On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-1704-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Axelrad, Fisher and Espinosa.
Plaintiffs, the holders of interests in a New Orleans hotel, were targets of two personal injury class action suits commenced in Louisiana by employees and guests of the hotel. Believing an insurer had correctly declined to provide coverage, plaintiffs contributed $3,850,000 to a settlement of the Louisiana suits, released the insurer, and then commenced this action against defendants -- an insurance brokerage firm and an underwriting firm -- for allegedly failing to procure coverage. At the conclusion of a trial, during which defendants took the position that plaintiffs were actually covered by the insurance policies procured, the jury rendered a verdict, which resulted in a judgment in defendants' favor. Plaintiffs appealed, arguing the insufficiency of the judge's charge. Finding no error, we affirm.
In October 1997, Pallas Ventures, LLC, purchased the Crescent on Canal Hotel in New Orleans through financing provided by plaintiff Credit Suisse First Boston Mortgage Capital, LLP (Credit Suisse). Pallas later defaulted and, in March 2000, Credit Suisse became the owner of the hotel through foreclosure. Credit Suisse then attempted to transfer its interest in the hotel to plaintiff Crescent on Canal, LLC (Crescent), an entity it formed for that purpose. However, due to an error in the deed, Credit Suisse remained on the title as an owner.
Crescent hired Tishman Hotel Corporation (Tishman) to manage the hotel, and Tishman created THC of New Orleans, LLC (THC) for that purpose. Crescent entered into a management agreement with THC, and Credit Suisse both funded Crescent and guaranteed its obligations.
In early 2000, Larry Goland,*fn1 a Credit Suisse representative, contacted defendant Philip Lehman Company, Ltd. (Lehman), an insurance brokerage firm in Butler, New Jersey, to procure property liability and excess liability insurance coverage for Crescent. Lehman's principal, Jeffrey Lehman, testified at trial that Goland requested that Crescent be listed on those policies as the named insured, and that Credit Suisse, THC, and Tishman be named as additional insureds. Lehman contacted defendant National Security Underwriters, Inc. (NSU), a specialty insurance wholesaler for hotels and the hospitality industry.
Pursuant to its customs and practices, NSU had no direct contact with plaintiffs, acting on the basis of the information provided, in this case, by Lehman. NSU requested that Lehman complete an application, which required among other things that Lehman attach "a list of all named insureds including a description of each entity." Lehman's response did not indicate that Credit Suisse, THC, or Tishman should have been specifically named as additional insureds.
Based on the insurance application, NSU sent Lehman a quote listing Crescent as the named insured on the proposed policy, and Lehman directed NSU to bind the coverage pursuant to the quote. As a result, NSU procured insurance for Crescent with primary, excess, and umbrella coverage. On May 4, 2000, NSU delivered the policies to Lehman; Credit Suisse, THC and Tishman were not listed as named insureds or additional insureds in the insurance application, quote, binder, order to bind, or the insurance policies.
By a fax cover-sheet dated March 15, 2000, Pam Brauner, an NSU representative, advised Lehman that it was authorized to issue any certificates of insurance needed to confirm the insurance obtained for Crescent. However, she requested that Lehman bring to NSU's attention "any special wording needed by the insured prior to issuing [the certificate of insurance]," so that NSU could seek approval from the insurers, if necessary. The next day, Barry Hansen of Lehman sent NSU a certificate of liability insurance that listed Credit Suisse, THC, and Tishman as additional insureds. A few days later, Lehman forwarded to Goland a certificate of liability insurance, which listed Credit Suisse, THC, and Tishman as additional insureds. And, on March 31, 2000, Jeffrey Lehman forwarded to Goland certain certificates of liability insurance that purported to be "final certificates," which listed Credit Suisse, THC, and Tishman as additional insureds.
Pursuant to NSU's procedures, however, insurance brokers were required to make written requests for specific endorsements naming entities as insureds or additional insureds; those written requests would then be forwarded to the insurers to decide whether a specific endorsement would be issued. In that regard, both Jeffrey Lehman and Hansen testified that it was Lehman's normal practice to send a written binder request to NSU when seeking a specific endorsement. Lehman made no written request for a specific endorsement listing Credit Suisse, THC, or Tishman as additional insureds. As a result, the only documents specifically listing those entities as additional insureds were the certificates of liability insurance prepared by Lehman. And even those certificates were somewhat equivocal since they expressly stated: "this certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend or alter the coverage afforded by the policies below."
Brauner testified that NSU did not consider the certificate as a written request to have those three entities specifically named as additional insureds because "[t]hat's not normal practice." According to Brauner, NSU never "accept[ed] Certificates of Insurance as requests from brokers to name additional insureds on any particular policy." Moreover, Brauner could not recall receiving from Lehman a completed certificate of liability insurance. She testified that if there were revisions to the certificate of liability insurance, she would wait until it was in "acceptable form" before she would forward it to the insurers. As a result, NSU did not submit to the insurers the certificate naming Credit Suisse, THC, and Tishman as additional insureds, and Lehman never sought to verify that NSU had done so.
Under the insurance coverage secured by defendants for Crescent, St. Paul Fire & Marine Insurance Company provided the primary layer of insurance coverage with a general liability limit of $1,000,000 per event, subject to a $2,000,000 general aggregate limit. The primary layer was followed by up to $30,000,000 in excess coverage, which was issued by Westchester Fire & Marine Insurance Company and Indemnity Insurance Company.
The policies did not contain an additional insured endorsement, nor did they name Credit Suisse, THC, or Tishman as additional insureds. However, the policies provided coverage to Crescent, as well as other persons or entities that qualify as "protected persons." Protected persons under the policies included Crescent's real estate and property managers, as well as those entities for which Crescent had a written contract that required it to provide coverage.
The policies also provided coverage for any entity for which Crescent was required to indemnify. In that regard, Crescent and THC entered into a written management agreement, wherein THC was the property manager of the hotel. Pursuant to the terms of that agreement, Crescent agreed to indemnify THC for any losses arising out of THC's management of the hotel. The agreement required Crescent to provide insurance coverage for THC, as well as its "affiliates," and defined the word "affiliate" in such broad terms as to encompass Credit Suisse. Additionally, Credit Suisse was the guarantor of Crescent's obligations under the management agreement, and the guarantee listed Credit Suisse as Crescent's affiliate.
Although Credit Suisse was not specifically named as an additional insured, the St. Paul policies contained a "Described Person or Organization Endorsement" (DPOE), a "blanket endorsement" providing coverage to any organization falling within its description. Due to its affiliation with Crescent and the scope of the property management agreement, there ...