and costs in our opinion in First Trenton Indemnity Co. v. River Imaging, P.A., A-6191-06T3, which is being filed simultaneously with this opinion. Thus, the sole effect of the order affirmed by our opinion in this appeal is to deny Patel reimbursement for the costs of an appeal from judgments entered against HIS, for which HIS itself was not covered, which Patel and Vernon voluntarily elected to pursue on HIS's behalf.

Patel makes a conclusionary assertion that the summary judgments entered against HIS "could form the basis for individual liability [against him] by estoppel or otherwise." However, his brief does not include any explanation of how the summary judgments could have this effect, and it is not self- evident to us that Patel's concerns have any foundation. Therefore, there is no need to consider whether the Zurich policy could be construed expansively to extend coverage to Patel for pursuing appeals from the summary judgments entered against HIS if Patel had shown that there were a substantial basis for believing that he would be bound by those judgments.

Affirmed.


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