March 8, 2010
PASSAIC VALLEY SEWERAGE COMMISSIONERS, IRENE G. ALMEIDA, JAMES KRONE, FRANK J. CALANDRIELLO, JR., DOMINIC W. CUCCINIELLO, CARL S. CZAPLICKI, JR., PETER A. MURPHY, ANGELINA M. PASHERCIA, THOMAS J. POWELL, DONALD TUCKER, ROBERT J. DAVENPORT, FRANK D'ASCENSIO, DANIEL CARDELLICHIO, SHELDON LIPKE, RAYMOND LUCHKO, DANIEL BECHT, AND RONALD W. GIACONIA, PLAINTIFFS-APPELLANTS/ CROSS-RESPONDENTS,
ST. PAUL FIRE AND MARINE INSURANCE COMPANY, DEFENDANT-RESPONDENT/ CROSS-RESPONDENT, AND GE COMMERCIAL INSURANCE, F/K/A COREGIS INSURANCE COMPANY, DEFENDANT-RESPONDENT/CROSS-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, General Equity, Essex County, Docket No. C-320-02.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 25, 2010
Before Judges Rodríguez, Reisner and Chambers.
This is a dispute over insurance coverage involving two insurers, Coregis Insurance Co. (Coregis) and St. Paul Fire and Marine Insurance, Co. (St. Paul), each of which insured plaintiff Passaic Valley Sewerage Commission (PVSC) during a different time period.
PVSC appeals from a March 24, 2008 order granting summary judgment, dismissing its claims against Coregis for indemnification in connection with the settlement of a 2000 counterclaim filed against PVSC by Spectraserv, Inc. (the Spectraserv litigation). Coregis cross-appeals from a December 19, 2005 order, granting summary judgment in favor of St. Paul on the grounds that the St. Paul policy did not cover the Spectraserv litigation.*fn1 Concluding that both orders were legally correct, for reasons thoroughly and cogently explained by the trial judges who entered them, we affirm.
We begin by addressing the claim against St. Paul. The following factual background is needed to put the claim in context. PVSC was created by the State to manage and regulate the collection and disposal of wastewater generated in a four- county area along the Passaic Valley River basin. Its function is to protect the waterways of the basin from pollution. As part of this function, PVSC maintains an extensive sewer system and operates a wastewater treatment plant in Newark.
In order to ensure compliance with federal and state law, PVSC has adopted rules and regulations for the users of the system, and issues sewer use permits to its significant industrial users. The permits establish monitoring and reporting requirements, set effluent limits, establish complaint schedules and identify penalties for violations and other special conditions applicable to the users.
In addition, PVSC bids on contracts advertised by other public entities. In doing so, PVSC competes with the industrial users it regulates. One such industrial user is Spectraserv, a private business that constructs wastewater facilities and hauls and treats wastewater. It owns and operates a facility within PVSC's statutorily-defined district, and is required to maintain a permit with PVSC to discharge its filtrate into the PVSC system.
In 1997, when PVSC was covered by a policy issued by Coregis, Spectraserv sued PVSC, claiming that PVSC was abusing its regulatory authority over Spectraserv and unfairly competing with Spectraserv for customers. The 1997 lawsuit was dismissed without prejudice pending settlement efforts. When there was no settlement, Spectraserv revived its earlier claims in a 2000 counterclaim, which reiterated the same essential claims first asserted in the 1997 lawsuit. In fact, the 2000 counterclaim, and later amendments, specifically referenced the 1997 lawsuit and characterized PVSC's alleged wrongs as a continuation of the conduct that gave rise to the 1997 lawsuit.
When the 2000 lawsuit was filed, PVSC was covered by a policy issued by St. Paul. However, the St. Paul policy only covered claims "first made" during the policy period and excluded claims "arising" from earlier litigation. The pertinent portions of the St. Paul policy address claims "first made" as follows:
When This Agreement Covers
During this agreement or the limited reporting period. We'll apply this agreement to claims or suits for covered loss only when they're first made or brought:
* while this agreement is in effect; or
* during the limited reporting period if it applies.
When we consider a claim or suit to be first made or brought. We'll consider a claim or suit for covered loss to be first made or brought on the earliest of the following dates:
* The date that we or any protected person receives a written claim or a notice of suit.
* The date that we receive, from any protected person, a notice of a wrongful act that subsequently results in a claim or suit. However, we won't accept such a notice unless it describes with particularity details of the wrongful act, including the date and identity of involved persons and what loss may result from the wrongful act.
The policy further addresses the issue of "arising out of" in the following language:
We'll consider all claims or suits arising out of the same wrongful act or series of related wrongful acts to be one claim or suit and to have been made or brought on the date that the first of such claims or suits was first made or brought, regardless if that date is before or during the policy period. Only that coverage and those limits applicable to the period when the earliest of such claims or suits is first made will apply.
Series of related wrongful acts means two or more wrongful acts that have as a common nexus any fact, circumstance, situation, event, transaction, cause, or series of related facts, circumstances, situations, events, transactions, or causes.
In granting summary judgment to St. Paul, Judge Levy found that the policy exclusion was unambiguous and applied to the 2000 lawsuit. Judge Levy reasoned that the 2000 lawsuit revived claims of unfair competition and abuse of the police power which were first made in 1997 but extended the scope of those claims to include additional examples. In other words, the claim was first made in 1997, and the 2000 suit was based on the same allegedly wrongful course of conduct that gave rise to the 1997 suit. Therefore, Judge Levy determined that St. Paul did not owe a duty to defend or indemnify PVSC in the 2000 Spectraserv litigation, because it was a continuation of the 1997 lawsuit.*fn2
On this appeal, our review of the trial court's summary judgment decision is plenary, using the same legal standard applied in the trial court. Turner v. Wong, 363 N.J. Super. 186, 198-99 (App. Div. 2003); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Likewise, the interpretation of an insurance policy "is a question of law which we decide independent of the trial court's conclusions." Simonetti v. Selective Ins. Co., 372 N.J. Super. 421, 428 (App. Div. 2004).
The principles we follow in that task are well understood:
[W]hen interpreting an insurance contract, the basic rule is to determine the intention of the parties from the language of the policy, giving effect to all parts so as to give a reasonable meaning to the terms. When the terms of the contract are clear and unambiguous, the court must enforce the contract as it is written; the court cannot make a better contract for parties than the one that they themselves agreed to.
[Ibid. (citations omitted).]
The parties agree that the coverage issue was ripe for summary judgment; they disagree on the result. Having reviewed the record, including the insurance policy, the 1997 complaint, and the 2000 counterclaim and amendments, we agree with Judge Levy's cogent analysis of the issues, and we affirm for the reasons he placed on the record on December 1, 2005. Coregis' appellate contentions on this issue are without sufficient merit to warrant further discussion here. R. 2:11- 3(e)(1)(E).
We next turn to PVSC's claim against Coregis. Again, all parties agree the matter was ripe for summary judgment, and our standard of review is plenary. Turner, supra, 363 N.J. Super. at 198-99; Simonetti, supra, 372 N.J. Super. at 428.
The background is as follows. When PVSC requested defense and indemnity with respect to the 2000 lawsuit, Coregis agreed to defend under a reservation of rights. However, because PVSC had its own attorneys who were familiar with the matter, Coregis agreed that PVSC could use its own defense counsel. Coregis and PVSC had a subsequent dispute over the costs of the litigation, with PVSC initially claiming about $4 million in attorney fees and costs and later demanding $6 million.
Coregis and PVSC eventually settled their dispute over defense costs, when Coregis agreed to pay $1.2 million.*fn3 They could not, however, resolve a dispute over indemnification. Relying on provisions of its policy limiting its indemnification obligation to reimbursement for "money damages," Coregis declined to indemnify PVSC for a settlement it entered into with Spectraserv in the underlying litigation, because the settlement did not require PVSC to pay any "money damages" as defined by the insurance policy.
Against that backdrop, we first review the language of the insurance contract. The Coregis policy was a "claims made and reported" policy, and provided:
The Company will pay on behalf of the Insureds Loss as a result of civil Claims made against the Insureds by reason of a Wrongful Act, provided that Claim is first made during the Policy Period and written report of said Claim is received by the Company during the Policy Period or within sixty (60) days thereafter.
The policy contained the following definitions:
H. "Claim" means a demand for Money Damages as of right.
All Claims against any insureds arising out of the same Wrongful Act, or logically or causally connected Wrongful Act, will be considered one Claim. All such Claims will be considered first made at the time the earliest such Claim was made against any insured.
I. "Money Damages" means monetary compensation for past harms or injuries.
L. "Loss" means Money Damages which the insured becomes legally obligated to pay by reason of a Wrongful Act.
Loss does not include:
1. Punitive damages, exemplary damages or the multiplied portions of any damage award;
2. Sanctions, fines or penalties;
3. Liquidated damages as provided under a contract or statute;
4. Return of taxes, assessments, penalties, fines and/or fees; [and]
6. Matters uninsurable under the law or against public policy[.]
The Coregis policy also contained the following exclusions:
This policy does not apply to the following, regardless of the cause of action or legal theory alleged:
A. any Claim or Loss Arising Out of any Insured gaining profit, remuneration or advantage to which any Insured was not entitled.
B. any Claim or Loss Arising Out Of any criminal, dishonest, malicious, fraudulent or knowingly wrongful act or omission.
C. any demand or proceeding seeking relief or redress in any form other than Money Damages, including any form of injunction or other equitable relief, including, but not limited to, restitution, replevin, unjust enrichment, declaratory judgments, or an accounting.
I. any Claim or Loss Arising Out Of inverse condemnation, temporary or permanent taking, adverse possession or dedication by adverse use.
M. any Claim or Loss Arising Out Of breach of contract, whether oral, written or implied, except any Employment Contract.
There was no dispute that PVSC did not pay Spectraserv any money to settle the lawsuit. The issue was whether Coregis was required to pay for the value of services PVSC agreed to provide to Spectraserv or its customers, and assets PVSC claimed it surrendered (including PVSC's agreement to waive penalties it could have levied against Spectraserv) as part of the settlement. Judge Vichness found that the Coregis policy was unambiguous, and that PVSC had not paid Spectraserv any money damages as part of the settlement. We agree with Judge Vichness that the Coregis policy unambiguously defines "money damages" and that none of the elements of the Spectraserv settlement meet that definition. We affirm on that point for the reasons stated in his oral opinion of March 7, 2008.
In a creative effort to sidestep the policy language, PVSC also argues that even if its claim would otherwise be barred under the policy, it should recover because Coregis allegedly breached its duty to defend PVSC against the Spectraserv litigation. This contention is without merit.
We agree with Judge Vichness that Coregis did not breach its duty to defend PVSC. Rather, Coregis agreed to defend under a reservation of rights, and then agreed that PVSC could use its own counsel to actually conduct the defense. Coregis later declined to pay what it considered to be PVSC's inflated claim for $4 million in defense costs, and the parties settled that claim for a little over $1 million. Under these facts, Coregis has no obligation to pay for the projected costs of the PVSC- Spectraserv settlement, a claim barred under the unambiguous language of the Coregis policy. Since there was no breach of the duty to defend, PVSC's reliance on cases such as Fireman's Fund Insurance Co. v. Security Insurance Co., 72 N.J. 63, 71 (1976), and Griggs v. Bertram, 88 N.J. 347, 364 (1982), is misplaced.*fn4 In light of this determination, we need not address Coregis' additional arguments in support of the December 19, 2005 summary judgment order.