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Crum & Forster Insurance Companies v. Mecca & Sons Trucking Corp.

September 9, 2009


On appeal from the Superior Court of New Jersey, Law Division, Morris County, L-847-02.

Per curiam.


Argued September 8, 2008

Before Judges R. B. Coleman, Sabatino and Simonelli.

Defendants Mecca & Sons Trucking Corporation, Atrimec Realty Corp. and Clean-O-Mat Corp. (collectively Mecca) appeal from a Law Division order granting summary judgment in favor of plaintiffs Crum & Forster Insurance Companies and United States Fire Insurance Company (collectively plaintiff or C&F) and denying Mecca's motion for summary judgment. C&F has filed a cross-appeal, contending the Law Division rejected additional grounds to deny coverage to Mecca. Because we agree that the insurance policy vacancy exclusion applies, we affirm.

On March 12, 2002, C&F filed a complaint for declaratory judgment against Mecca seeking a determination that C&F was not liable on an insurance policy issued to Mecca for damages claimed as a result of a fire on September 3, 2001, at a building located at 163 Avenue A, Bayonne, New Jersey (the property). The complaint alleged in five counts that (1) Mecca did not own the property where the loss occurred and, therefore, did not have an insurable interest; (2) the premises were vacant at the time of the loss, triggering an exclusion to coverage; (3) the policy was suspended at the time of the loss because Mecca had increased the hazard; (4) Mecca did not sustain a loss because the property had no value on the day of the fire; and (5) Mecca misrepresented material facts in its application that warrant rescission of the policy.

On June 6, 2002, Mecca filed an answer and counterclaim, asserting in its pleadings that: (1) C&F breached the insurance contract by failing to pay the Agreed Value on the policy; (2) C&F's failure to pay pursuant to the terms of the written policy of insurance constitutes bad faith dealings; (3) C&F disclaimed coverage in an untimely and improper manner; (4) C&F breached its statutory and common law duties to act in good faith and in fair dealing; (5) C&F breached the Plain Language Act, N.J.S.A. 56:12-1 to -13; and (6) C&F violated the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -106. Mecca joined its insurance brokers, Eastern Insurance Agency, Inc. (Eastern) and Crump Group of New Jersey, Inc. (Crump), as third-party defendants; however, the claims against those parties have been resolved and are not at issue in this appeal.

In this appeal, Mecca contends that plaintiffs were improperly granted summary judgment based on the vacancy/vandalism condition of the policy, and that Mecca's breach of contract claim was improperly dismissed. In the cross-appeal, C&F essentially contends that it is entitled to judgment on each of the theories advanced in the various counts of its cross-claim.


By an insurance application dated October 25, 2000, submitted on its behalf, Mecca sought insurance coverage from C&F in compliance with a leasehold agreement Mecca held on the property in question. In the "Property Section" of the application, the broker Crump represented that all of the locations for which it sought coverage were "Masonry, except 528-530 Art Lane, Ridgefield, NJ." The letters "NC" were handwritten above the word "Masonry." C&F states it understood "NC" to be an abbreviation for non-combustible. The application further stated that "[a]ll locations have smoke and CS Burglar Alarms." Below this language is handwriting stating "all are AS" which, according to C&F, indicates sprinklers.

In contrast, Peggy Mecca, the President of Mecca, filed a certification in support of Mecca's motion for summary judgment in which she certifies that she never represented -- either to C&F or to her own agent -- that the premises had sprinklers. In fact, she avers that she specifically represented the premises were not alarmed for smoke, burglary or fire. She states she was never asked whether the premises had sprinklers.

The initial Property Coverage Schedule listed eleven properties, including 163 Avenue A, Bayonne. Mecca requested and the issued policy provided for $700,000 in building coverage and $250,000 in business interruption and extra expenses coverage. Coverage was effective from November 29, 2000 to November 29, 2001. C&F asserts that Mecca's request for that type of coverage led it to believe that the building was actively in use. C&F also points out that an employee of Crump, which acted as the broker in procuring the policy, communicated to C&F that "[insured] has regular maintenance on all locations, all will be in good condition and inspect [sic] well." Consistent with its policy not to inspect buildings unless the proposed value of the building was stated to be in excess of $2,000,000, C&F did not conduct its own inspection of the property.

The term "vacancy" is a defined term in the policy, in pertinent part, to include the following:

(a) When this policy is issued to a tenant, and with respect to that tenant's interest in Covered Property, building means the unit or suite rented or leased to the tenant. Such building is vacant when it does not contain enough business personal property to conduct customary operations.

By way of limitation, the policy provides that: "C&F will pay no more for loss of or damage to [Covered Property to which this Optional Coverage applies] than the proportion that the Limit of Insurance under this Coverage Part for the property bears to the Agreed Value shown for it in the Declarations." Section F(2) of the Custom Deluxe Coverage Form states that if Mecca and C&F disagree on the value of property or the amount of a loss, either party may make a demand for an appraisal and each party will then select an appraiser.

On September 3, 2001, a fire occurred at 163 Avenue A, Bayonne, and Mecca promptly reported the loss to C&F. Various individuals investigated the fire, and issued reports regarding their findings. Among those issuing such reports were firefighter Kevin Fitzhenry and investigators Gerald Trimboli and James Young.

In his report dated October 1, 2001, Fitzhenry indicated that no fire and smoke detectors were present in the building. He reported the building status as vacant and unsecured. Similarly, a report prepared by the Bayonne Police Department described the building as abandoned.

Trimboli, who was retained by C&F, prepared a report that contained the following observations: the fire occurred at a "one-story... warehouse (vacant)"; "[t]here were no utilities in service [sic] at the time of this fire"; "the structure was vacant at the time of the fire"; "[t]he building was vacant at the time of the incident with all roll downs secure"; "[t]he building was vacant with concrete floors"; "[e]lectrical service was not in service to this building"; and "[t]he building reportedly has been vacant for approximately 5 plus years."

Young certified that he spoke with Peggy Mecca, who advised him that on the date of the fire, Mecca did not own the building, that it had a leasehold interest in the property. Mecca certified further that at the time of the fire, the building was being used for viable business purposes and for storage.

In the course of its investigation, C&F obtained a December 1996 appraisal report of the building. That appraisal report estimated that the entire premises were valued at $1,804,200, but the existing industrial building could no longer be used due to zoning restrictions. Given that the cost to demolish the building was approximately $845,000, the report concluded that the market value of the site, valued as vacant land only, was approximately $960,000.

On March 12, 2002, C&F sent a letter to Mecca disclaiming liability for Mecca's claim. The letter provided the following reasons for denying coverage: (1) at the time of the damage, Mecca had no insurable interest in that the legal title of the building was in the name of a third party, and Mecca's subsidiaries that may have had an insurable interest were not named insureds under the policy; (2) the building was vacant for more than ninety days prior to the loss and coverage was subject to an exclusion in the event of vandalism; (3) the policy was suspended because Mecca increased the hazard of fire by failing to have a functioning sprinkler system as was represented in the application process; (4) Mecca did not sustain any loss because the building could not be used for industrial use and the cost of demolishing the building negated any value the building might have had; and (5) C&F is entitled to rescind the policy due to misrepresentations made by Mecca at the time of its application for the issuance of the policy. Shortly after sending this letter to Mecca, C&F filed its complaint for declaratory judgment.

Mecca and C&F filed competing motions for summary judgment which were resolved in accordance with the court's June 27, 2006 letter opinion. In summary, the court determined that Mecca did have an insurable interest because it maintained the insurance policy, had a right of occupancy and provided evidence of substantial loss due to the fire. The court declined to determine whether the fire was caused by vandalism because it believed disputed issues of material fact existed as to the cause of the fire. The court did find, however, that the building was "vacant" under the terms of the policy, and that any use of the building was not customary or valid. As for the increased risk of hazard, the court again found that the existence of issues of material fact precluded the grant of summary judgment. The court held, however, that the property had an Agreed Value of $700,000 that neither party to the insurance agreement could challenge. Also, the court found that there were disputed issues of material fact as to whether Mecca had made false representations in the application process.

As for the issues related to Mecca's counterclaim, the court determined that C&F did not breach its contractual obligations to Mecca by disclaiming coverage. The court concluded that C&F had a reasonable or debatable basis to deny coverage and it had not acted in bad faith. Moreover, the court held that C&F gave Mecca time to demonstrate an insurable interest and loss, therefore, its disclaimer of coverage was not impermissible. Lastly, the court found that the policy did not violate the Plain Language Act.


As a preliminary matter, C&F contends that because Mecca's notice of appeal does not mention the June 27, 2006 order deciding the motions and cross-motions for summary judgment, Mecca has appealed only from the January 22, 2007 order disposing of the parties' motions in limine, and not the June 27, 2006 order. Rule 2:5-1 states, in pertinent part, that an appellant "shall designate the judgment [or] decision... appealed from...." It has been observed that "[w]hile the rule does not in terms so provide, it is clear that it is only the judgments or orders... designated in the notice of appeal which are subject to the appeal process and review." Pressler, Current N.J. Court Rules, comment 6.1 on R. 2:5-1 (2008); see also Fusco v. Bd. of Educ. of Newark, 349 N.J. Super. 455, 461-62 (App. Div.), certif. denied, 174 N.J. 544 (2002) (order of summary judgment was not included with notice of appeal and would not be considered on appeal); 30 River Court E. Urban Renewal Co. v. Capograsso, 383 N.J. Super. 470, 473-74 (App. Div. 2006) (claims ...

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